Acme United Corp (ACU) Reports Full Year Earnings with Strong Margin Growth
Net Sales: $191.5 million for the year ended December 31, 2023, a slight decrease from $194.0 million in 2022.
Net Income: Excluding the sale of product lines, net income for 2023 was $8.2 million, a significant increase from $3.0 million in 2022.
Earnings Per Share: Diluted EPS for 2023 was $4.86, including the sale of Camillus and Cuda, compared to $0.82 in 2022.
Gross Margin: Improved to 37.7% for the year, up from 32.8% in the previous year.
Free Cash Flow: Reached a record $24 million, including a $5 million reduction in inventory.
Debt Reduction: Bank debt less cash was reduced to $19.0 million from $55.0 million as of December 31, 2022.
Divestiture Impact: The sale of Camillus and Cuda product lines resulted in an after-tax gain of approximately $9.6 million.
On March 1, 2024, Acme United Corp (ACU) released its 8-K filing, detailing the financial results for the fourth quarter and full year ended December 31, 2023. The company, a leading supplier of first aid and medical products, as well as cutting technology, reported a slight decrease in net sales but a substantial increase in net income and earnings per share, largely due to strategic divestitures and cost-saving measures.
Financial Performance and Strategic Moves
Acme United's net sales for 2023 were $191.5 million, a 1% decrease from the previous year, attributed to the sale of the Camillus and Cuda product lines and a soft European economy. Despite this, the company's net income, excluding the impact of the sale, was $8.2 million, or $2.23 per diluted share, compared to $3.0 million, or $0.82 per diluted share, in 2022. Including the sale, net income was $17.8 million, or $4.86 per diluted share.
The divestiture of the Camillus and Cuda product lines to GSM Holdings, Inc. for $19.8 million allowed the company to focus on its core businesses and reduce its debt by $13 million. This strategic move, along with inventory reduction and cost-saving initiatives, contributed to a record free cash flow of $24 million and a strengthened balance sheet.
Operational Highlights and Future Outlook
Chairman and CEO Walter C. Johnsen highlighted the company's achievements, stating,
We had an outstanding year of strong earnings and achievements in 2023. The sale of Cuda and Camillus in the fourth quarter enabled the Company to focus on our core businesses and reduced our debt by $13 million."
Johnsen also noted the successful implementation of cost reduction and productivity initiatives that generated approximately $6.5 million in savings, surpassing the initial target of $5 million.
Looking ahead, Johnsen expressed optimism for 2024, anticipating growth from new first aid customers, additional placement of cutting tools, and new sharpener business. With a strong balance sheet, the company continues to seek accretive acquisitions.
Regional Sales and Margin Improvements
Regionally, U.S. segment sales decreased by 6%, while European sales declined by 8% in U.S. dollars and 13% in local currency, reflecting economic challenges. However, Canadian sales increased by 11% in U.S. dollars and 12% in local currency, driven by higher sales of first aid products.
Notably, gross margin improved significantly, reaching 39.1% for the quarter and 37.7% for the year, up from 31.9% and 32.8% respectively in the previous year. This increase was primarily due to productivity improvements and lower inbound freight costs.
Balance Sheet and Cash Flow
Acme United's balance sheet showed a marked improvement, with bank debt less cash decreasing to $19.0 million from $55.0 million at the end of 2022. The company also paid $2.0 million in dividends on its common stock during the year.
The company's financial tables reflect these changes, with a notable increase in net income and a strengthened equity position. The sale of the Camillus and Cuda product lines not only provided a substantial gain but also streamlined the company's focus on its core segments.
Acme United's financial achievements in 2023, particularly the growth in net income and gross margin, are significant for a company in the Consumer Packaged Goods industry. These metrics are crucial indicators of the company's operational efficiency and its ability to manage costs effectively while maintaining profitability.
Investors and stakeholders can participate in a conference call and webcast to discuss the quarterly results on March 1, 2024, with details available on the company's website.
Overall, Acme United's strategic decisions and operational improvements in 2023 have positioned the company for continued success in the coming year, making it a potentially attractive option for value investors.
Explore the complete 8-K earnings release (here) from Acme United Corp for further details.
This article first appeared on GuruFocus.
