Karat Packaging Inc (NASDAQ:KRT) stock rose 2.21% (As on March 14, 11:31:02 AM UTC-4, Source: Google Finance) though the company posted lower than expected results for the fourth quarter of FY24. The company has reduced its dependence on China for imported goods to approximately 20 percent and diversified the sourcing to countries with more favorable trade conditions and minimal tariffs, such as Taiwan, which accounted for more than 50 percent of the global sourcing for the year ended December 31, 2024. The company is actively working on further reducing dependence on China and negotiating additional vendor discounts to mitigate potential negative pricing and margin impact.

Moreover, the gross profit for the 2024 fourth quarter increased 16.8 percent to $39.8 million, from $34.1 million in the prior-year quarter. Gross margin expanded 350 basis points to 39.2 percent in the 2024 fourth quarter, from 35.7 percent in the prior-year quarter, which included a net unfavorable impact of 290 basis points from the adjustments related to online sales platform fees, additional import duty reserve, and production expenses. Net income for the 2024 fourth quarter increased 40.3 percent to $5.9 million, from $4.2 million in the prior-year quarter. Net income margin was 5.8 percent in the 2024 fourth quarter, compared with 4.4 percent in the prior-year quarter. Adjusted EBITDA increased to $11.3 million for the 2024 fourth quarter, from $8.6 million for the prior-year quarter. Adjusted EBITDA margin was 11.1 percent of net sales for the 2024 fourth quarter, compared with 9.0 percent for the prior-year quarter.

KRT in the fourth quarter of FY24 has reported the adjusted earnings per share of 29 cents, missing the analysts’ estimates for the adjusted earnings per share of 36 cents. The company had reported the adjusted revenue growth of 6.3 percent to $101.6 million in the fourth quarter of FY24, missing the analysts’ estimates for revenue of $102.2 million. The increase for the 2024 fourth quarter was primarily driven by volume growth and change in product mix of $14.6 million, partially offset by a decrease of $3.4 million in online sales platform fees reflecting the impact from the favorable impact in the prior-year quarter, as well as a decrease of $5.4 million from unfavorable year-over-year pricing comparison.

Additionally, the company has approved a regular quarterly dividend of $0.45 per share on the Company’s common stock, payable on or about February 28, 2025, to stockholders of record as of February 24, 2025.