Turning Point Brands profits climb despite Zig-Zag sales dip

Smoking accessories maker Turning Point Brands Inc. (NYSE: TPB) reported a mixed bag of financial results for the fourth quarter and full year ended Dec. 31, 2023, though the firm managed to turn a profit and keep its piggy bank in check.

The figures showed a slump in total consolidated net sales by 6.1% to $97.1 million for the quarter, while the annual sales saw a marginal decline of 2.3% to $405.4 million versus the previous year.

Despite the drop in sales, the company saw an uptick in gross profit for the quarter, up 1.9% to $50.5 million, and a significant rise in net income to $10.1 million, reversing a loss in the same quarter the previous year.

For the year, Turning Point Brands recorded a substantial rise in net income, up 230.4% to $38.5 million. The improvement came even as the company faced sales challenges, particularly in its Zig-Zag rolling paper segment, which saw a decrease in net sales both quarterly and annually, partly due to discontinuing unprofitable products.

Conversely, the Stoker’s products segment showed a positive trend, with an 18.6% increase in quarterly net sales and a 10.5% rise for the year, thanks to growing demand for its moist snuff tobacco and loose-leaf tobacco products.

President and CEO Graham Purdy noted that the company has managed to save up a considerable amount of cash which will help it pay off debts.

“Our fourth quarter results were at the high-end of our expectations,” Purdy said in a statement. “The Zig-Zag segment was stable from the previous year excluding the impact of a discontinued product line and is well positioned to return to growth in 2024.”

Looking forward, Turning Point Brands anticipates an adjusted EBITDA in the range of $95 million to $100 million for 2024, not counting any earnings from its vape distribution subsidiary, Creative Distribution Solutions.

The vape distributor, representing 15% of total net sales, continued its downturn, with net sales diving by 43.7% to $14.1 million for the quarter. Despite the sharp decline, the segment managed to contribute over $2 million of EBITDA in the full-year earnings, the company said. Gross profit for the division stood at $3.1 million for the quarter, with a gross margin of 22.4%.

Earnings per share improved from a loss to a $0.53 cents, and the adjusted EPS increased to $0.79 cents from $0.69 cents.

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