Karat Packaging Inc. announced record financial results for the second quarter ended June 30, 2025, with net sales increasing 10.1% year-over-year to $124.0 million. This growth was primarily driven by a $14.2 million increase in volume and product mix. The company also reported record quarterly net income of $11.1 million, a 19.8% increase from the prior-year quarter, resulting in diluted earnings per share of $0.54.
Gross profit for the quarter rose 13.1% to $49.1 million, with gross margin expanding by 110 basis points to 39.6%. This margin improvement was supported by more favorable vendor pricing and product mix, as well as a reduction in depreciation expense. Karat Packaging significantly reduced its sourcing from China to just 10% in the second quarter, demonstrating successful diversification efforts to enhance supply chain resilience.
Despite the strong performance, the company reported a $2.9 million loss on foreign currency transactions due to the weakening U.S. dollar against the New Taiwan dollar. Management projects Q3 2025 net sales to increase by approximately 9% to 10% year-over-year, but anticipates a temporary dip in gross margin to the low to mid-30s, with adjusted EBITDA margin between 10% and 12%. This expected decline is attributed to inventory brought in with elevated tariffs during Q2 2025 that will be sold in Q3 2025.
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