Acme United Turns Tariff Pressure into Strategic Win

In its second quarter of 2025, Acme United Corporation (US: ACU – $43.28) demonstrated resilience and strategic agility, reporting increased profitability despite a modest decline in revenue. While net sales dipped 3% year-over-year to $54.0 million from $55.4 million, net income climbed 7%, reaching $4.8 million, or $1.16 per diluted share, compared to $1.09 per share in the same period last year. The performance was underpinned by improved gross margins and disciplined operational execution, enabling the Company to deliver record earnings in the face of global trade headwinds.

One of the most significant challenges during the quarter was the uncertainty of tariffs on Chinese imports, which caused certain U.S. customers to cancel or delay back-to-school orders. Rather than allow these disruptions to erode momentum, Acme United seized the event to accelerate long-term strategic shifts.

The Company adjusted quickly, optimizing inventory flow, enhancing its sourcing flexibility, and strengthening its domestic manufacturing capabilities. CEO Walter C. Johnsen highlighted this proactive stance during the earnings call, stating, “Our team turned a short-term challenge into a long-term advantage.” Tariffs forced Acme to reevaluate its global footprint, and it came out stronger.

This reorientation included a sharpened focus on domestic production and logistics infrastructure, culminating in an acquisition in just last week. Acme United purchased a 77,000-square-foot manufacturing and warehouse facility in Mt. Pleasant, Tennessee, for approximately $6 million. The infrastructure, which sits on a 12-acre site with expansion capacity of up to an additional 60,000 additional square feet, is fully climate-controlled and FDA-compliant. It will primarily support the Company’s Spill Magic product line, known for its rapid-response spill cleanup solutions used in schools, stores, and industrial settings.

The Tennessee facility is more than just a real estate purchase, it’s a strategic investment that aligns with Acme’s long-term vision: bringing more of its manufacturing closer to home, adding automation, and controlling its own destiny in an unpredictable global trade environment.

Canadian Segment Performs Very Strong

Acme United reports financial information on three separate business segments: the United States (including Asia), Europe and Canada. Exact revenues per segment for the second quarter of 2025 will be available in the Company’s 10-Q, which will be filed mid-August. However, Acme announced for each segment the percentage by which revenues increased or decreased compared with last year. Based on those numbers, we provide the following estimate.

	Three Months Ended June 30
Amounts in $000’s	2025	2024
U.S.	45,009	45,200
Canada	5,198	4,376
Europe	3,789	3,760
Estimated sales per segment for the second quarter ended June 30, 2025 (Source: Smallcaps Investment Research) and actual sales per segment for the second quarter ended June 30, 2024 (Source: Company Filing)

What moving to a bigger and more efficient facility can do, is shown in the second quarter by the performance of the Canadian segment. In 2024, Acme Canadian subsidiary First Aid Central, which manufactures first aid kits and safety supplies, moved into a much bigger plant. Now, they are starting to benefit from that move. As a result, net sales in Canada for the three months ended June 30, 2025 increased 28% in both U.S. dollars and local currency compared to the same period in 2024. Management expects this trend to continue in the foreseeable future.

In the U.S. market, sales decreased 5% compared to the same period in 2024, mainly due to the cancellation of certain back-to-school orders. Additionally, there was a large order of kitchen sharpeners from a major mass market retailer that took place in the second quarter of 2024 and that didn’t reoccur this year.

In Europe, revenues fell approximately 3% in U.S. dollars (6% in local currencies), largely due to the timing of customer shipments. Management remains optimistic though about growth in the segment for the second half of the year.

Second Quarter Financials & Balance Sheet

Sales for the six months ended June 30, 2025, were $100 million compared to $100.4 million in the same period in 2024. Net income for the first six months ended June 30, 2025, was $6.4 million or $1.57 per diluted share compared to $6.1 million or $1.47 per diluted share in the comparable period last year, increases of 5% and 7%.

The gross margin was 41% in the second quarter of 2025 versus 40.8% in the comparable period last year. Gross margin was 40.1% for the first 6 months of 2025 compared to 39.9% for the same period in 2024.

	Three Months Ended June 30		Six Months Ended June 30
Amounts in $000’s	2025	2024	2025	2024
Net Sales	53,996	55,425	99,954	100,382
Cost of Goods Sold	31,847	32,798	59,888	60,358
S, G & A Expenses	15,759	16,252	31,250	31,090
Income From Operations	6,390	6,375	8,816	8,934
Interest Expense	401	539	798	982
Other Expense (Income)	(99)	(28)	(188)	(72)
Pre-Tax Income	6,088	5,864	8,206	8,024
Income Tax Expense (Benefit)	1,336	1,412	1,802	1,935
Net Income	4,752	4,452	6,404	6,089
Earnings Per Share	1.16	1.09	1.57	1.47
Shares Out. – Diluted	4,101	4,088	4,070	4,143
Selected income statement data for the quarters and six months ended June 30, 2025 and June 30, 2024. Source: Company Press Release

SG&A expenses for the second quarter of 2025 were $15.8 million or 29% of sales compared with $16.3 million or 29% of sales for the same period of 2024. The lower SG&A in the quarter was due to cost savings and reduced discretionary spending. SG&A expenses for the first 6 months of 2025 were $31.3 million or 31% of sales compared with $31.1 million or 31% of sales in 2024.

Amounts in $000’s	June 30, 2025	June 30, 2024
Cash and Cash Equivalents	3,641	3,791
Accounts Receivable	36,174	40,074
Inventories	57,309	56,621
Total Current Assets	101,341	106,148
Property and Equipment	32,901	30,570
Total Assets	171,147	173,541
Accounts Payable	10,181	10,319
Other Accrued Liabilities	11,376	15,656
Total Current Liabilities	23,494	27,992
Bank Debt	16,352	26,419
Mortgage Payable – Long Term	9,662	10,073
Total Liabilities	57,425	69,583
Total Stockholder Equity	113,722	103,958
Selected balance sheet data for the quarters ended June 30, 2025 and June 30, 2024. Source: Company Press Release

The Company’s bank debt less cash as of June 30, 2025 was $22.8 million compared to $33.1 million as of June 30, 2024. During the twelve-month period ended June 30, 2025, the Company distributed approximately $2.2 million in dividends on its common stock and generated approximately $12.0 million in free cash flow.

Outlook

Despite the short-term softness in revenue, Acme United’s financial health remains strong. The Company generated approximately $12 million in free cash flow during the quarter and reduced its bank debt (net of cash) to $22.8 million, down from $33.1 million a year earlier.

Acme’s factories in the United States have benefited from the increased tariffs. The Med-Nap facility in Brookfield, Florida is producing alcohol and BZK wipes, castile soap and other first aid items at record levels. Moreover, the Vancouver, Washington and Rocky Mount, North Carolina plants, that produce first aid kits, are also running at full speed.

The new Tennessee facility marks another important move toward enhancing the Company’s supply chain resilience and reducing dependency on overseas production. The start of the production in 2026 will be more than welcome, as the current Spill Magic plants in Santa Ana, California and Smyrna, Tennessee are running multiple shifts.

Looking ahead, management anticipates continued top-line growth in the second half of 2025 as delayed orders potentially resume and the benefits of its manufacture-at-home strategy materializes further. Solid confidence in its outlook was also shown back in June, as the Company increased its quarterly cash dividend to 16 cents per share. Mr. Johnsen commented, “This is Acme United’s fifteenth dividend increase since 2004. We are optimistic about our future, and we are pleased to provide this additional return to shareholders.”

Acme United’s second quarter results offer a clear message to investors: the Company is not only navigating challenges but leveraging them to build a more agile, efficient, and future-ready enterprise. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $52.61	Latest Company Report (pdf)
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