Oil-Dri Corporation of America (ODC) Q4 2026 earnings review
Oil-Dri's profit rises, but its clay cat litter sales fall
Oil-Dri, the maker of Cat's Pride cat litter, ended its year with rising profit while its main litter sales shrank. Operating profit rose 17% on record quarterly sales, because overhead costs fell. Sales to industrial customers grew, led by a record quarter for animal-feed additives. Chief executive Daniel Jaffee gave no numbers for the new year.
| Sales | $129.3M +3% from a year ago; a quarterly record |
|---|---|
| Operating profit | $18.2M +17% from a year ago |
| US cat litter sales, excluding contract manufacturing | $55.9M -3% from a year ago |
| Outlook for fiscal 2027 | None given quarterly dividend unchanged at $0.225 per share |
⚖️ Verdict: 🟢 Bullish
The story got better because the two problems of the first half, falling margins and a lost animal-feed customer, both eased. Gross margin stopped falling after three quarters of declines, and feed-additive sales grew again. One caution: the retail group's profit fell 5%, because freight costs rose and rivals kept discounting cat litter.
The question now is whether profit can keep growing without more cuts to overhead. Either freight costs and rivals' discounts ease and the litter business contributes, or Oil-Dri must rely on cost cuts and contract work. Gross margin for the quarter ending in October will give the first answer.
🐂 Bull Case
Lower Overhead Lifted Operating Profit 17%
Oil-Dri's costs rose all year, and chief executive Daniel Jaffee said discipline was the answer: "Despite inflationary cost pressures, we maintained disciplined expense management". The fourth quarter supports him, because overhead fell 8% while sales rose 3%.
- Operating profit: $18.2 million, up 17% from a year ago
- Selling and administrative costs (overhead): 13.7% of sales, down 1.6 percentage points
- Gross margin: 27.8%, the same as a year ago
- Corporate costs outside the two business groups: down 12% by our math
This matters because gross margin had fallen about two percentage points in each of the prior three quarters. But the saving may not last. Oil-Dri credited "reduced outside service expenses and lower human resource costs attributable to corporate functions". For the full year it also cited a smaller bonus accrual, and a better year would restore that cost.
What to watch: gross margin in the quarter ending in October, against 29.5% a year earlier. A reading near 28% would show that profit growth now depends on overhead savings.
Sales to Industrial Customers Returned to Growth
The Business to Business group sells clay products to farm-chemical makers, oil and fuel refiners and animal-feed producers. This unit shrank early in the year, but in the fourth quarter its sales rose 4% and its operating profit rose 13%.
- Animal-feed additives: $9.9 million, up 18% and an all-time high
- Farm-chemical carriers: $12.6 million, up 6%
- Filtering clays for oils and fuels: $27.6 million, about level
The feed-additive recovery matters most, because a distributor lost a large customer early in the year. Oil-Dri now credits "new end-user accounts gained during the year", so these sales depend less on that one buyer.
What to watch: feed-additive sales in the quarter ending in October, against $4.7 million a year earlier. Growth from that base would show that the new accounts keep ordering.
Litter Made for Other Brands Grew 60%
Oil-Dri also makes cat litter under contract for other companies' brands, a business the release calls co-packaged litter. Sales grew 60% in the fourth quarter, and the release credits "an expanded product portfolio that now includes lightweight litter".
- Second quarter: up 31% from a year ago
- Third quarter: up 94%
- Full year: up 47%
This matters because contract work adds volume while Oil-Dri's own litter sales shrink. But the company does not publish the dollar value, so readers cannot judge the size or the profit of this business.
What to watch: the growth rate over the next two quarters, as year-ago sales begin to include lightweight litter. A rate that stays in double digits would show lasting demand from these customers.
🐻 Bear Case
Oil-Dri's Main Cat Litter Sales Fell 3%
Most of Oil-Dri's litter revenue comes from products sold in the US under its own brands, such as Cat's Pride, and under retailers' store brands. That business shrank in the fourth quarter, mainly in clay litter.
Oil-Dri blamed promotion timing at a large account, retailers' pricing changes and "ongoing heightened trade spending by competitors". That phrase means rivals are paying for discounts and shelf space. Crystal litter and new lightweight products grew, but they did not cover the gap.
- US litter excluding contract manufacturing: $55.9 million, down 3%
- Store-brand distribution changes: cost $3.9 million of sales this year
- Largest customer: $90.8 million of annual sales, 18% of the total
What to watch: the same US litter figure in the quarter ending in October, against $56.2 million a year earlier. Another decline would show that rivals' discounts are costing Oil-Dri shelf space.
Freight Costs Cut the Retail Group's Profit
The Retail and Wholesale group sells cat litter and floor absorbents, and Oil-Dri ships them by truck. In the fourth quarter the group's sales rose 3% but its operating profit fell 5%. The release blamed "significantly higher costs to transport cat litter products".
- Group operating margin: 11.7%, down 0.9 percentage points
- Shipping and handling, full year: 13.6% of company sales, up 0.2 percentage points
- Unpaid freight bills at year-end: $4.8 million, up from $2.7 million
Oil-Dri's annual report says conflict in the Middle East "may lead to increased input and transportation costs in future periods", so the pressure may continue.
What to watch: the group's operating margin in the quarter ending in October, against 16.3% a year earlier. A margin near the fourth quarter's level would show freight costs still rising faster than prices.
Cash Flow From Operations Did Not Grow
Chief executive Daniel Jaffee said Oil-Dri "achieved historic levels of cash generation" this year. The cash balance did reach a record. But the business produced almost exactly as much cash as last year, and it spent more on its plants.
- Cash from operations: $80.1 million, against $80.2 million last year
- Spending on plants and equipment: $34.2 million, up 5%
- Cash left after that spending: $45.9 million, down 4% by our math
- Gross profit, full year: down 4%, while operating profit stayed level
Record net income needs the same test. Operating profit did not grow, so the 6% rise came from outside the business. By our math, a legal settlement, lower landfill costs and higher interest income improved pre-tax profit by $3.5 million, more than its whole increase.
What to watch: spending on plants and equipment in the quarter ending in October, after $13.3 million in the fourth quarter by our math. Spending that stays near that level would leave less cash after investment, even if profit holds.
👓 Other Themes
Lenders Raised Oil-Dri's Borrowing Limits in October
On October 7 Oil-Dri amended two debt agreements. Its private note programme can now reach $150 million, double the old limit. The bank credit line rose by a third, to $100 million. The bank also agreed to "the removal of the $100 million cumulative permitted acquisitions threshold". Oil-Dri has borrowed nothing on the credit line and named no use for the money.
💲 Other KPIs
Cash rose $23.2 million in the year and now equals 1.9 times total debt. The multiple was 1.3 a year ago and has climbed for three straight quarters. Oil-Dri built the balance while it bought back shares and raised its dividend twice.
Receivables, the bills customers have not yet paid, grew 9% from a year ago while fourth-quarter sales grew 3%. By our math, the balance equals about 54 days of sales, up from 51. The annual report cites higher sales and the timing of collections.
Oil-Dri spent $12.6 million on its own shares, up from $2.3 million last year. Almost all of it came in the first half. The diluted share count still ended about level at 13.9 million, as 209,000 employee shares vested during the year.
The tax rate rose to 20.3% from 15.8% a year ago, by our math. Oil-Dri said last year's quarter included one-time tax benefits. That is why pre-tax profit grew 17% but net income grew 10%. The full-year rate held at 18%.
🔮 Guidance
Unchanged. The board kept the payout at the level first paid in August, which is 25% above the dividend of a year ago. By our math, dividends took 18% of net income in fiscal 2026, so the payout has room. Oil-Dri gave no sales or profit outlook for fiscal 2027. Jaffee said only that the company will "remain focused on our strategic initiatives and supporting our businesses".
❓ Key Questions
What does Oil-Dri plan for sales and profit in 2027?
A year ago Jaffee said he expected to beat fiscal 2025, and Oil-Dri did. This time the release gives no target, only a statement of focus. Readers have no yardstick for the new year.
How large is contract-manufactured litter in dollars?
Oil-Dri reports growth of 31%, 94% and 60% for this business but never its size. Without the dollar figure, nobody outside can tell how much of the retail group's growth depends on it.
Will the corporate cost savings repeat next year?
Corporate costs fell $4.6 million this year, partly on a smaller bonus accrual, while gross profit fell $5.6 million. If bonuses return, operating profit needs gross profit to grow again.
Why raise borrowing limits while holding record cash?
Oil-Dri holds more cash than debt and has borrowed nothing on its credit line. Its bank also removed the cap on acquisition spending. Management has not said whether it plans a purchase.
Has the lost animal-feed customer come back?
The annual report calls the loss temporary. The release credits the record quarter to current customers and new accounts, and does not say whether the lost buyer returned.