Hawkins reports record revenue as segment growth offsets margin pressure
The chemical distributor saw revenue rise 8% to $315.7 million in the first quarter of fiscal 2027.
Hawkins (HWKN) reported record first-quarter revenue of $315.7 million. The chemical distributor saw sales rise 8% year-over-year, with organic growth accounting for approximately 5% of that increase.
Despite the top-line growth, diluted earnings per share decreased 4% to $1.35, compared to $1.40 in the prior-year period. The company's consolidated gross margin compressed to 23% of sales from 25% a year ago. This decline was impacted by a $1.9 million increase in LIFO reserves and $1.3 million in unrecovered freight costs.
Growth was distributed across all three primary segments. Water Treatment sales grew 6% to $158.3 million, supported by organic growth in proprietary product lines and $6.9 million in sales from acquired businesses. Industrial Solutions sales rose 10% to $60.1 million due to higher volumes of manufactured, blended, and repackaged products.
Food & Health Sciences sales grew 9% to $97.3 million. Agricultural products within the segment grew 30% via higher volumes, though those gains were partially offset by lower food ingredient volumes.
Operating expenses rose as the company expanded. SG&A expenses increased 14% to $35.3 million. This rise was due to $2.1 million in costs from acquired Water Treatment businesses and the absence of a $1.9 million favorable fair value adjustment that had occurred in the prior year.
Adjusted EBITDA increased 1% to $56.9 million. The company revised the definition of this metric in the third quarter of fiscal 2026 to exclude non-cash earnout related expense and income.
Cash flow and balance sheet metrics improved during the period. Free cash flow rose over 30% to $23.5 million, up from $17.9 million in the prior-year period. The leverage ratio decreased slightly to 1.36x adjusted EBITDA from 1.37x at the end of fiscal 2026.
During the first quarter, the company acquired Aqua-Chem, Inc. for $3.6 million.