A.O. Smith building $65 million factory in China

New facility to be open by 2018

Milwaukee-based A.O. Smith Corp. plans to open a $65 million manufacturing and assembly facility in China in 2018, chief financial officer John Kita said during the company’s third quarter earnings call.

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Kita said the company has seen strong growth in its water treatment business in China and will reach capacity at its current leased facility in the next few years. The company allocated $20 million in capital expenditures for the facility in 2016, he said.

The new building will be for water treatment manufacturing and air purification assembly.

China now makes up 32 percent of A.O. Smith’s sales and is growing at 15 percent in local currency. North American water heaters makes up 57 percent of the company’s sales and is growing at 4 percent.

“The really exciting part of this is the fact that in China what we have is a very strong consumer brand and very strong distribution,” said Ajita Rajendra, A.O. Smith chairman and chief executive officer. “There are a number of other categories and segments that we can get into, new segments, where we can leverage our brand and our distribution to continue this type of growth in China.”

The company reported net income during the third quarter of $83.2 million, an increase of 13 percent over last year. Earnings during the quarter increased from 41 cents to 47 cents per diluted share.

Revenue was up 9.4 percent to $683.9 million, a record for sales, according to the company.

A.O. Smith’s North American segment reported revenue of $450.8 million, up from $417.4, with higher volumes of residential and commercial water heaters in the United States. The company’s acquisition of Aquasana on Aug. 8 added $6.2 million to sales during the quarter.

The rest of world segment was up 11 percent to $240.3 million, with a 17 percent local currency increase in China.

The company did say it had higher selling costs in China as it expanded into tier two and three cities and higher advertising costs to promote its products during the Summer Olympics and European football championships.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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