When
Stephen Shafer takes over as
A.O. Smith’s newest CEO
on July 1, he’ll be taking the helm during a time of economic uncertainty due to President Donald Trump’s ever-changing tariff policies.
The Milwaukee-based global manufacturer of water heaters reported Tuesday during its first quarter earnings call that tariffs will impact its total cost of goods sold by between 6% and 8% annually.
The bulk of this cost increase comes from importing some components from China. Despite the economic uncertainty, A.O. Smith leadership remains optimistic that the company can handle supply chain and cost issues adeptly.
The company maintained its guidance for 2025, which includes a sales growth projection of 0% to 2%. Earnings per share are projected to be between $3.60 and $3.90.
“The tariff-related impacts that we considered when maintaining our outlook are based on what has been announced as of today,” said
Charles Lauber, chief financial officer at A.O. Smith. “While our manufacturing footprint supports our in-country for-country business model, our supply chain costs are impacted by not only our direct imports of components, but also our suppliers’ footprint and import strategies.”
In North America, A.O. Smith has announced price increases of between 6% and 9% on most water heater products. Price increases have also been announced in other product categories.
A.O. Smith has also congregated cross-functional tariff response teams to identify tariff and supply chain-related risks to the business. The teams develop action plans to mitigate any risks.
“Other mitigating factors include footprint optimization, strategic sourcing and other cost containment measures,” said Schafer, who currently serves as A.O. Smith’s president and chief operating officer.
The company was already working to move production of its gas tankless products out of China and into Mexico. This project has been accelerated since the president’s tariff announcement earlier this year.
“We had already announced our intent to move our production out of China and into Juarez, Mexico, and this just accelerates are ability to ramp up production,” said
Kevin Wheeler, CEO at A.O. Smith.
In the coming months, company leadership will be focused on honing plant operating efficiency and order management to help deal with its newly announced price increases.
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