A.O. Smith Corp. today reported record sales and profits with a 50 percent increase in its fourth quarter net income and a 36 percent net income increase for the full year.
The Milwaukee-based maker of residential and commercial water heaters and treatment products has had a string of quarters with increasing profits driven by new regulations that started in April 2015. The increased efficiency of residential water heaters came with increased production costs and an increase in price.
The company’s net income for the quarter was $79.8 million or 90 cents per diluted share. For the year it was $282.9 or $3.16 per share. The company had revenue of $639.4 million in the fourth quarter, an increase of 2 percent. For the full year A.O. Smith had revenue of $2.54 billion, an increase of 7.6 percent.
The company credited increased prices in North America, higher sales of Lochinvar-branded products and commercial water heaters in the U.S. and demand for water heating and treatment products in China for the increase in revenue.
A.O. Smith’s North American segment had a 5 percent increase in revenue for the full year to $1.70 billion. Increased prices and higher volume in U.S. commercial water heaters and boilers helped to offset lower residential water heater volumes.
The company’s rest of world segment saw revenue up 13 percent to $866.1 million, with Chinese sales up 14 percent in U.S. dollars.
The company projected its sales in 2016 would be up 8 percent, matching the growth from 2015. Chief executive officer Ajita Rajendra said the company expects to see strong growth in China despite volatile economic conditions. He said issues with the Chinese stock market were not the focus on many consumers when he was in the country recently.
“The people on the street, that’s not even a topic of conversation,” he said.
Rajendra said while A.O. Smith competes with Haier in China, he doesn’t expect the company’s purchase of General Electric’s appliance business to impact his company’s performance.
“It’s (too) early to tell, but it’s not something at this point we’re concerned about,” he said, although he added it is something executives are watching.
Rajendra also said the company remains committed to India and plans to expand some offerings there in the coming year, despite expecting an $8 million to $9 million loss this year.
“India is an investment for the future,” Rajendra said.
