Production impact of potential Mexico tariffs unclear, Meeusen says

Badger Meter reports revenue, net income records

Badger Meter Inc. headquarters
Badger Meter Inc.'s headquarters in Brown Deer.

Rich Meeusen says it’s too soon to know if potential tariff and tax changes would force Badger Meter Inc. to bring work back to the United States from Mexico .

The chairman, president and chief executive officer of the Brown Deer-based water meter manufacturer said the company has the capacity to bring some manufacturing back to the U.S. if the move was financially justified by any tariffs imposed by the Trump administration.

The company currently manufacturers components for its residential water meters in the U.S. and sends the parts to a 181,300-square-foot facility in Nogales, Mexico for final assembly. Larger commercial water meters are manufactured at the company’s Brown Deer headquarters.

Meeusen said the fact that the company is exporting components and importing a final product is an important distinction on how the business would be treated. He also noted there is no clarity on what is being proposed and it would be premature to speculate.

“We could bring some production back if we had to,” he said, although he noted U.S. assembly would come with higher labor costs. “We would automate, we would never do it the way we would in Mexico.”

Meeusen said when the company has previously done U.S. assembly the process was highly automated and used about one-tenth of the labor.

Uncertainty about future government actions was one of the potential headwinds the company highlighted for 2017, while Meeusen said he was also optimistic about the possibility of stronger economic growth in North America and potential opportunities in the Middle East.

The company reported records for revenue, net income and earnings in 2016, although topline results were down slightly in the fourth quarter.

For the year, Badger Meter had net income of $32.3 million, a 24.5 percent increase over 2015, and earnings increased from 90 cents to $1.11 per diluted share. Revenue was also up 4.3 percent to $393.8 million.

The company reported a 2.8 percent drop in revenue during the fourth quarter to $93.1 million, which Meeusen attributed to lower international sales and weakness in flow instrumentation markets, including oil and gas. He said domestic municipal water sales were strong, helping to offset those weak points.

Badger Meter did improve net income during the quarter by 11.5 percent to $6.1 million and earnings increased from 19 to 21 cents per diluted share.

“Despite some headwinds in material costs, 2017 is off to a good start. We are optimistic about the continued growth of our successful new products in the municipal water market and believe the flow instrumentation market may be recovering,” Meeusen said.

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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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