Soft water heater market slows A.O. Smith sales
A.O. Smith, the global water technology company, reported third quarter 2018 net sales of grew just 1% to $754.1 million from net sales of $749.9 in the third quarter 2017.
The Milwaukee, Wis., based company also reported third quarter net earnings of $104.6 million, nearly a 12% increase from net earnings of $93.7 million during the same period last year.
“We experienced softer water heater sales in the U.S. and China than expected,” said Kevin Wheeler, president and CEO of A.O. Smith. “We believe a decline in water heater industry volumes in the U.S. and weaker housing growth in China drove the softness in the quarter.”
Wheeler noted that sales of water treatment products in China grew significantly in the quarter. “This growth reaffirms our belief of the growing consumer desire for safe drinking water in that country, as well as our capabilities to bring the best products to the market.”
The company also launched A. O. Smith-branded water treatment products in more than 1,700 Lowe’s stores across the country. “We understand that water quality is a growing concern for families and our comprehensive line of products gives shoppers a wide array of options to effectively improve the overall quality and safety of their water,” Wheeler noted.
Third quarter sales of $486.9 million for the North America segment, which include U.S. and Canadian water heaters, boilers and water treatment products, were essentially flat compared with third quarter 2017. Pricing actions in 2018 on water heaters and boilers related to higher steel and freight costs were more than offset by the effects of lower volumes of water heaters in the U.S., the company said.
Looking ahead, Wheeler said, “We do not expect sales of water heaters in the U.S. will be as strong as we previously forecasted.”
Based on A.O. Smith’s shipments in September, the company expects residential water heater industry volumes in the United States will be down approximately 100,000 units in the second half of the year compared with last year, but increase by 250,000 to 300,000 units for the total year. The company also said it expects 2018 commercial water heater industry volumes will decline by approximately 5% percent compared with last year.
The Milwaukee, Wis., based company also reported third quarter net earnings of $104.6 million, nearly a 12% increase from net earnings of $93.7 million during the same period last year.
“We experienced softer water heater sales in the U.S. and China than expected,” said Kevin Wheeler, president and CEO of A.O. Smith. “We believe a decline in water heater industry volumes in the U.S. and weaker housing growth in China drove the softness in the quarter.”
Wheeler noted that sales of water treatment products in China grew significantly in the quarter. “This growth reaffirms our belief of the growing consumer desire for safe drinking water in that country, as well as our capabilities to bring the best products to the market.”
The company also launched A. O. Smith-branded water treatment products in more than 1,700 Lowe’s stores across the country. “We understand that water quality is a growing concern for families and our comprehensive line of products gives shoppers a wide array of options to effectively improve the overall quality and safety of their water,” Wheeler noted.
Third quarter sales of $486.9 million for the North America segment, which include U.S. and Canadian water heaters, boilers and water treatment products, were essentially flat compared with third quarter 2017. Pricing actions in 2018 on water heaters and boilers related to higher steel and freight costs were more than offset by the effects of lower volumes of water heaters in the U.S., the company said.
Looking ahead, Wheeler said, “We do not expect sales of water heaters in the U.S. will be as strong as we previously forecasted.”
Based on A.O. Smith’s shipments in September, the company expects residential water heater industry volumes in the United States will be down approximately 100,000 units in the second half of the year compared with last year, but increase by 250,000 to 300,000 units for the total year. The company also said it expects 2018 commercial water heater industry volumes will decline by approximately 5% percent compared with last year.