A.O. Smith managed to set a record for earnings and revenue in the first quarter, even as the company’s sales of residential water heaters were down in the United States compared to the previous year.
Sales in North America were off roughly 1 percent as higher prices and improved boiler sales were offset by lower volumes in residential and commercial water heaters.
The Milwaukee-based company experienced strong sales in the first quarter of 2015 because of pre-buy ahead of a price increase in April.
A.O. Smith reported total revenue of $636.9 million, up 3 percent from the prior year and setting a record for the quarter. The company’s bottom line performance was much better and set records with net income up 26 percent to $73.5 million and diluted earnings per share up 28 percent to 83 cents.
The company’s rest of world segment had a strong quarter with revenue up 11 percent to $217.4 million. That included a 17 percent increase in local currency in China with strong demand for premium water heating and water treatment products, along with seasonal demand for air purifier products.
Chief executive officer Ajita Rajendra said A.O. Smith is a consumer products company in China, making it different from other industrial firms, adding he is confident the company will have 15 percent growth for the year in local currency.
“Right now we feel comfortable with what we see,” Rajendra said when asked if he had concerns about a slowdown in China. “In the consumer appliance categories, we’re not seeing that.”
He also said the company is continuing to invest in new product categories in China and in expanding into smaller cities.
“We are never going to be dependent on a stagnant portfolio of products in China for growth, because that obviously doesn’t last forever,” Rajendra said.
The decrease in U.S. residential water heater sales was more than the company expected, chief financial officer John Kita said. The company passed the anniversary of its price increases and will have more favorable comparison’s moving forward. The company also expects volumes to increase for the industry during the year.
The company also increased its guidance for the year to between $3.47 and $3.55 for the year and expects to have 8 percent growth in revenue.
