Company: AOS
Filing Date: 2025-02-11
Form Type: 10-K
Source: 0000091142-25-000036
Chunk: 19

Company: SMITH A O CORP
Filing Date: 2025-02-11
Form: 10-K
Item: Item 1A
Chunk 19
---
 highly competitive, our revenues and earnings could decline as we respond to competition

We sell all of our products in highly competitive and evolving markets. We compete in each of our targeted markets based on product design, reliability, quality of products and services, advanced technologies, product performance, maintenance costs and price. Some of our competitors may have greater financial, marketing, manufacturing, research and development and distribution resources than we have; others may invest little in technology or product development but compete on price and the rapid replication of features, benefits, and technologies, and some are increasingly expanding beyond their existing manufacturing or geographic footprints.  New technologies and new competitors have developed and continue to develop in certain markets in which we participate, such as gas tankless and heat pump technologies in North America.  While we design and manufacture these and other products, we cannot assure that our products will continue to compete successfully with those of our current competitors and new market participants and it is possible that we will not be able to retain our customer base or improve or maintain our profit margins on sales to our customers. There is also increasing use of data analytics, machine learning, and artificial intelligence software, which our competitors may be able to use more effectively or implement more successfully than we are able to do.  Failure to adapt to the evolving competitive environment could materially and adversely affect our financial condition, results of operations and cash flows.

■Because approximately 21 percent of our sales in 2024 were attributable to China, adverse economic conditions or changes in consumer behavior in China could impact our business

Our third-party sales in China decreased six percent in local currency in 2024 compared to 2023. We derive a substantial portion of our sales in China from premium-tier products. Changes in consumer preferences and purchasing behaviors including preferences for e-commerce and manufacturer emphasis on brand ecosystems and connectivity, weakening consumer confidence and sentiment, as well as economic uncertainty, sociopolitical and demographic risks, availability of 

8

government incentives, and increased competition from Chinese-based companies may prompt Chinese consumers to postpone purchases, choose lower-priced products or different alternatives, or lengthen the cycle of replacement purchases. Further deterioration in the Chinese economy may adversely affect our financial condition, results of operations and cash flows.

Business, Operational, and Strategic Risks

■We sell our products and operate outside the U.S., and to a lesser extent, rely on imports and exports, which may present additional risks to our business 

Approximately 32 percent of our sales in 2024 were attributable to products sold outside of the U.S