Ethan Morgan

Ethan Morgan, on behalf of Tami Zakaria, asked for more color on India's strong growth with Pureit integration, the roadmap for scaling India over the next three to five years, and potential further M&A in that region. He also inquired about the forecast for operational improvements and margin strength in the international segment, particularly with India scaling and China potentially improving in the second half of 2026.

Answer

CEO Steve Shafer stated the primary focus for India is leveraging the Pureit addition and the combination of Pureit and A. O. Smith's existing business for organic growth, driven by high-paced innovation and new product introductions at a larger scale. He noted that future M&A will play out over time. CFO Chuck Lauber indicated that margin improvement in the international segment would be a longer-term scale, as they are still investing in growth in India. For China, he expressed satisfaction with 2025 performance due to restructuring actions and cost management, but noted it's too early to call out significant margin improvement for 2026, pending economic recovery and scale growth in India.

Ethan Morgan from JPMorgan Chase & Co. requested more details on the India business, specifically the roadmap for scaling operations over the next three to five years following the Pureit integration, and the potential for further M&A in the region. He also inquired about the long-term outlook for international segment margin improvements, particularly for India as it scales and China potentially recovers in the second half of 2026.

Answer

CEO Steve Shafer stated that the primary focus for India is leveraging the Pureit integration and organic growth through high-paced innovation, which has historically driven double-digit growth, with M&A being a longer-term consideration. CFO Chuck Lauber indicated that international margin improvements, including for India and China, are a longer-term prospect, as India is still in a growth investment phase, and China's margin recovery depends on economic conditions and the strategic assessment, despite positive impacts from 2024 restructuring actions.