A. O. Smith Continues Review of China Business After Sales Fall 28% in Second Quarter
Key Facts
A. O. Smith continued its strategic review of its China business after facing a significantly weaker market, Chief Executive Steve Shafer said in the company’s second-quarter 2026 earnings filing. The company did not confirm an announcement about selling a stake in the business, and no such announcement appeared on its public news page. Shafer said the company was "continuing its strategic review of the business" in China. The review follows a decline in the company’s sales in the Chinese market during the second quarter. In its filing, the company linked the performance to weak consumer demand and a difficult market environment.
A. O. Smith’s sales in China fell 28% in local currency in the second quarter of 2026 compared with the same period a year earlier. The company attributed the decline to continued weakness in consumer demand and a difficult market environment. The drop puts its China business at the center of the strategic review Shafer described, after the company said it was managing its business in a significantly weaker market. In the first quarter, Rest of World segment sales fell 11% to 200.7 million dollars, with the company attributing the decline to continued challenges in China’s consumer appliance market. Results for two consecutive quarters show ongoing pressure on its business outside the U.S. market, although the segment figures cover a broader area than China alone.
Rest of World segment sales were 194.9 million dollars in the second quarter of 2026, down 19% year over year, according to the company’s filing. The segment margin fell to 5.2%, compared with 10.5% in the corresponding period of 2025. That reflects the concurrent decline in sales and margin in the segment that includes the China business. Segment sales in the first quarter were 200.7 million dollars, down 11% year over year, amid challenges in China’s consumer appliance market. These results provide direct financial context for the company’s review of its business there, without announcing a final decision on it.
Pressure on the company’s business came as China recorded a decline in utilized foreign investment, while the trend differed in high-tech industries. China’s vice commerce minister said attracting foreign capital faced challenges including worsening geopolitical disputes, weak growth momentum and increased protectionist and unilateral measures. By contrast, foreign investment in high-tech industries rose 33.8% during the period from January to September 2026. The figures highlight differences in investment flows across sectors as A. O. Smith reviews its China business.
On activity indicators, China’s manufacturing Purchasing Managers’ Index stood at 50.1% in September 2026, up 0.3 percentage points from the previous month, according to China’s National Bureau of Statistics. The index thus entered expansion territory after being below that level in the previous month. The indicator offers a different reading from the demand pressures A. O. Smith described in its China business, since it measures industrial activity across the economy rather than the company’s performance or its appliance market alone. In the market, the company’s shares closed at 62.06 dollars on October 27, 2026. The available data did not include other prices for the session.
A. O. Smith scheduled its third-quarter 2026 earnings call for October 29 at 10:00 a.m. U.S. Eastern time. The call is a near-term opportunity for the company to provide an update on its review of the China business, following Shafer’s July statement that the strategic review was continuing. In October, the company raised its quarterly cash dividend 6% to 0.38 dollars per share. The third-quarter results will be the latest announced opportunity for investors to follow what management says about conditions in the Chinese market and its direction for the business there.