Tariffs? What Tariffs? Techtronic Shrugs Off Trade Pressures In Latest Earnings

The power tool maker's revenue rose 7.5% in the first half of the year, and its profit rose by 14%, despite its heavy reliance on the U.S. market for sales and China for manufacturing

Key Takeaways:

• Techtronic reported solid revenue and profit growth in the first half of the year, and said it is well positioned to weather "evolving global trade policies" in the second half
• The company has avoided U.S. tariff fallout so far partly by relying on newer factories in the U.S., Vietnam and Mexico to complement its original Chinese manufacturing base

Tariffs? What tariffs?

That was the big message in the latest earnings report from power tool maker Techtronic Industries Co. Ltd. (0669.HK), which previously looked like one of the most vulnerable companies in the U.S.-China trade war. The company gets the bulk of its revenue from power tools under the Milwaukee and Ryoki brands, with big portions of its products manufactured in China and sold in the U.S.

But Techtronic's latest financial report for the first half of 2025 showed no signs of impact from the trade war, which has seen U.S. President Donald Trump impose various levels of tariffs on goods from China and other countries. U.S. tariffs on imports from China have seesawed all over the map since Trump took office in January, and last stood at an average of around 55%, according to the Peterson Institute for International Economics.

Techtronic looked especially vulnerable to the tariffs due to its major manufacturing base in China, combined with its huge reliance on the U.S. market, which accounts for about three-quarters of its sales. Realizing that people would worry about that exposure, the company put out a special announcement in February saying U.S. tariffs at that time would have an "immaterial" impact on its results this year.

Fast forward to the present, when the company's latest earnings report, issued on Tuesday, shows its business did quite well in the first half of the year, including a 7% revenue increase and an even larger 14% profit rise. The company did mention the "tariff" word in the report, though only twice, both times in reference to steps it was taking to reduce the threat.

That said, some of the company's tactics to minimize the impact appear to be short-term in nature, mostly involving building up inventories in other countries not subject to the same high tariff rates. Thus, if the U.S. and China don't reach a longer-term trade agreement by the end of this year, it's quite possible that Techtronic may start to feel some pain from any continued high tariff rates on Chinese goods going into 2026.

But for now, at least, things seem to be going quite well for the company, whose other main business is making cleaning products like the Hoover brand of vacuums. Unlike many other Chinese companies in its situation, Techtronic is a bit different in that it's based in Hong Kong and looks like quite the international company, based on its executive ranks.

The company is also getting ready for a major transition as its aging co-founder and Chairman Horst Julius Pudwill prepares to step aside and welcome in a new generation of leaders, including his son. While we aren't intimately familiar with the company's inner workings, it wouldn't be out of the question for Techtronic to ultimately relocate its headquarters to another city, perhaps Singapore or even to the U.S., to lower its chances of getting caught up in a U.S.-China rivalry that's not likely to lessen anytime soon.

Growing revenue

For now, at least, Techtronic's business appears to be quite sound. The company's revenue rose 7.5% year-on-year to $7.83 billion from $7.31 billion a year earlier, accelerating slightly from 6.5% growth for all of last year. Power tools made up the big majority of sales, accounting for about 95% of the total, and were up by an even stronger 8.3% year-on-year.

The weak link for Techtronic during the six-month period was its smaller floorcare and cleaning business, whose revenue actually fell 4.8% to $408 million. The company attributed that decline to its efforts to rationalize that part of the business to improve its profitability, though it didn't break out profit margins for that segment.

In terms of geography, sales in the North America, mostly from the U.S., rose 8.1% year-on-year, accelerating from 5.5% growth for all last year. The accelerating growth probably owed at least partly to a purchasing rush of products already in the U.S. before Trump took office by people trying to avoid paying higher prices as a result of the new tariffs.

Techtronic previously relied mostly on a manufacturing base in the Southern Chinese city of Dongguan near Hong Kong, but more recently has diversified its footprint to include facilities in the U.S., Mexico and Vietnam. While the company doesn't say how much of its manufacturing still takes place in China, various reports estimate the amount anywhere from 40% to as much as 80%.

The company is clearly using all of its manufacturing capacity outside of China for sales to the U.S., though that amount looks insufficient to cover all of its sales to the key U.S. market. To make up the difference, Techtronic appears to be relying on products and components that were stockpiled in the U.S. before Trump took office to avoid tariffs. As it built up those stockpiles, its inventory rose to $4.29 billion by the end of June from $4.03 billion a year earlier. And reflecting how it's now using that inventory to avoid U.S. tariffs, its inventory days decreased by one to 103 at the end of June from 104 a year earlier.

The company's operating expenses grew 6.5% in the first half of the year, or slightly slower than its revenue growth. That allowed it to boost its profit for the period by 14.2% to $628 million from $550 million year-on-year. In a show of confidence about its prospects, the company even raised its interim dividend by 15.7% from a year earlier.

"Looking forward to the second half of 2025, we are in a very strong position to address the challenges presented by the current macroeconomic and geopolitical environment and the evolving global trading policies," it said.

The company's stock was basically unchanged in the two trading days after the announcement, showing investors were neither pleasantly surprised nor worried by the results. The stock trades at a price-to-earnings (P/E) multiple of 18, which is comfortably in between the higher 22 for Stanley Black & Decker (SWK.US), but ahead of the 16 for Japanese peer Makita (6586.T).

It's hard to say what lies ahead in the volatile U.S.-China trade relationship, but Techtronic clearly wants us to believe its above the fray. That could be true for now, and the company appears to be managing the trade frictions well so far. But if the trade war drags on, or even worsens, the company is likely to ultimately feel the effects.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.