Regal Rexnord Provides Update On Tariff-Related Impacts

Rhea-AI Summary

Regal Rexnord (NYSE: RRX) has provided an update on tariff impacts during the Bank of America Global Industrials Conference 2025. The company estimates an unmitigated annualized cost impact of approximately $60 million from current U.S. tariffs on imports from Canada, China, and Mexico, as well as on steel and aluminum.

The company has developed mitigation plans including supply chain realignments, production relocations, and pricing actions to achieve price/cost neutrality. RRX expects to achieve margin neutrality by the end of 2025 under current tariffs, or by first half of 2026 if USMCA exclusions are removed. The tariffs are expected to have negligible impact on Q1 2025 results.

Regal Rexnord, with 30,000 associates globally, operates through three segments: Industrial Powertrain Solutions, Power Efficiency Solutions, and Automation & Motion Control, serving markets including factory automation, aerospace, medical, and alternative energy.

Positive

• Company has comprehensive mitigation plans to achieve price/cost neutrality
• Negligible impact expected on Q1 2025 results
• Most imports from Canada and Mexico are USMCA-compliant and exempt from tariffs

Negative

• $60 million estimated annual cost impact from current tariffs
• Potential margin pressure until end of 2025 or H1 2026
• Risk of additional impact if USMCA exclusions are removed

Insights

Financial Analyst

Regal Rexnord's tariff impact disclosure provides important clarity for investors concerned about trade policy pressures. The $60 million gross annual impact from current tariffs represents less than 1% of the company's $7.8 billion market cap, making it a manageable challenge rather than a crisis. What's particularly reassuring is management's comprehensive mitigation strategy and confident timeline.

The company's disclosure that most Canadian and Mexican imports qualify for USMCA exemptions currently limits their exposure, while their contingency planning for potential USMCA exclusion removal demonstrates prudent risk management. Their multi-faceted approach—combining supply chain realignments, production relocations, and pricing actions—suggests they have substantial operational flexibility and likely some pricing power with customers.

The timeline to achieve neutrality (end of 2025 under current conditions or first half of 2026 without USMCA exclusions) provides investors with concrete expectations. Most importantly, the negligible Q1 2025 impact indicates no immediate earnings pressure, giving management breathing room to implement mitigation measures without quarterly performance disruption.

This announcement effectively reduces uncertainty while demonstrating management's proactive approach to external challenges. For a diversified industrial company serving growth markets including factory automation, data centers, and alternative energy, this level of operational adaptability amid trade policy shifts is a positive indicator of their competitive resilience.

Supply Chain Expert

Regal Rexnord's tariff mitigation strategy reveals sophisticated supply chain management capabilities that many industrial manufacturers lack. The company's confidence in achieving dollar neutrality despite a $60 million tariff exposure indicates they've likely already mapped multiple contingency scenarios across their complex global operations.

Their approach combines three critical levers: supply chain realignments (likely shifting sourcing to non-tariffed countries), production relocations (moving manufacturing to optimize tariff structures), and pricing actions (passing costs to customers where market position allows). This multi-pronged strategy significantly increases their probability of successful mitigation compared to companies relying solely on pricing.

The negligible Q1 impact suggests they've already implemented initial mitigation steps or structured their supply chain with substantial USMCA-compliant sourcing. Their timeline—margin neutrality by end of 2025 under current conditions or first half of 2026 without USMCA exclusions—appears realistic given the complexity of reconfiguring industrial manufacturing supply chains.

What's notably absent is any mention of inventory stockpiling ahead of tariff implementation—a tactic many manufacturers employ but which creates balance sheet pressure. This suggests Regal Rexnord is focusing on structural solutions rather than temporary buffers, which is more sustainable long-term but requires greater operational capabilities.

For a company with 30,000 associates worldwide serving diverse critical industries, this level of supply chain adaptability represents a competitive advantage when navigating increasingly volatile trade policy environments.

MILWAUKEE, March 19, 2025 /PRNewswire/ -- Regal Rexnord Corporation (NYSE: RRX), in conjunction with its participation at the Bank of America Global Industrials Conference 2025 in London, is providing the investment community with additional clarity related to estimated impacts from current and potential U.S. tariffs on imports from Canada, China, and Mexico, as well as on steel and aluminum.

Based on information currently available, and excluding the potential impacts from any retaliatory tariffs, the Company estimates a gross, unmitigated annualized cost impact from tariffs that are currently in place at approximately $60 million. This estimate reflects that the vast majority of goods the Company imports from Canada and Mexico are compliant with the United States-Mexico-Canada Agreement (USMCA) and so are currently exempt from tariffs.

The Company has well-developed plans in place intended to fully mitigate the impacts of tariffs in the year – at current levels and under a scenario where there is no USMCA exclusion. These mitigation plans may include supply chain realignments, production relocations, and productivity and pricing actions, and should enable the Company to be at least price/cost neutral on a dollar basis. The Company expects to be neutral on a margin basis by the end of 2025 under the tariff regime currently in effect, or by the first half of 2026 under a scenario where there are no USMCA exclusions.

The Company is further clarifying that tariffs currently in place are expected to have a negligible impact on the Company's first quarter 2025 results.

The Company undertakes no obligation to update the information in this press release related to the impacts of tariffs on future quarters, although it may do so from time to time as it believes is appropriate and as clarity around the tariff terms and duration, as well as progress on its mitigation efforts, becomes available.

About Regal Rexnord

Regal Rexnord's 30,000 associates around the world help create a better tomorrow by providing sustainable solutions that power, transmit and control motion. The Company's electric motors and air moving subsystems provide the power to create motion. A portfolio of highly engineered power transmission components and subsystems efficiently transmits motion to power industrial applications. The Company's automation offering, comprised of controllers, drives, precision motors, and actuators, controls motion in applications ranging from factory automation to precision tools used in surgical applications.

The Company's end markets benefit from meaningful secular demand tailwinds, and include factory automation, food & beverage, aerospace, medical, data center, warehouse, alternative energy, residential and commercial buildings, general industrial, construction, metals and mining, and agriculture.

Regal Rexnord is comprised of three operating segments: Industrial Powertrain Solutions, Power Efficiency Solutions, and Automation & Motion Control. Regal Rexnord is headquartered in Milwaukee, Wisconsin and has manufacturing, sales and service facilities worldwide. For more information, including a copy of our Sustainability Report, visit RegalRexnord.com.

Forward Looking Statements

All statements in this communication, other than those relating to historical facts, are "forward-looking statements." Forward-looking statements can generally be identified by their use of terms such as "anticipate," "believe," "confident," "estimate," "expect," "intend," "intended," "plan," "may," "will," "project," "forecast," "would," "could," "should," and similar expressions, including references to assumptions. Forward-looking statements are not guarantees of future performance and are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements. Forward-looking statements include, but are not limited to, statements about expected market or macroeconomic trends, future strategic plans and future financial and operating results. Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements in this communication include, without limitation: changes to and uncertainty in trade policy, including the terms, scope and duration of any tariffs on imports into the U.S. from Canada, Mexico and China, or tariff and import/export regulations or other trade restrictions imposed by the U.S. or other governments, including any retaliatory tariffs; the potential impact of tariffs on the Company's results; the Company's ability to successfully implement any tariff mitigation efforts, and the possible effect of mitigation efforts by the Company; the Company's substantial indebtedness as a result of the acquisition of Altra Industrial Motion Corp. and the effects of such indebtedness on the Company's financial flexibility; the Company's ability to achieve its objectives on reducing its indebtedness on the desired timeline; dependence on key suppliers and the potential effects of supply disruptions; fluctuations in commodity prices and raw material costs; any unforeseen changes to or the effects on liabilities, future capital expenditures, revenue, expenses, synergies, indebtedness, financial condition, losses and future prospects; unanticipated operating costs, customer loss and business disruption or the Company's inability to forecast customer needs; uncertainties regarding our ability to execute restructuring plans within expected costs and timing; actions taken by competitors and their ability to effectively compete in the increasingly competitive global industries and markets; dependence on significant customers and distributors; risks associated with global manufacturing, including risks associated with public health crises and political, societal or economic instability, including instability caused by ongoing geopolitical conflicts; risks associated with excess or obsolete inventory charges including related write-offs or write-downs; economic changes in global markets, such as reduced demand for products, currency exchange rates, inflation rates, interest rates, recession, government policies, including policy changes affecting taxation, trade, tariffs, import/export regulations, immigration, customs, border actions and the like, and other external factors that the Company cannot control; unanticipated costs or expenses that may be incurred related to product warranty issues; risks related to foreign currency fluctuations or changes in global commodity prices or interest rates; losses from failures, breaches, attacks or disclosures involving information technology infrastructure and data; costs and unanticipated liabilities arising from rapidly evolving laws and regulations, including data privacy laws, labor and employment laws, environmental laws and regulations, and tax laws and regulation; and other factors that can be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available on our Investor Relations website. Forward-looking statements are given only as of the date of this communication and we disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

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SOURCE Regal Rexnord Corporation

FAQ

What is the estimated annual cost impact of tariffs on Regal Rexnord (RRX)?

RRX estimates a gross, unmitigated annualized cost impact of approximately $60 million from current U.S. tariffs.

How is RRX planning to mitigate the tariff impacts in 2025?

Through supply chain realignments, production relocations, and pricing actions to achieve price/cost neutrality.

When does RRX expect to achieve margin neutrality from tariff impacts?

By end of 2025 under current tariffs, or by first half of 2026 if USMCA exclusions are removed.

Will the tariffs affect RRX's Q1 2025 financial results?

No, the company expects tariffs to have a negligible impact on Q1 2025 results.