Gale Pacific has sharply downgraded its full-year EBITDA guidance due to tariff-driven demand softness in the US, while its Australia, New Zealand, and developing markets hold steady.
- Full-year EBITDA guidance cut from $18-20 million to $10-12 million
- US market faces reduced consumer demand following new tariffs introduced April 2, 2025
- US retail partners cautious on inventory replenishment amid tariff uncertainty
- Australia, New Zealand, and developing markets perform in line with expectations
- Manufacturing diversification outside China progressing amid US-China trade tensions
Gale Pacific Revises Earnings Outlook
Gale Pacific Limited (ASX: GAP), a global leader in screening and shading products, has issued a sobering trading update that slashes its full-year EBITDA guidance by nearly 50%, from an earlier $18-20 million range down to $10-12 million. The revision primarily reflects a sharp slowdown in the US market, where new tariffs introduced on April 2, 2025, have dampened consumer demand and prompted retail partners to adopt a cautious stance on inventory replenishment.
CEO Troy Mortleman highlighted that while the company enjoyed a solid first half of FY25, the outlook for the northern hemisphere’s summer selling season has darkened considerably. The tariff-induced price pressures and ongoing negotiations with US customers are creating headwinds that Gale Pacific had not fully anticipated earlier in the year.
US Market Challenges and Tariff Impact
The US market, a key revenue driver for Gale Pacific, is grappling with the fallout from the recent tariff escalation. Although existing inventory remains unaffected by the new tariffs, the ripple effects are evident in softer consumer demand and a more conservative approach by retail partners toward restocking. This cautious inventory management signals uncertainty and potential volatility in upcoming quarters.
Negotiations over tariff-related pricing adjustments are ongoing, underscoring the complexity of navigating the evolving trade landscape. The company’s ability to manage these challenges will be critical to stabilizing its US operations moving forward.
Stable Performance in Australia, New Zealand, and Developing Markets
In contrast to the US, Gale Pacific’s operations in Australia, New Zealand, and developing markets, particularly in the Middle East, continue to perform in line with expectations. This geographic diversification is proving to be a buffer against the turbulence in the US, reflecting the resilience of the company’s broader portfolio.
These markets are expected to provide a steady revenue base as the company navigates the uncertain US environment, although they are unlikely to fully offset the tariff-related headwinds in the near term.
Manufacturing Diversification Strategy Gains Momentum
Amid the ongoing US-China trade dispute, Gale Pacific is accelerating its strategy to diversify manufacturing away from China. The company has been exploring alternative manufacturing locations across Asia even before the recent tariff impositions, and these efforts have intensified in response to the new trade barriers.
This strategic pivot aims to mitigate future tariff risks and supply chain disruptions, potentially positioning Gale Pacific for greater operational flexibility and cost control in the medium to long term. However, the timeline and scale of benefits from this diversification remain to be seen.
Looking Ahead
Gale Pacific’s revised guidance and strategic responses highlight the tangible impact of geopolitical tensions on global manufacturing and trade-dependent companies. Investors will be watching closely for updates on tariff negotiations, inventory trends in the US, and progress in manufacturing diversification as the company prepares to release its full-year FY25 results.
Bottom Line?
Gale Pacific’s sharp earnings downgrade underscores the tangible risks tariffs pose, but its diversified markets and manufacturing pivot offer cautious optimism.
Questions in the middle?
- How quickly can Gale Pacific scale up manufacturing outside China to offset tariff impacts?
- Will US retail partners resume normal inventory replenishment once tariff negotiations conclude?
- Can Australia, New Zealand, and developing markets grow enough to compensate for US market softness?