As backdrop, two years ago, the EU imposed anti-dumping duties on product imported from China and Vietnam to protect local suppliers. Given TBL’s exposure to Europe (1/3 of total), this cost the company $9-$10mm or ~100bps in EBIT margin (Big on a 5.7% base). This duty expires on October 8th, which triggers a review process that could extend the duties by upwards of one year.
The important point here is that I don’t have any duty recapture in my model, and my sense is that the Street’s models do not either. If they do, then expectations are way too low on other operating metrics.
I’d also note that the EU is under more pressure to remove these anti-dumping duties today than 2 years ago. Whether or not the duties were even necessary was a hot debate in the first place given the vast difference in quality and label for European brands vs. those made in Asia. Now – with a weaker consumer spending environment and higher inflation, consumer interest groups such as EuroCommerce, BEUC and AEDT are leading a unified push to bring said duties to an end. If this were to occur, I’d have to take up my estimates for TBL, which are already above consensus.