Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Aebi Schmidt is exposed to market risks in the ordinary course of business, which primarily relate to fluctuations in foreign currency exchange and commodity prices:
Foreign exchange fluctuations
Aebi Schmidt transacts in multiple currencies around the world aside from the U.S. dollar, including the Swiss franc and the euro. While Aebi Schmidt aims to source, produce and sell in the same currency, there may be limitations to this alignment, including the fact that certain commodities are typically nominated in a particular currency and the resulting net impact of foreign currency fluctuations may be material. Accordingly, Aebi Schmidt faces foreign currency exchange rate risks arising from transactions in the normal course of business. In addition, because the functional currency of most of the reporting units is the respective local currency, the translation into the group’s reporting currency, the U.S. dollar, is subject to foreign exchange rate fluctuations. Foreign currency transactions and the translation into the reporting currency, the U.S. dollar, may have a material impact on the group’s net sales, net earnings and operating results. A hypothetical 10% weakening of the Swiss franc or euro against the U.S. dollar would cause a decrease of approximately $0.4 million and an increase of approximately $3.2 million to Aebi Schmidt’s net income for the year ended December 31, 2025, respectively. To date, Aebi Schmidt has not entered into any material hedging arrangements with respect to foreign currency risk. Aebi Schmidt will continue to reassess its approach to manage its risk relating to fluctuations in currency rates.
Commodity price changes
Aebi Schmidt purchases, directly and indirectly through component purchases, significant amounts of stainless steel, carbon steel, aluminum, plastics composite, materials, wood, electronic components, cables and other commodity-sensitive raw materials. In particular, the prices of stainless steel, carbon steel and aluminum have been volatile in recent years, and Aebi Schmidt aims to mitigate this risk of short-term volatility by contracting purchases of major raw material categories in advance. Stainless steel, carbon steel and aluminum are the category of direct raw materials with the highest purchase volume. A hypothetical 10% change in stainless steel, carbon steel and aluminum prices would have caused a $4.6 million change in Aebi Schmidt’s net income for the year ended December 31, 2025, respectively. As impacts to Aebi Schmidt’s results due to changes in commodity prices are difficult to quantify, the calculation of the above amounts includes only direct raw materials. Additionally, indirect effects of higher stainless steel, carbon steel and aluminum prices may result in higher prices for components, semi-finished and finished products. Aebi Schmidt continues to monitor the effects of commodity price changes and its mitigation strategies.
Interest rate changes
Aebi Schmidt has interest rate risk with respect to its indebtedness due to the variable interest rates related to its debt arrangements under the New Credit Facilities Agreement. As of December 31, 2025, Aebi Schmidt had an aggregate face value o f $595.0 million of outstanding indebtedness. A one percent increase or decrease in the annual interest rate on Aebi Schmidt’s variable rate borrowings of $520.2 million would have increase or decrease its annual cash interest expense by approximately $5.2 million .
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