Gates Industrial Corp Ltd.

Current report

U.S. policies, actions, or legislation could have a material adverse impact on our and our business partners’ operations and financial results.

Current report

Although we have global operations, our corporate headquarters and a significant portion of our facilities and workforce are located in the U.S. Approximately 37% of our Fiscal 2024 revenues were generated from customers in the U.S. Accordingly, our business and results of operations, as well as the business and results of operations of many of our vendors and customers, are subject to risks associated with U.S. government policies, actions, and legislation, including risks related to:

Current report

•the imposition of tariffs and other trade restrictions or embargoes and uncertainty related thereto, including inflationary pressures;

Current report

•economic and political instability related to U.S. relationships with its key trading partners;

Current report

•withdrawal of or changes in federal funding and support of organizations and programs that affect companies operating in the U.S. and their workforces, including those related to cyber security; and

Current report

•other changes to U.S. policies that may have a negative impact on us.

Current report

The likelihood and duration of such occurrences and their potential effect on us, our vendors and customers, are unpredictable and our efforts to minimize or eliminate the effects of these occurrences may not be successful. While we have taken measures to help mitigate the impact of recently enacted U.S. tariffs and retaliatory tariffs, such as price increases and adjustments to our supply chain and operations, recent tariff policies have been volatile, making it difficult for us and our vendors to predict or act to mitigate negative impacts of the tariffs. If we are unable to recoup cost increases through price increases on a timely basis or at all, or are unable to offset these cost increases through other means, our operating margins and results of operations may be materially adversely affected. Moreover, we may be impacted by tariffs to a greater degree than our competitors who operate in countries that are not subject to tariffs or are subject to lesser tariffs, placing us at a disadvantage. The duration of the tariffs and the extent to which additional tariffs will be enacted remain uncertain. Uncertainty with respect to tariffs and other trade measures has led to, and may continue to lead to, volatility in the global financial markets, which could negatively impact demand for our products. Certain of these risks may be exacerbated if key trading partners coordinate retaliatory efforts against the U.S.

Current report

We are subject to economic, political and other risks associated with international operations that could adversely affect our business and our strategy to capitalize on our global reach.

Current report

A substantial portion of our operations are conducted and located outside the U.S. For Fiscal 2024, approximately 63% of our net sales originated from outside of the U.S. We have manufacturing, sales and service facilities spanning six continents and sell to customers in over 130 countries. Moreover, a significant amount of our manufacturing functions and sources of raw materials and components are from emerging markets such as China, India and Eastern Europe. Accordingly, our business and results of operations, as well as the business and results of operations of our vendors and customers, are subject to risks associated with doing business internationally, including:

Current report

• changing economic conditions in the global and regional end markets we serve, which could impact the level of demand for our products, as a portion of our revenues are derived from customers in cyclical industries that typically are adversely affected by downward economic cycles;

Current report

• macroeconomic factors beyond the Company’s control, such as recent significant volatility around inflation, material and logistics availability, supply chain and labor challenges;

Current report

• political, social or economic instability, civil unrest, terrorist attacks, conflicts or war (such as the ongoing conflicts in Eastern Europe and the Middle East), public health crises (including pandemics), natural disasters (including as a result of climate change), widespread cybersecurity incidents, and other catastrophic events may disrupt economic activities (including demand for and production and distribution of our products) and our workforce in affected countries or globally;

Current report

• trade wars and the imposition of additional sanctions, tariffs or other trade restrictions or embargoes, as well as import and export licensing and control requirements;

Current report

• volatility of global financial markets, including interest rate fluctuations and hyperinflation or deflation in the countries in which we operate;

Current report

• exchange rate fluctuations, as well as currency restructurings, the imposition of currency restrictions, and limitations on repatriation of earnings, that could affect our ability to realize a profit or our ability to readily access global cash balances;

Current report

• partial or total expropriation by local, state or national governments;

Current report

• compliance with or effect of complying with complex and changing laws, regulations and policies of foreign governments, including differing and, in some cases, more stringent labor, sustainability, environmental, social, and governance (“ESG”) and HSE-related regulations as well as limitations on our ability to enforce our legal rights and remedies;

Current report

• differing local product preferences and product requirements; and

Current report

• difficulties involved in staffing and managing widespread operations, including challenges in enforcing corporate policies, which may be different than the normal business practices of local cultures.

Current report

The likelihood of such occurrences and their potential effect on us vary from country to country and are unpredictable. Certain regions, including Latin America, Asia, Eastern Europe, the Middle East and Africa, can be economically and politically volatile and as a result, our operations in these regions could be subject to significant or frequent fluctuations in sales and operating income. Because a significant percentage of our operating income in recent years has come from these regions, adverse fluctuations in the operating results in these regions could have a material adverse impact on our results of operations in future periods. While we have adopted certain operational and financial measures to reduce the risks associated with doing business internationally, such measures may not be successful and any one of the risks listed above may have a material adverse effect on our financial condition and results of operations.