What Donaldson Company, Inc. told the SEC could break it.

Donaldson's principal raw materials are steel, filter media and petrochemical-based products (plastic, rubber, adhesives), and purchased raw materials represent ~67% of its cost of sales — so material-cost changes directly drive margins, partly mitigated via supply arrangements, pricing, material substitution and redesigns.

“The principal raw materials the Company uses are steel, filter media and petrochemical-based products including plastic, rubber and adhesive products. Purchased raw materials represent approximately 67% of the Company's cost of sales.”

Donaldson expects ~$35M of annual costs from recently implemented/increased tariffs (<1% of sales, largely offset by pricing), but additional or retaliatory tariffs — especially substantial increases on US imports from Mexico, China and the EU — plus export controls and sanctions could materially disrupt its supply chain and raise costs.

“While the ultimate impact of tariffs remains uncertain, the Company continues to expect annual costs related to recently implemented or increased tariffs of approximately $35 million, which represents less than 1% of the Company's total sales and is expected to be largely offset by pricing increases.”

Donaldson obtains raw materials (steel, filter media, petroleum-based products and other components) from third-party suppliers and often concentrates sourcing of some materials from one or a few suppliers; an unanticipated delivery delay or quality failure could prevent on-time product delivery to customers.

“We obtain raw materials, including steel, filter media, petroleum-based products and other components from third-party suppliers. We often concentrate our sourcing of some materials from one supplier or a few suppliers. We rely, in part, on our suppliers to ensure they meet required quality and delivery standards.”