Kadant Inc. (KAI): PESTLE Analysis [Nov-2025 Updated]

You're analyzing Kadant Inc. (KAI) for 2025, and you need to know which macro-forces will actually move the stock. The core truth is that KAI is an industrial technology play benefiting from the global shift to the circular economy, but its path to projected 2025 revenue of around $1.05 billion is anything but smooth. We're going to map the six external forces-Political, Economic, Social, Technological, Legal, and Environmental-that will defintely determine if their specialized equipment sales soar or stall. You can't make a smart decision without seeing how global trade tensions and CapEx cycles directly hit their bottom line.

Kadant Inc. (KAI) - PESTLE Analysis: Political factors

You're looking at Kadant Inc. (KAI) and trying to gauge the political headwinds for 2025, and honestly, the biggest factor isn't a single regulation, but the sheer volatility of global trade policy. This uncertainty directly impacts capital expenditure decisions, which is where Kadant makes its money on large projects.

The core political risk is a fractured global trade environment, which Kadant's management cited as a key challenge in their 2025 outlook. They had to revise their initial full-year adjusted earnings per share (EPS) guidance from a midpoint of $9.87 down to a maintained range of $9.05 to $9.25, specifically due to tariff-induced uncertainties. That's a real-money impact of up to $0.39 per share in the first quarter alone, which is defintely a headwind you need to factor in.

US-China trade tensions still create tariff uncertainty for global supply chains.

The US-China trade relationship remains a significant cost driver and risk amplifier for Kadant, given its global manufacturing footprint. The tariff structure for industrial goods is not just high; it's unpredictable. As of late 2025, US tariffs on many Chinese imports have stabilized around 54%, but the threat of a potential 100% additional levy looms, which would push the effective tariff rate to approximately 155%.

This instability forces manufacturers like Kadant to re-engineer supply chains, raising the cost of goods sold. China has also retaliated, imposing tariffs on US-origin products, including a 10% tariff on agricultural machinery, which affects Kadant's customers in the wood and fiber processing segments. This isn't just a tariff problem; it's a structural cost increase that makes long-term sourcing decisions a nightmare.

Shifting trade agreements (e.g., USMCA) impact raw material sourcing costs.

The political shift toward protectionism in 2025 has directly increased the cost of Kadant's core inputs: steel and aluminum. In March 2025, the U.S. imposed a 25% duty on all imported steel and aluminum, ending many prior exemptions. This move, coupled with the strict enforcement of USMCA (United States-Mexico-Canada Agreement) origin rules, means that any components Kadant sources from Canada or Mexico that fail to qualify as North American-made face a significant 25% tariff.

Here's the quick math: For the machinery and equipment market, the cumulative effect of these tariffs is estimated to increase manufacturing and assembling costs by approximately 12% to 19% in the short term. This margin compression is a direct result of political decisions, forcing the company to either absorb costs or pass them on to customers, risking a slowdown in new equipment sales.

Increased government incentives in the EU for recycling infrastructure investment.

The European Union's ambitious Circular Economy Action Plan (CEAP) presents a clear political opportunity for Kadant's Fiberline and Industrial Processing segments, which supply equipment for recycling and resource efficiency. While the EU's new Clean Industrial Deal (CISAF) State aid framework in 2025 did not explicitly include new, dedicated funds for circular economy projects, the European Commission is actively encouraging Member States to use existing state aid rules to support recycling infrastructure.

This political push is backed by a mandate for change:

• The EU is prioritizing financial and regulatory support for businesses adopting circular models.
• New rules are being developed to improve recycling efficiency and material recovery from waste batteries.
• The goal is to double the share of recycled materials in the EU's economy by 2030.

This political direction creates a long-term demand tailwind for Kadant's advanced recycling and processing equipment, even if the immediate, large-scale grant funding is decentralized to individual Member States.

Global political instability slows down large-scale, multi-year capital projects.

Geopolitical risk, which the World Economic Forum's Global Risks Perception Survey (GRPS) ranked State-based armed conflict as the #1 risk for 2025, is the primary dampener on Kadant's capital equipment sales. Kadant's Q3 2025 results showed organic revenue decline of 4%, driven by a 'persistent softness in demand for capital equipment'.

Large-scale projects in the paper, packaging, and wood products industries-Kadant's customer base-are multi-year, multi-million-dollar commitments. When a company faces a global environment with over 3,000 new harmful trade restriction measures implemented in 2024 alone, they pause. This political uncertainty translates directly into 'prolonged delays in project execution,' as Kadant's CEO noted, pushing back revenue recognition and depressing capital equipment bookings.

The immediate action is to focus on the resilient aftermarket parts business, which accounted for a record 75% of Kadant's Q1 2025 revenue.

Political Factor (2025)	Kadant Inc. (KAI) Impact	Quantifiable Data Point
US-China Trade Tensions	Increased cost of goods and supply chain risk.	Expected 2025 EPS impact of up to $0.39 from tariffs in Q1.
USMCA/Global Metal Tariffs	Surge in raw material costs for machinery.	U.S. 25% tariff on imported steel and aluminum.
EU Circular Economy Push	Long-term demand driver for recycling equipment.	EU goal to double the share of recycled materials by 2030.
Global Political Instability	Delays in large capital project execution.	Organic revenue decreased 4% in Q3 2025, tied to 'softness in demand for capital equipment'.

Kadant Inc. (KAI) - PESTLE Analysis: Economic factors

Global industrial capital expenditure (CapEx) growth is moderating in late 2025.

You need to understand the CapEx cycle because it drives Kadant Inc.'s high-margin capital equipment sales. While the overall global Pulp and Paper market is robust, projected to reach $355.6 billion in 2025, the near-term capital spending is showing signs of caution. We are seeing a 'wait-and-see' mentality from major customers, which is the definition of CapEx moderation. Kadant Inc.'s management has already noted that some large capital projects are being delayed, pushing the associated revenue recognition into 2026. This isn't a cancellation risk, but it's a timing risk that slows your near-term growth projections. The aftermarket parts business, which is a steady stream of revenue, is the only thing keeping the top line from a steeper decline. Honestly, the CapEx slowdown is the biggest headwind for Kadant Inc.'s capital segments right now.

Inflationary pressures on raw materials (steel, specialized alloys) compress margins.

The cost of goods sold (COGS) is under persistent pressure, even though Kadant Inc. has done a solid job raising its gross margin to 45.2% in the third quarter of 2025. The core issue is raw material inflation, specifically for the steel and specialized alloys Kadant Inc. uses for its equipment. For instance, key alloy components like nickel and chromium are predicted to see price increases of 3-5% in 2025. Plus, the re-imposition of a 25% tariff on all steel and aluminum imports in February 2025 significantly raises the input costs for imported metals. This is a direct hit to profitability that Kadant Inc. has to offset through pricing power or operational efficiency.

Here's the quick math on the tariff's impact on earnings:

• Tariffs on steel, aluminum, and Chinese goods are expected to increase Kadant Inc.'s material costs by $5 million to $6 million for the full year 2025.
• This cost is estimated to impact Q2 2025 Adjusted EPS alone by $0.14 to $0.18.

A stronger US dollar (USD) can negatively impact sales translated from overseas markets.

Kadant Inc. is a global company, so currency volatility matters a lot. A strong US Dollar (USD) makes US-manufactured exports more expensive for foreign buyers and reduces the value of foreign earnings when converted back to USD. We are seeing major volatility in 2025. In the first quarter of 2025, Kadant Inc. reported an unfavorable foreign currency translation effect of $5.8 million on revenue. But then, the Dollar Index broke above 100 in November 2025, signaling a potential shift to durable strength, which will create revenue translation headwinds for multinational industrial companies like Kadant Inc.

What this estimate hides is the speed of the shift; you need to watch the trend in the last quarter of 2025 closely. The currency impact has been a mixed bag, as you can see:

Quarter 2025	Revenue Impact from Foreign Currency Translation	Direction of Impact
Q1 2025	$5.8 million	Unfavorable (Revenue Decrease)
Q2 2025	1% increase (approx. $2.55 million based on $255.3M revenue)	Favorable (Revenue Increase)
Q3 2025	2% increase (approx. $5.43 million based on $271.6M revenue)	Favorable (Revenue Increase)

High interest rates make financing for large mill upgrades more defintely expensive.

The elevated interest rate environment, a result of the Federal Reserve's efforts to control inflation, directly affects Kadant Inc.'s customers. Large industrial mill upgrades and new capacity projects, which Kadant Inc. supplies, are typically financed with long-term debt. When rates are high, the internal rate of return (IRR) on these multi-million-dollar projects drops, causing customers to delay or shrink the scope of the project. This is a primary driver of the CapEx moderation. The Federal Reserve's target federal funds rate was between 4.25% and 4.5% in early 2025, and the 10-year Treasury rate, a key benchmark for long-term borrowing, was at approximately 4.47% in May 2025. That's a high hurdle for any long-term industrial investment.

The cost of capital is simply too high for marginal projects. The result is a reduced appetite for investment and tighter lending criteria from banks, making it harder for businesses to qualify for loans. This is why capital equipment bookings, while solid, are not accelerating as fast as they might in a lower-rate environment.

Kadant Inc. (KAI) - PESTLE Analysis: Social factors

Strong, sustained consumer demand for sustainable and fiber-based packaging.

The social shift toward environmental consciousness is a powerful tailwind for Kadant Inc.'s Industrial Processing segment, which supplies equipment for fiber-based packaging. Consumers are actively driving this demand, making sustainable packaging a necessity, not a niche. The global market for sustainable packaging is projected to be worth $301.8 billion in 2025, with paper and paperboard materials expected to dominate with a 42% share of this market.

This isn't just a compliance issue; it's a revenue opportunity for Kadant's customers. We see that 90% of consumers are more likely to buy from brands that use sustainable packaging, and a significant portion of consumers are willing to pay a premium. Specifically, consumers across 63 countries are willing to pay an average of 9.7% more for sustainably sourced goods. This social preference directly fuels capital expenditure on Kadant's fiber-processing and packaging-related equipment.

Labor shortages in skilled trades (engineering, field service) affect installation capacity.

The persistent shortage of skilled labor poses a near-term execution risk, particularly for the installation and maintenance of Kadant's capital equipment. This is a critical factor, as Kadant's high-margin aftermarket parts and consumables business-which accounted for 75% of total revenue in Q1 2025-relies heavily on field service capacity for installation and maintenance.

In 2025, 50% of skilled tradespeople identified a shortage of qualified candidates as the top challenge, with retirement and retention cited by 31% of workers as major staffing concerns. This means that while demand for Kadant's products remains robust-evidenced by the full-year 2025 revenue guidance of $1.036 to $1.046 billion-the ability to execute on large-scale capital projects can be delayed. The construction industry alone will need an estimated 439,000 net new workers in 2025, showing the scale of the talent gap in industrial services.

Skilled Labor Shortage Impact on Industrial Operations (2025)

Metric	2025 Data Point	Implication for Kadant Inc.
Tradespeople Citing Shortage as Top Challenge	50%	Higher wage pressure and difficulty in recruiting field service engineers.
Estimated New Construction Workers Needed (US)	439,000	Slower installation and commissioning times for new capital equipment projects.
Q1 2025 Revenue from Aftermarket Parts	75%	A critical, high-margin revenue stream is exposed to service capacity constraints.

Growing corporate focus on Environmental, Social, and Governance (ESG) performance drives equipment upgrades.

ESG is no longer a peripheral compliance item; it is a core capital expenditure driver. The C-suite is prioritizing this, with 45% of executives citing climate change and sustainability as a most pressing challenge for the next year. This focus translates directly into spending on Kadant's 'Sustainable Industrial Processing' technologies, which help customers reduce energy and water consumption.

The overall U.S. capital expenditures are projected to rise by 4.7% in 2025, indicating a continued willingness to invest in strategic assets. This is not just spending for the sake of it; 83% of companies increased their sustainability investments over the past year because one in three CEOs reports that climate-friendly investments have resulted in increased revenue. Kadant's equipment, which is designed to reduce waste and optimize energy, is perfectly positioned to capture this ESG-driven capital spending surge.

Public pressure on water usage and pollution mandates cleaner industrial processes.

Public awareness of water scarcity and pollution from emerging contaminants is creating a significant market for Kadant's fluid-handling and water-management solutions. The industrial water supply service market is a massive opportunity, estimated at $500 billion in 2025, driven by stringent environmental regulations.

The focus is shifting to mandatory efficiency and reuse.

• Stricter regulations are emerging for pollutants like PFAS (per- and polyfluoroalkyl substances), pushing industrial facilities to invest heavily in advanced effluent treatment systems.
• There is a growing expectation for mandatory water reuse in industrial settings, which requires the kind of closed-loop systems and high-efficiency filtration Kadant supplies.
• Public demand for transparency is rising, forcing companies to publicly report their water footprint (usage, consumption, and discharge), which necessitates investment in real-time monitoring and water-efficient process equipment.

This social pressure is a direct revenue driver for Kadant, as its core mission is to help customers generate more yield with fewer inputs, particularly water.

Kadant Inc. (KAI) - PESTLE Analysis: Technological factors

You need to know how Kadant Inc. is using technology to stay ahead, especially as industrial customers demand more efficiency and less waste. The core takeaway is that Kadant is strategically deploying its capital through acquisitions and a consistent R&D focus to dominate the high-margin, aftermarket segment with energy-efficient fluid handling and digital-enabled predictive maintenance (PdM) solutions.

Focus on Advanced Dewatering and Fiber Optimization Technologies for Paper Mills

Kadant's technological edge in the paper industry centers on maximizing fiber yield and minimizing water content, which directly cuts energy costs for the mill operators. The company is actively deploying its advanced fiber processing systems in major global projects. For example, in the Asia-Pacific market, Kadant Fiberline (China) Co. Ltd. was awarded a project for two approach flow systems at Taizhou Forest Paper, scheduled to start up in 2025. This project includes the RADICLONE™ AM80 hydrocycloning systems, a technology that ensures high-efficiency heavyweight contaminant removal and fractionation, leading to a cleaner, higher-quality pulp.

This focus on fiber optimization is a smart, defensive play. It ensures Kadant remains a critical supplier of consumables and engineered systems, tying its revenue stream to the ongoing operational needs of paper mills, not just new capital expenditure cycles.

Continued Investment in Digital Services and Industrial Internet of Things (IIoT) for Predictive Maintenance

The industrial shift toward the Industrial Internet of Things (IIoT) and predictive maintenance is a massive opportunity that Kadant is positioned to capture. While the company doesn't disclose a specific IIoT investment budget, its product roadmap and the general market trend show the direction. The global Predictive Maintenance market is projected to reach $12.59 billion in 2025, a clear signal that customers are ready to pay for data-driven reliability.

Kadant's newer fluid handling products, such as the LMX™ Smart Pump and ThermoZone™ Condensate Handling Station, are designed to integrate into these digital frameworks. This shift from time-based to condition-based maintenance offers customers a tangible return on investment:

• Reduce overall maintenance costs by 10-20%.
• Lower unplanned downtime by up to 25%.
• Extend asset lifespan through optimized intervention.

The goal is to turn Kadant from a component supplier into a critical process efficiency partner.

Acquisition Strategy Targets Specialized Water Treatment and Separation Technologies

Kadant's acquisition strategy is a key driver of its technological expansion, targeting specialized businesses that bolster its 'Sustainable Industrial Processing' platform. This is where you see the company buying expertise rather than building it from scratch.

Here's the quick math on recent, relevant deals:

Acquired Company	Acquisition Date	Acquisition Cost (Cash)	Core Technology Focus
Clyde Industries	October 2025	$175 million	Boiler efficiency solutions, energy optimization
Babbini S.p.A. & GPS Engineering S.r.l.	July 2025	Undisclosed	Industrial dewatering, screw press technology, system integration
Dynamic Sealing Technologies LLC (DSTI)	June 2024	Approximately $55 million	Engineered fluid sealing and transfer solutions (Flow Control)

The July 2025 acquisition of Babbini and GPS Engineering, for instance, immediately expands Kadant's reach in industrial dewatering for non-paper sectors like agriculture and food and beverage, providing new avenues for growth outside its traditional pulp and paper base.

R&D Spending is Concentrated on Energy-Efficient Fluid Handling Systems

Kadant maintains a consistent, focused internal investment in R&D to drive organic innovation, particularly in fluid handling systems that minimize energy consumption. For the first six months of the 2025 fiscal year, Kadant's Research and Development expenses were $7.247 million, demonstrating a steady commitment to innovation.

This spending is concentrated on technologies like advanced rotary joints, steam systems, and condensate handling solutions. Their global R&D center in Three Rivers, Michigan, which houses 18 test machines and 43 test positions, is a testament to this focus.

The core innovation here is designing products, such as their Pressure Powered Pumps, that use existing steam or air pressure instead of electricity to move condensate. This design avoids the energy loss from cooling condensate for electric pumps, delivering a defintely measurable reduction in a customer's energy bill and supporting their sustainability goals.

Kadant Inc. (KAI) - PESTLE Analysis: Legal factors

The legal landscape for Kadant Inc. in 2025 is defined by a convergence of environmental mandates and heightened global enforcement, which translates directly into higher compliance costs but also a competitive advantage for those who adapt quickly. You need to focus your capital expenditure (CapEx) planning on proactive compliance, not just reactive fixes.

Stricter global regulations on Per- and Polyfluoroalkyl Substances (PFAS) in manufacturing processes.

The global regulatory crackdown on Per- and Polyfluoroalkyl Substances (PFAS), or forever chemicals, is a major compliance pressure point for a global manufacturer like Kadant Inc. In the US, the Environmental Protection Agency (EPA) delayed the effective date for adding nine PFAS chemicals to the Toxics Release Inventory (TRI) to March 21, 2025, but reporting for the 2025 fiscal year is still due by July 1, 2026. [cite: 14, 21 in previous step] This means you must track and report usage data for the current year.

Internationally, the rules are already tightening. The European Union (EU) is moving to ban the sale and use of PFHxA (a common PFAS substitute) in certain products, and Canada is requiring manufacturing facilities to report PFAS use to the National Pollutant Release Inventory starting in 2025. [cite: 8, 22 in previous step] Since Kadant Inc. operates globally, these varied rules create a complex, multi-jurisdictional compliance challenge that demands a centralized chemical management system.

• Track nine new PFAS chemicals for US TRI reporting.
• Comply with EU's PFHxA restrictions on specific products.
• Report PFAS use to Canada's National Pollutant Release Inventory.

Increased complexity in cross-border intellectual property (IP) protection, especially in Asia.

Protecting Kadant Inc.'s proprietary engineered systems across its global footprint, especially in Asia, is getting more complex, but the opportunity for enforcement is also growing. China, a key market, is actively strengthening its IP framework, particularly for high-value sectors like 'green and low-carbon technologies' and 'high-end equipment manufacturing,' which align with Kadant Inc.'s core business of Sustainable Industrial Processing. [cite: 3, 4, 7 in previous step]

The sheer volume of new IP in China is staggering: the number of valid domestic invention patents reached 5.01 million as of June 2025, a 13.2% year-on-year increase. [cite: 7 in previous step] This creates a dense, competitive patent thicket. On the plus side, China has established a punitive compensation system for IP infringement that is now aligned with the highest global standards, giving you a stronger legal tool to fight counterfeiting and unauthorized use of your technology. [cite: 9 in previous step]

Enhanced ESG reporting and disclosure mandates require more detailed operational data.

Mandatory Environmental, Social, and Governance (ESG) reporting is moving from voluntary best practice to a hard legal requirement, impacting your financial disclosure process. As a US-listed company with significant European operations, Kadant Inc. is facing a dual regulatory burden.

The US Securities and Exchange Commission (SEC) Climate Disclosure Rules are set to begin implementation in phases starting with the 2025 fiscal year for large public companies. [cite: 13 in previous step] Simultaneously, Kadant Inc. is preparing for compliance with the European Union's Corporate Sustainability Reporting Directive (CSRD), which will require a much deeper level of data, including a double materiality assessment (impact on the company and impact by the company). [cite: 7 in previous step] This means your internal data collection processes for Scope 1, 2, and 3 emissions must be audit-ready for the 2025 reporting cycle.

Here's the quick math: Kadant Inc.'s full-year 2025 revenue guidance is $1.020 to $1.040 billion, [cite: 1 in previous step] making it a large-scale operation whose ESG data integrity will be under intense scrutiny from both regulators and institutional investors like BlackRock.

New labor and safety standards in manufacturing facilities increase compliance costs.

Compliance costs for manufacturing labor and safety standards are rising, driven by both increased regulatory focus and significantly higher penalties for non-compliance. The US Occupational Safety and Health Administration (OSHA) increased its maximum penalty amounts effective January 15, 2025. [cite: 6, 10 in previous step]

This penalty increase is a direct hit to the P&L for any safety lapse. A Serious or Other-Than-Serious violation now carries a maximum fine of $16,550 per violation, up from the prior year. [cite: 6, 10 in previous step] More concerning, a Willful or Repeated violation can now cost up to $165,514 per violation. [cite: 6, 10 in previous step] Beyond the financial risk, Kadant Inc. must also adapt to new standards for automated machinery and a potential Workplace Heat Stress Prevention Rule in 2025, which will require CapEx investment in new equipment and cooling infrastructure. [cite: 8, 11 in previous step]

OSHA Violation Type (Effective Jan. 2025)	Maximum Penalty Amount	Financial Risk Implication
Serious / Other-Than-Serious	$16,550 per violation	Increased cost of minor compliance failures.
Willful or Repeated	$165,514 per violation	Major financial risk for systemic safety issues.

You defintely need to budget for enhanced safety training and technology upgrades now.

Kadant Inc. (KAI) - PESTLE Analysis: Environmental factors

EU Green Deal and similar global policies mandate higher recycling rates for packaging.

You need to pay close attention to the regulatory tailwinds driving demand for Kadant Inc.'s core business, particularly in Europe. The new EU Packaging and Packaging Waste Regulation (PPWR), which came into force in February 2025, is a major catalyst. This policy is part of the broader EU Green Deal and mandates a reduction in packaging waste by at least 15% by 2040 compared to 2018 levels.

The immediate opportunity for Kadant's Industrial Processing segment lies in the aggressive recycling targets for fiber-based materials. The EU has set a target for 85% of all paper and cardboard packaging to be recycled by 2030. This directly increases the need for the company's fiber processing and recycling equipment, as customers in the paper and packaging industries must upgrade their infrastructure to meet these higher standards. The regulation also requires all packaging to be recyclable by 2030, which pushes manufacturers to invest in the most efficient and advanced sorting and processing technologies.

EU Packaging Regulation (PPWR) Target	Mandate/Threshold	Kadant Inc. Segment Impact
Overall Packaging Waste Reduction	5% by 2030, 15% by 2040 (vs. 2018)	Drives demand for resource-efficient Fiber Processing equipment.
Paper & Cardboard Recycling Rate	85% by 2030	Directly increases capital expenditure for recycling systems in the Industrial Processing segment.
Recyclability by Design Standard	Minimum Grade C by 2030	Pushes customers to adopt Kadant's advanced filtration and cleaning systems to ensure high-quality recycled pulp.

Growing demand for water-saving technologies in paper and process industries.

Water scarcity is a growing operational risk for industrial customers, so demand for Kadant's water-efficient solutions is defintely on the rise. The company's core strategy is built around 'Sustainable Industrial Processing,' which focuses on generating 'more yield with fewer inputs,' especially water.

One concrete example is the water conservation technology developed at the Auburn, Massachusetts location. This proprietary cleaning and conditioning equipment is engineered to reduce total water consumption by an estimated 26 billion units (likely gallons) annually compared to older, traditional systems. This isn't just a marketing point; it's a measurable operational cost reduction and compliance tool for customers facing stricter water discharge limits and rising utility costs. Kadant's Flow Control segment, which includes water-filtration systems, is positioned to capture this growing market, particularly as the company was recognized as one of 'America's Greenest Companies 2025.'

Focus on reducing Scope 1 and 2 emissions from industrial drying and heating processes.

The drive to decarbonize is a massive capital expenditure cycle for Kadant's customers, and the company is positioning itself as a key enabler. Their Flow Control segment's engineered steam and condensate systems are crucial here, as they optimize the energy utilization in high-intensity processes like industrial drying and heating.

For its own operations, Kadant has already achieved a significant milestone in reducing its Scope 2 emissions: the company sourced 100% of its electricity from renewable sources in 2024 through the purchase of Renewable Energy Certificates. More importantly, the company is committed to setting formal, verifiable targets for all three emissions scopes (Scope 1, 2, and 3) by submitting them to the Science Based Targets initiative (SBTi) in December 2025. That's a clear action plan.

Pressure to design products for end-of-life recycling (circular economy focus).

The shift to a circular economy (CE) is fundamentally changing how industrial equipment is bought and used. It's no longer enough to sell a machine; you must consider its entire lifecycle. Global trends for 2025 show a strong push toward 'easy disassembly regulations,' which are projected to improve component recovery in manufacturing by up to 30%.

Kadant is well-aligned with the CE model, not just through the equipment it sells to recyclers, but through its own business model. The company's aftermarket parts business is a natural fit for the CE principles of 'Remanufacture' and 'Repair,' and this segment is highly resilient. For the first quarter of 2025, aftermarket parts revenue constituted a record 75% of the company's total revenue, demonstrating the value of extending the life of installed equipment. This focus on service and parts, rather than just new capital sales, acts as a strong hedge against economic uncertainty while simultaneously supporting customers' sustainability goals.

• Design for Disassembly: New regulations mandate product design that facilitates component recovery.
• Remanufacture/Repair: Kadant's aftermarket parts accounted for 75% of Q1 2025 revenue.
• Product-as-a-Service: The high aftermarket revenue suggests a long-term service relationship, which is a key CE business model.

Next step: Operations leadership should quantify the revenue opportunity from the EU's 85% paper recycling target by modeling market share growth for fiber processing systems over the next three years.