A prolonged downturn or additional consolidation in the pharma/biopharmaceutical, food manufacturing, and chemical industries could adversely affect our operating results. A reduction in the capital resources or government funding of our customers could reduce our sales.
Our products are used extensively in the pharma/biopharmaceutical, food manufacturing, and chemical industries. We recently experienced reduced demand in these segments, which negatively impacted our net sales in 2023 and 2024. Market demand in pharma/biopharmaceutical was particularly impacted in 2023 after significant growth during the COVID-19 pandemic. Consolidation in these industries also hurt our sales in the past. A prolonged global economic downturn, a downturn affecting one or more of these industries, or consolidation in any of these industries could adversely affect our operating results. In addition, the capital spending policies of our customers in these and other industries are based on a variety of factors we cannot control, including the resources available for purchasing equipment, the spending priorities among various types of equipment, and policies regarding capital expenditures. Any decrease or delay in capital spending by our customers would cause our revenues to decline and could harm our profitability. Changes in governmental regulations or a decline in government funding of research or education could reduce some customers’ ability to purchase our products.
We operate in highly competitive markets, and it may be difficult for us to preserve operating margins, gain market share, and maintain a technological advantage.
Our markets are highly competitive. Many are fragmented both geographically and by application, particularly the industrial and food retailing markets. As a result, we face numerous regional or specialized competitors, many of which are well established in their markets. In addition, some of our competitors are divisions of larger companies with potentially greater financial and other resources than our own. There has also been an increase in the consolidation of precision instrument companies in recent years. Any consolidation within our market could result in competitors becoming larger and having greater financial and other resources than our own. Some of our competitors are domiciled or operate in emerging markets and may have a lower cost structure than ours. We are confronted with new competitors in emerging markets which, although relatively small in size today, could become larger companies in their home markets. Given the sometimes significant growth rates of these emerging markets, and in light of their cost advantage over developed markets, emerging market competitors could become more significant global competitors. Taken together, the competitive forces present in our markets could harm our operating margins.
We also expect our competitors to continue to improve the design and performance of their products and to introduce new products with competitive prices. If tariffs are implemented and we cannot pass on the increased costs to our customers, our margins could be impacted as we work to remain competitive. In addition, our competitors are expected to continue to improve their technology infrastructure, as well as the technology services offered to their customers, including the use of artificial intelligence and machine learning solutions, to interact with suppliers, sell their products and services, and support and grow their customer base. Our ability to innovate our own technology infrastructure and appropriately address user experience could affect our ability to compete. Although we believe that our products and services have advantages over our competitors, we may not be able to realize and maintain these advantages.
We may face risks associated with future acquisitions.
We may pursue acquisitions of complementary product lines, technologies, or businesses, but these involve risks such as integration challenges, management distractions, and potential loss of key employees. Future acquisitions may also lead to stock issuances that dilute current shareholders, increased debt and liabilities, and higher amortization expenses for intangible assets. Any of these risks could materially impact our profitability.
Larger companies are increasingly targeting life sciences and instruments, potentially altering market competition. Additionally, we may face challenges in identifying, completing, or integrating future acquisitions, and even successful acquisitions may not positively impact our business or results. We must also estimate the fair value of acquired assets and assumed liabilities, relying on valuation models with inherent uncertainties and our judgment regarding certain assumptions.