After surprising the marine industry with the announced sale of its iconic Sea Ray business at the end of 2017, Brunswick Corporation did an about-turn in June this year with a decision to retain the brand while trimming it down its portfolio to boats under 40 feet.
Today, in its first release of financial results since the Sea Ray decision, Brunswick remained bullish about the prospects of the company’s marine portfolio for 2018.
"We continue to have a favourable outlook on the marine business, which is benefitting from unprecedented demand for outboard engines, exciting new products, the successful execution of our strategy to grow the parts and accessories businesses, and a global marine market that remains healthy,” said Brunswick chairman and chief executive officer Mark Schwabero.
Schwabero, in particular, noted Mercury’s launch of the largest number of outboard engines in the company's history, consisting of 19 models of V6 and V8 engines ranging from 175 to 300 horsepower. At the same time, he said demand for the new range was far exceeding expectations and would continue to outpace production into 2019, while the company added new capacity.
Acknowledging that market trends have “slightly trailed initial expectations,” the company noted year-to-date retail unit growth was up 2% in both US and international markets, while wholesale unit shipments were down -5% in the US and -3% globally year to date (compared to +8% for America and +7% internationally for the first half of 2017). By comparison, boat retail sales across the US industry for the main powerboat segments are up 1% year-to-date (based on NMMA and Statistical Surveys estimates of preliminary figures). Due to higher average prices, Brunswick's net dollar sales for the boat business were up 3% in both the US and global markets during the second quarter and first half of 2018. Brunswick also stated that its pipeline was well-positioned for current market performance.
Despite the softer first half in the boat market, Swabero maintained that, “our long-term favorable view of the industry has not changed and is supported by positive dealer and customer sentiment, as well as the ongoing demand for our industry leading products and brands.”
The company reported adjusted revenue across the Marine business for the first half of the 2018 financial year increased by $146 million to $2.1bn, up 7.6% (excluding acquisitions and Sea Ray yacht operations) and 5% in constant currency. For the engine business, Brunswick reported first half sales up 9% across the propulsion business and the parts and accessories business which each account for approximately half of segment sales. Year-to-date operating earnings saw an increase of 5% compared to last year.
Geographically, Brunswick’s combined marine business registered 7% growth in the US through the second quarter (representing 70% of total sales); flat growth in Europe (12% of total sales); an 11% gain in Canada which accounts for 7% of sales, a 2% drop in Asia-Pacific (7% of total sales), and flat results across the rest of the world (representing 4% of total sales).
The marine engine business which includes parts and accessories was up 8.8% for the first half of the financial year while the boat segment grew 4.8% (excluding Sea Ray yacht operations).
The company reported adjusted operating earnings for the first half up 5% versus 2017, and said the earnings impact for Sea Ray’s yacht operations of $35.5 million while other restructuring, exit, integration and impairment charges would amount to $38.6 million.
For the full financial year, Brunswick Corporation confirmed revenue targets of 5% to 6% revenue growth for the Boat segment, with improved operating margins, and low-teens percent gains for the Engine segment, including the recent Power Products acquisition.
Brunswick is estimating that the negative impact of US and international tariffs on earnings will range between $10 - $15 million for 2018 (based on measure currently enacted).