Analyst: Move will help Brunswick control costs - Trade Only Today

Analyst: Move will help Brunswick control costs

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A Brunswick Corp. analyst at Wells Fargo Securities believes the company's decision to stop building and selling Bayliner cruisers in North America does not reflect a material shortfall.

Instead analyst Timothy Conder believes the changes are necessary to meet projected 2014 operational and financial goals in the cruiser portion of the portfolio.

“Additionally, Bayliner cruiser focus in South America should more efficiently address a stronger market that would likely view Bayliner cruisers as a premium — versus value — brand,” Conder wrote in a statement issued this morning.

“Cruiser consolidation will further streamline manufacturing costs while allowing Brunswick Corp. the capacity to significantly ramp production when global conditions improve,” he wrote.

Wells Fargo projects that a “significant portion of expected annual savings” could be realized in 2013, with the most significant restructuring charges taken in the third and fourth quarters of this year and having a “relatively insignificant” impact on year-over-year comparisons.

The Wells Fargo statement comes in light of Brunswick’s announcement Tuesday afternoon that it will refocus Bayliner's global portfolio to “fully address a broader set of recreational day boat products,” such as bowriders, deckboats and jetboats, Conder wrote.

The company will consolidate Sea Ray cruiser production in North America to Palm Coast, Fla., and Vonore, Tenn., while eliminating cruiser production near Knoxville, Tenn., and closing that plant. Bayliner cruisers will be exclusively built in Brazil and sold in South American markets.

Annual savings of $10 million to $12 million are expected, largely beginning in 2013.

The company estimates third-quarter 2012 restructuring and impairment charges of $25 million to $32 million, with a majority of the restructuring and impairment charges non-cash asset write-downs of Hatteras, Cabo, and European/Asian brands, along with some cash severance, facility closures and other costs.

“Some additional similar charges are expected in future periods (i.e., through early 2013),” Conder wrote.

— Reagan Haynes

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