Brunswick confident in strategy after 1Q results

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The first quarter of 2012 represented Brunswick Corp.'s ninth consecutive quarter of year-over-year earnings per share growth, which "demonstrates the continuing success of our business strategy," chairman and CEO Dustan McCoy said Thursday in a call with analysts following the company’s quarterly earnings release.

The boat segment, which saw a 1 percent increase in sales, recorded its first profitable first quarter since 2007, which McCoy noted was a big hurdle to overcome.

He attributed the increase in the boat segment to:

• an investment in 2009 in the dealer network and ongoing work to keep the network healthy

• becoming better at choosing the right products to take to market

• better communication with dealers, which allows the company to be more flexible and hit local markets with appropriate product

Brunswick has fewer products and models than it did in the past, but those that remain are in demand from consumers, McCoy said.

He said there is “one category” operating at a loss, but did not name that category or boat line.

Overall, Brunswick Thursday reported a slight decline in net sales, which were $974.2 million, down from $985.9 million a year earlier. It reported net earnings of $39.7 million, or 43 cents per diluted share, for this year’s first quarter, compared with $27.5 million, or 30 cents per diluted share, for the first quarter of 2011.

The decline in sales was largely attributed to specific factors affecting the marine engine and life fitness segments, McCoy said. Sales grew in the outboard and the parts and accessories areas, but were offset by declines in sterndrives. Global sterndrive sales decreased because of production ramp-up issues and overall weaker demand, he said.

The boat segment reported net sales of $306.4 million for the first quarter of 2012, compared with $303.5 million in the first quarter of 2011. Boat segment production and wholesale shipments increased during the quarter, compared with the first quarter of 2011.

The increase in wholesale unit shipments was partially offset by the effect of a higher mix of smaller-boat sales and the absence of sales from the Sealine brand, which was divested Aug. 30, 2011. McCoy said he expects smaller boats, with smaller margins, to continue to be more in demand than larger boats.

He noted that in 2011 an estimated 139,500 units were sold in the United States — up one half of 1 percent from 2010. It’s a small increase, he said, but the first annual increase recorded since 2004.

For 2012, Brunswick expects mid-single-digit revenue growth, an increase in operating earnings and a stable and improving U.S. marine market, McCoy said. The second quarter will likely have “unfavorable comparisons” to the prior year, but for the second half of 2012, Brunswick expects sales and earnings growth.

Analyst Tim Conder, with Wells Fargo Securities, said Brunswick officials are “executing well overall short-term and investing for organic growth. All else equal, [Brunswick] should continue posting solid market share gains in multiple segments. We continue to be buyers of this quality cyclical name.”

Beth Rosenberg


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