Brunswick Q2 Outperforms Expectations

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Brunswick Corp. reported consolidated net sales of $987.8 million, down from $1.164 billion in 2019. Diluted EPS for the quarter was $0.89 on a GAAP basis and $0.99 on an adjusted basis.

The propulsion segment, which includes Mercury Marine, reported a sales decrease in the quarter as continued demand for higher-horsepower outboard categories and related controls and systems was offset by the impact of production suspensions at Mercury and its OEM customers due to the coronavirus pandemic.

Operating earnings also decreased due to lower sales and the unfavorable absorption resulting from Covid-19 production disruptions, as well as the impact of changes in foreign exchange rates and tariffs, the company said.

The boat segment also reported lower sales and earnings, which the company attributed to suspended manufacturing in most plants in April.

Freedom Boat Club contributed approximately 2 percent of sales in the quarter despite many locations being impacted by local business-closure orders early in the quarter.

“All our businesses outperformed our expectations in the quarter,” CEO David Foulkes said in a statement. “Our resilient, aftermarket-driven parts-and-accessories business supported consumers as stay-at-home restrictions were lifted and boaters returned to the water in force.”

Demand in the U.S. retail marine market accelerated into May and June, resulting in robust new-boat and engine sales, with sales to first-time purchasers or returning lapsed boaters representing approximately half of the boat sales, Foulkes said.

“This surge in demand, together with the suspension of production at most of our manufacturing facilities from late March into mid-April due to the pandemic, resulted in our lowest midseason pipeline inventory levels in almost 20 years, with 34 percent fewer boats in dealer inventory versus the second quarter of 2019,” Foulkes said.

The second-quarter performance, along with a “surging marine retail environment,” has created substantial growth opportunities for 2021, he said.

“Given recent sustained demand, elevated production levels over time will be required to rebuild pipelines and, together with substantial upcoming new product offerings, should drive wholesale growth through 2021 and potentially beyond,” Foulkes said.

Brunswick anticipates marine industry retail unit demand will be up by low single digits for the year, with stronger demand in the United States than internationally, he said.

Brunswick also expects operating expenses of $560 million to $575 million for the year, which represents an approximate 10 percent decrease from its initial 2020 plan.

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