Brunswick Corp. is continuing expansion of its Boston Whaler facilities due to strong demand of larger boats.
“It’s a multiyear expansion relative to Whaler,” Brunswick CEO Mark Schwabero told investors and analysts during a call Thursday to discuss first-quarter financial results. “But it is in response to strong demand, and it probably [began] a bit earlier than we would have anticipated when we did initial expansion a year ago. Demand for the product has well outpaced our expectation.”
The current expansion will help Boston Whaler increase production of larger models, Schwabero said.
The company is also addressing raw material pricing fluctuations it anticipates as a result of aluminum and steel tariffs, Schwabero said.
“We buy very very little foreign aluminum as well,” Schwabero said. “The thing you’ve seen though is, obviously aluminum prices are going up. When there were actions around Russia, we saw the stuff spike; they pulled some of that away, prices almost overnight dropped about 10 percent. So there’s a lot of volatility in the aluminum market.”
The volatility isn’t a function of the tariff, but a function of how the domestic market will respond to the tariffs being in place, Schwabero said.
“Fundamentally we think everyone will be affected equally, and it’s probably going to result in pricing [increases] across the board in the industry, which isn’t material enough, in our opinion, to really change the demand profile and therefore shouldn’t impact our margin profile,” Schwabero said.
The company has already been adjusting pricing in part because of anticipated tariffs and in part due to inflation.
Pontoon prices were particularly affected by pricing increases, Schwabero said.
“We have some of those announcements,” Schwabero said. “Typically this time of year we’re doing pricing for model year 2019. We already factored some in and we will continue to look at pricing.”
The company said its engine segment continues to grow, despite parts and accessories being off in the first quarter due to bad weather.
Brunswick has invested around $1.1 billion into the Mercury business from 2011 to 2017, Schwabero said.
“I would challenge you that no one else is making those kind of sustained investments in a business, and I think we're clearly differentiating ourselves in that space,” Schwabero said.
“Some of our competition, they may have longer term supply or multiyear supply arrangements,” Schwabero said. “And so those could convert over time. But I would tell you where there's a mixing of the business with an OEM, we're continuing to grow our share with that mix and picking up our own exclusive customers as well.”