High-horse Engines in High Demand

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Mercury Marine has gained market share in the high-power outboard market, according to the company.

Mercury Marine has gained market share in the high-power outboard market, according to the company.

Mercury Marine parent Brunswick Corp. resumed production of some outboards a couple of weeks ago, beginning with the line that produces its newest platform — 175- to 300-hp outboards — as well as the 450 Racing engine.

That’s according to Brunswick CEO Dave Foulkes, who detailed first-quarter results to investors and analysts on a conference call Thursday.

“That was an area where we consistently had the highest demand and where inventory levels had gotten to their lowest point,” Foulkes said on the call. “Now we’ve started production of the 400- and 450-hp line, and we’ll gradually introduce other lines. We’re managing this to make sure all our new protocols for health and safety work.”

Saltwater markets, repowers and commercial sales were driving market share gains in those higher-horsepower engines, Foulkes said, characterizing market-share gains both domestically and internationally in high-horse outboard segments as “substantial.”

“We do see opportunity here,” Foulkes said. “They do have capacity to service all their channels now, and it was no coincidence the first two lines we had to bring back up were our high-horsepower lines, where inventory had already dropped to low levels. It is unfolding the way we thought it would.”

As a result of the short-term disruption in demand, the company is planning to manage second-quarter production “substantially lower” in advance of the model year changeover, which may get moved forward for some brands, Foulkes said.

Brunswick Corp. outlined its fiscal year assumptions, though it declined to give official guidance, as well as detailing its plans to de-lever by lowering estimates for debt retirement, capital expenditures and share repurchases.

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Brunswick Corp. outlined where it would de-lever. “I’m pretty comfortable with where we’re de-levering,” Brunswick CFO Bill Metzger said. “We’re balancing out all three the same. The volume reduction is fairly significant; with a portfolio that’s de-levering at 35 to 40 percent, you really have to do a lot on the cost side to offset that.

“Quite frankly, we are in a period where we ought to continue to play a little offense instead of just playing defense,” Metzger added. “The fact that we’re maintaining R&D at $120 million to $130 million worth of spend, and the fact that we’re maintaining all our critical products, is a decision we can make because our financial position allows us to, and it maintains all the optionality on growth we expected in our last three-year plan. I think all of that stuff is very important.”

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