Marine Products Corp. reported a 22.4 percent decline in net sales and a 19.2 decline in gross profit for the fourth quarter of 2019, due to production cuts designed to help dealers reduce inventory — a situation the company said it has resolved.
The company reported net sales of $48.1 million, compared with $62 million in the prior year quarter, and gross profit of $10.5 million, compared with $13 million in the fourth quarter of 2018.
The Chaparral and Robalo parent said it will increase production early in the first quarter of 2020 to respond to positive demand indicators, including brisker-than-usual boat show sales and customer preferences for larger boats.
“We reduced our head count and our lowered our production during the fourth quarter,” CEO Richard Hubbell said during a conference call to discuss the quarter. “As a result, our net sales during the quarter decreased 22.4 percent.
“We will continue to monitor field inventories, as we always do, and at this time, we have an increasingly positive outlook for 2020,” Hubbell added.
The company said unit sales decreased 21 percent, as sales declined across all model lines, and that average selling prices declined 1.3 percent due to a change in the model mix.
Sell-through at the dealer level was typical for that time of year; the company just didn’t ship boats, CFO Ben Palmer said during the call. “We didn’t have particularly strong discounting — it was kind of normal for year-over-year and for the period,” Palmer said.
The increase in production is a tactical response to what appears to be a stronger boat show season, said corporate finance vice president Jim Landers.
The company saw a “significant increase” in sales to Canadian dealers after Canada eliminated the 10 percent retaliatory tariff it had placed on U.S.-built boats.
Gross profits were about $10.5 million, a 19.2 percent decrease compared with gross profit of around $13 million in the same period of the prior year. As a percentage of net sales, gross margin was 21.8 percent in the fourth quarter of 2019, compared with 21 percent in the fourth quarter last year.
Operating profit was nearly $4.2 million, a decrease of 30.6 percent from the fourth quarter of 2018, when operating profit was more than $6 million.
Net income for the quarter was $3.5 million, a 25.1 percent decrease from $4.7 million the year prior.
Diluted earnings per share were $0.10, a decrease of $0.04 compared with $0.14 diluted earnings per share in the same period of 2018.