Brunswick Corp. reported market share growth despite headwinds caused by a dollar that was continuing to strengthen during the second fiscal quarter.
Brunswick CEO Dustan E. McCoy told investors on Thursday that the company faced foreign exchange headwinds, particularly in Canada, during an otherwise strong quarter.
“The only thing that causes us to be probably a little conservative about the boat group is continued concern about Canada,” McCoy said. “A significant portion of that market is aluminum and that includes fishing and pontoon, as well as engines, and it’s just a tough place to be right now. It could be down as high as low single digits. It’s a very tough place to be right now and we have a bit of concern for that. That’s the only issue in our guidance that really popped up. From the last call to the call today, the dollar continues to strengthen.”
The weakness in Canada affected margins, causing them to be about flat. Declining unit shipments also were chalked up to weakness in the region, which has been primarily focused on western Canada.
On Thursday, Brunswick reported total revenue of $1.14 billion for the quarter that ended July 4, compared with $1.07 billion a year earlier, and a profit of $117.8 million, or $1.25 a diluted share, up 33 percent from $88.6 million, or 93 cents a share, last year.
The company has seen a spike in competition outside the United States from a Japanese engine competitor.
“One of the two smaller ones is being a bit disruptive outside the U.S., and that’s something our team is dealing with,” McCoy said.
He also mentioned European builders using the strong dollar as a competitive advantage.
“As we look at boats, especially larger boats, we’re beginning to see the first instances of European boatbuilders using the euro a bit to their advantage as they come in and price,” McCoy said. “As I’ve looked at our business, especially with larger boat models … backlogs continue to be strong. We’re doing a better job with cutting down delivery time. Our folks are on the ground managing [the pricing advantages from European boatbuilders] even better than we can expect.”
Company executives also spent time addressing new-model backlogs during the question-and-answer portion of the call.
“On the through-put side, delivery times are really trending down,” said president and COO Mark Schwabero, who is set to succeed McCoy next year. “That’s because we’re getting dealers some inventory, like 19 [and] 21 [Sea Ray] SPX, which is available in sterndrive or outboard. When retail orders come in, we’re better able to respond because … we’re able to handle that situation now that we’ve got some out in the field.”
“On the big boats, we’ve been able to bring delivery time down a little bit,” he said. “Like a custom home, on a 650, it by definition is going to have months and months of lead time because of the entire process involved in one of those large vessels.”
“Having a big backlog and a reasonable length of time to deliver boats, it’s very good for ourselves and the dealer network,” McCoy added. “People have got to wait a year to get a boat, the dealer doesn’t have to discount and the consumer gets exactly what he wants because can talk about what he wants and how. We’re becoming increasingly confident about the power of our products in the marketplace and that people will wait a year.”
For example, people are still waiting a year for the 420 Whaler, but the company is delivering the boats, McCoy said.
“And the backlog is just as high today as it was six months ago,” he said. “My perspective is the delivery date is not a big issue. The key is making sure we have a backlog and we’re continuing very strong.”