Mercury to increase capacity

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Demand for outboards has outpaced supply.

Demand for outboards has outpaced supply.

Brunswick Corp. is increasingly focused on becoming a singular marine company as it looks to either spin off or sell its fitness business.

“We are solidly in marine; it’s by far our primary focus,” said David Foulkes during his first earnings call with investors since becoming CEO. “A couple of our businesses, like Power Products, do have some product categories that extend beyond marine, but our entire strategic focus now is on marine. I honestly believe … that we have tremendous runway in the marine business.”

Brunswick is capturing new market share and expanding margins in various areas of its marine business, Foulkes said, and that should grow after Mercury expands capacity. This should help address challenges relative to the product introduced in 2018 and in bringing on new capacity in the products, CFO Bill Metzger said.

“The next big increase in capacity will be online in the fourth quarter of 2019,” Foulkes said. “Unlike the original increase for the new platform, we’re not building new walls. We’re essentially adding machines in Fond du Lac and adding capacity to the supply base. We believe that will give us added capacity to meet demand for the next several years.

“The good news about that additional capacity is a lot of that comes at higher margin than the initial capacity we added because we’re able to satisfy demand in channels we haven’t been able to satisfy, especially the dealer channel, which is a higher margin channel for us,” he added.

Mercury will continue to aggressively roll out new products, with launches similar to those in 2018 on the horizon for 2019 and 2020, Foulkes said.

Focusing exclusively on marine will still provide opportunities for growth, especially in light of Brunswick’s Power Products acquisition, he said. “We have really only just begun to exploit the Power Products acquisition,” Foulkes said. “Nobody else in the marine industry has the kind of platform that we have,” with propulsion, parts and accessories, and the boat portfolio.

“We intend to fully capitalize on that, and that is a combination of growth initiatives, which includes new-product development, potentially some new categories, along with a rigorous attention to operating excellence and quality,” Foulkes said.

“Power Products gives us a whole electrical backbone and digital backbone of the boat,” he said. “We can now come to a boat OEM and offer them a fully integrated solution for their boat system, with propulsion, electrical, digital control, water management, steering — essentially allowing an OEM to focus where they want to focus, which is how to differentiate their product.”

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