BRP grows its E-TEC sales

VALCOURT, Québec, Canada — While Bombardier Recreational Products Inc. sold more watercraft and more E-TEC engines during the three-month period ended July 31, its marine engine and powersports revenues are down.

BRP’s consolidated revenues for the quarter reached $467.3 million; a decrease of $106.5 million when compared to restated consolidated revenues of $573.8 million for the second quarter of fiscal 2005, the company reported in a statement yesterday.

The decrease is due to lower number of units sold for $109.5 million and the unfavorable impact of foreign exchange fluctuations for approximately $32.0 million, which was partially offset by higher average selling price and product mix of $34.1 million, according to BRP.

Consolidated revenues for the six-month period ended July 31 reached $1,061.3 million, a decrease of $136.4 million when compared to restated consolidated revenues of $1,197.7 million for the first half of fiscal 2005.

Consolidated gross profit reached $80.1 million for the second quarter of fiscal 2006 compared to restated consolidated gross profit of $97.2 million for the three-month period ended July 31, 2004.

Consolidated gross profit reached $195.4 million for the first half of fiscal 2006, compared to restated consolidated gross profit of $187.4 million for the six-month period ended July 31, 2004.

Operating expenses, comprised of selling and marketing, research and development and general and administrative expenses, amounted to $97.4 million for the three-month period ended July 31, a $13.8 million increase when compared to $83.6 million for the second quarter of fiscal 2005. Operating expenses amounted to $197.8 million for the six-month period ended July 31, 2005, an increase of $11.3 million when compared to $186.5 million for the first half of fiscal 2005.

The increases in selling and marketing expenses are attributable to the promotion of the Evinrude E-TEC outboard engines and the promotion of sales incentives relating to watercraft, according to BRP. The increase in marketing expense was partially offset by lower research and development expenses.

Consolidated Adjusted EBITDA reached $19.8 million and $52.2 million, respectively, for the three-month periods ended July 31, 2005 and 2004 and $62.9 million and $87.5 million, respectively, for the six-month periods ended July 31, 2005 and 2004.

Net loss for the three-month period ended July 31 amounted to $1.7 million, compared to the net income of $28.5 million for the second quarter of fiscal 2005. Net loss for the six-month period ended July 31 amounted to $4.5 million, an improvement of $15.2 million compared to the net loss of $19.7 million for the first half of fiscal 2005.

BRP operates in two segments: the Powersports segment includes snowmobiles, watercraft, all-terrain vehicles, sport boats and Rotax engines; the Marine Engines segment includes outboard engines.

Marine engine sales down despite jump in E-TEC sales

The contribution BRP’s Evinrude E-TEC engines are making to its marine engine revenues has increased dramatically this year from 19 percent to 52 percent, the company reported in its second quarter earnings conference call yesterday.

During the call, José Boisjoli, BRP’s president and CEO, said BRP had to invest millions in marketing and advertising to get that result, but it was “a very good investment” that resulted in “lots of increase in E-TEC demand.”

But despite this “turnaround,” a reduction in offerings and thus sales of Johnson four-strokes and two-stroke carbureted outboards has resulted in a decrease in marine engine revenues for the quarter.

Marine Engines segmented revenues decreased to $152.9 million for the three-month period ended July 31 compared to $164.5 million for the second quarter of fiscal 2005, the company stated. The decrease results primarily from a lower number of units sold due to the reduction in the number of models for $19.1 million and the strengthening of the Canadian dollar in relation to the US dollar for approximately $12.0 million, all of which were partially offset by an improved product mix of $21.4 million resulting from an increase in the number of Evinrude E-TEC engines sold, according to BRP.

Segmented revenues decreased to $291.5 million for the six-month period ended July 31, 2005 compared to $315.6 million for the first half of fiscal 2005.

Marine Engines segment operating income amounted to $14.3 million for the second quarter of fiscal 2006 as compared to $7.8 million for the three-month period ended July 31, 2004. Segment operating income amounted to $9.5 million for the first half of fiscal 2006 as compared to an operating loss of $3.1 million for the six-month period ended July 31, 2004.

The increase in the segment’s operating income results from improved margins due to the model rationalization and the decision to focus on the Evinrude E-TEC outboard engines totaling $5.1 million and $13.5 million for the three- and six-month period, respectively, the company reported. The favorable impacts from the improved operating income were partially offset by increased marketing expenses for the promotion of the Evinrude E-TEC outboard engines brand through advertising efforts.

Watercraft sales increase helps offset decline in ATVs and snowmobiles sold

Boisjoli said the company “had a good summer in North America, which turned out to be very good for our watercraft and sport boat businesses.”

Powersports segmented revenues were $321.9 million for the three-month period ended July 31, 2005 as compared to $419.0 million for the second quarter of fiscal 2005. The decrease in revenues is primarily a result of lower number of units sold amounting to $90.5 million. The decrease number of ATVs and snowmobiles sold was partially offset by increased number of watercraft sold.

Segmented revenues reached $793.7 million for the six-month period ended July 31, 2005 as compared to $903.2 million for the first half of fiscal 2005.

Powersports segment operating loss amounted to $13.7 million for the second quarter of fiscal 2006 as compared to an operating income of $22.1 million for the three-month period ended July 31, 2004.

Segmented operating income amounted to $19.3 million for the first half of fiscal 2006 as compared to $31.1 million for the six-month period ended July 31, 2004.

“Not withstanding the revenue decline in the Powersports segment during the second quarter, we continued to enjoy a strong leadership position in our traditional businesses.” commented Boisjoli. ”As for the Marine Engines segment, I am pleased with the turn around due to our decision to focus on E-TEC; it will bring a better balance between our two business segments. Going forward, I see progress and I remain confident to close the year with an improved overall adjusted EBITDA,” he concluded.

BRP’s portfolio of brands and products includes: Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and sport boats, Johnson and Evinrude outboard engines, direct injection technologies such as Evinrude E-TEC, Bombardier all-terrain vehicles (ATV), Rotax engines and karts.

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