BRP rebounds despite lower sales

VALCOURT, Quebec, Canada — Despite weathering a drop in sales, privately held Bombardier Recreational Products Inc. gained profitability in its year-ended January 31, 2006, rebounding on a favorable product mix and cost-cutting efforts.

BRP said net income for its fourth quarter ended January 31, was C$16.2 million, up from a net loss of C$23.9 million for the corresponding period ended January 31, 2005. Net income for the fiscal year ended January 31 was C$61.6 million, up from C$28.5 million for fiscal 2005.

BRP’s fourth quarter revenues were C$675.3 million, up from C$622.4 million for the same period last year. Revenues for the year ended January 31 were C$2,361.2 million, down from C$2,451.3 million in 2005.

BRP operates in two segments: the Marine Engines segment includes outboard engines; the Powersports segment includes snowmobiles, PWC, ATVs, sport boats and Rotax engines. BRP said the C$90.1 million decrease in revenues for fiscal 2006 is a reflection of a lower number of units sold in the Powersports and the Marine Engines segments, as well as unfavorable foreign exchange rate variations.

BRP operating income for the fourth quarter of fiscal 2006 was C$128.5 million, up from $95.1 million for the same three-month period last year. Year-end operating income was C$485.4 million, up from C$411.4 million for fiscal 2005. BRP said the 18 percent increase corresponds to a 3.8 percentage point improvement in gross profit margin for fiscal 2006 and is primarily due to a favorable product and price mix as well as improved production costs.

Marine Engines
Marine Engines segment fourth quarter revenues were C$109.5 million, down 7.1 percent from C$117.9 million for the three-month period ended January 31, 2005. Marine Engines segment revenues for the recent year ended were C$540.0 million, down 3.76 percent from C$561.1 million for fiscal 2005. BRP said the decrease in revenues is mainly due to a reduction in units sold as a result of SKU rationalization and an unfavorable impact of the strengthening Canadian dollar in relation to the U.S. dollar.

The Marine Engines segment improved its operating loss of C$11.7 million for the fourth quarter of fiscal 2006, which was down 45 percent from a loss of C$21.3 million for the fourth quarter of fiscal 2005. For the year ended January 31, Marine Engines operating income amounted to C$12.6 million, an improvement from an operating loss of C$17.2 million for fiscal 2005. BRP said the increase in operating income is due to favorable product mix but offset by higher selling and marketing expenses of C$5 million.

Powersports
BRP’s Powersports segment fourth quarter revenues were C$580.4 million, up 11.85 percent from C$518.9 million for the same period last year. For the fiscal year ended, Powersports segment sales were $1,875.3 million, down 3.1 percent from C$1,935.6 million last year. Company officials said decreased revenues were primarily caused by the strengthening of the Canadian dollar and a corresponding overall reduction in the number of units sold.

Powersports segment fourth quarter operating income was C$59.5 million, up 95.7 percent from C$30.4 million for the fourth quarter of fiscal 2005. Year-end operating income was C$137.2 million, up 31.8 percent from C$104.1 million for fiscal 2005. BRP said the increase in operating income is due to better product and price mix, improved production costs and restructuring of operations.

“I am pleased with our progress,” said José Boisjoli, BRP’s President and CEO. “We are becoming more and more profitable because of a better product mix and our sustained efforts to reduce our costs. Our determination to maintain our leadership position in our traditional markets, our capacity to undertake a major turnaround in the profitability of our marine engines segment as well as the introduction of market-shaping products such as the Outlander 800 and the Evinrude E-TEC family of engines, will continue to have a positive impact on our financial results.

“We expect to continue to experience external pressures such as high commodity prices and a strong Canadian dollar while we pursue the implementation of our cost reduction program and keep on developing and marketing exciting, innovative products for our customers. Overall, I am confident that our strong position in our traditional markets, the expansion of our international business, our decision to focus on E TEC and our modified ATV strategy towards powersports enthusiasts will generate growth and increase our EBITDA going forward.” – By Guido Ebert, Powersports Business magazine

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