Marine Products Corp.’s income takes a hit

ATLANTA – Marine Products Corp.’s (NYSE: MPX) second quarter results demonstrate that the boat builder is feeling the impact of current market conditions, and its top executive doesn’t see an end in sight for the industry.

“Our results for the second quarter of 2007 reflect continued weakness in the recreational boating market that began late in 2005,” said Richard A. Hubbell, Marine Products’ chief executive officer, in a statement released earlier this week. “We believe that this retail selling season was negatively impacted by high fuel prices and a weaker housing market, neither of which show signs of improvement. Although overall unit volume was down, we continue to see relative strength in our larger SSi Sportboats, our SSX Sportdecks, and our larger Robalo sport fishing boats.”

Marine Product Corp. generated net sales of $67,869,000 during the second quarter ended June 30, a 5.4 percent decrease compared to $71,739,000 in the second quarter of last year. The change in net sales resulted primarily from a 13.3 percent decrease in the number of boats sold, partially offset by a 6.8 percent increase in the average gross selling price per boat, the company reported.

Gross profit for the quarter was $14,934,000, or 22.0 percent of net sales, compared to $16,136,000, or 22.5 percent of net sales, in the prior year. The decrease in gross profit as a percentage of net sales was the result of manufacturing cost inefficiencies resulting from lower production volumes, according to the company.

Operating income for the quarter was $7,014,000, an 8.9 percent decrease compared to the second quarter last year, due to lower gross profit, partially offset by lower selling, general and administrative expenses. Operating income was 10.3 percent of net sales for the quarter, compared to 10.7 percent in the prior year. Selling, general and administrative expenses decreased because of lower warranty and incentive compensation expense, partially offset by higher research and development expenses due to new product development, Marine Product Corp. reported.

Net income for the quarter ended June 30 was $5,275,000, a 16.1-percent decrease compared to $6,289,000 in the prior year. Net income decreased due to lower operating income and a higher effective income tax rate compared to the prior year.

Net sales for the six months ended June 30 were $132,845,000, a 6.2-percent decrease compared to the first six months of 2006. Net income for the six-month period decreased 23.8 percent to $9,192,000 or $0.24 diluted earnings per share compared to $12,065,000 or $0.31 diluted earnings per share in the prior year.

“Our field inventory is comparable to this time last year,” commented Hubbell. “Order backlog is slightly lower, but reasonable in the current environment. In anticipation of continued low retail demand, we have taken steps to align our costs with current and projected production levels, including appropriate headcount reductions.

“In this difficult environment we are continuing to build and invest for the long term. We are using our enhanced research and development, engineering and marketing resources to bring to market exciting new models for the 2008 model year. Most notably, we have developed an entirely new Sunesta Wide-Tech line for 2008 and are continuing development of our 40-foot Chaparral Sport Yacht for later in the 2008 model year. We are continuing to use our financial strength and superior industry resources to build innovative, high-quality pleasure boats.”

Marine Products Corp. manufactures fiberglass boats under two brand names: sterndrive and inboard pleasure boats by Chaparral, including SSi Sportboats, Sunesta Wide-Techs, SSX Sportdecks, Signature Cruisers, and outboard sport fishing boats by Robalo.

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