LAKE FOREST, Ill., Brunswick Corporation (NYSE: BC) announced this morning that it will lower production of marine products in the second half of 2007 due to continued weakness in retail markets in the United States.
"Preliminary industry data indicates that retail sales are down by as much as 13 percent in our key category of stern drive and inboard powered fiberglass boats in the second quarter, which historically represents the strongest period of the selling season," said Brunswick chairman and CEO Dustan E. McCoy. "In an effort to manage our pipeline inventories, we have been reducing both our production levels and our wholesale shipments of boats.”
Through the first half of the year, McCoy explained, Brunswick’s wholesale shipments have been significantly below levels in the same period a year ago, even below 2007 retail sales. But, he says, despite the company’s reduced shipments, the anemic retail demand for stern drive and inboard fiberglass boats has not allowed for meaningful progress in reducing the company’s pipeline inventories for these products.
“We also see no reason to believe that retail trends will reverse in the second half of the year, which is the slowest period for boat sales,” McCoy concludes. “As we go into the 2008 model year, which began July 1, commitments received from our dealers support our view of the retail environment. To ensure the continued health of the company and that of our distribution network, we are reducing further production levels for both boats and engines."
The company said it will report its final financial results for the second quarter of 2007 on Thursday, July 26, before the market opens, but expects to report diluted earnings per share from continuing operations of $0.64 to $0.65. Primarily due to the lower production levels planned for the second half of the year, the company is reducing its earnings estimate for 2007 to a range of $1.20 to $1.35 per diluted share from continuing operations. This reflects the effect of lower sales and lower fixed-cost absorption from the production cuts, among other factors. Previously, the company had estimated diluted earnings per share from continuing operations of $1.65 to $2.00 for 2007.
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