Marine Products Corp. reports 2Q sales decline

ATLANTA – Boat builder Marine Products Corp. (NYSE: MPX) saw its sales decline by 17.9 percent to $55,734,000 during the quarter ended June 30, it reported in a statement earlier this week. Marine Products is a manufacturer of fiberglass boats under two brand names: sterndrive and inboard pleasure boats by Chaparral and outboard sport fishing boats by Robalo.

The decrease in net sales for the quarter ended June 30 was due to a 24.8 percent decrease in the number of boats sold, partially offset by a 6.8 percent increase in the average selling price per boat, according to the company.

“The increase in average selling price per boat was due to the continued success of our new Sunesta Wide Techs and Xtremes, in which unit volume increased significantly compared to last year at much higher average selling prices than the previous Sunesta models,” the company stated.

Gross profit for the quarter was $11,027,000, or 19.8 percent of net sales, compared to $14,934,000, or 22.0 percent of net sales, in the prior year, according to Marine Products. Gross profit as a percentage of net sales declined compared to the prior year due to cost inefficiencies resulting from lower production volumes and the impact of its retail incentive program.

Operating income for the quarter was $4,407,000, a 37.2 percent decrease compared to the second quarter last year due to lower gross profit, partially offset by lower selling, general and administrative expenses, Marine Products reported. Selling, general and administrative expenses in the second quarter of 2008 decreased by 16.4 percent compared to the prior year due to the variable nature of many of these expenses, including incentive compensation, which declined as a percentage of net sales because this cost varies with sales and profitability, the company said. Operating income was 7.9 percent of net sales for the quarter compared to 10.3 percent of net sales in the prior year.

Net income for the quarter ended June 30 was $3,896,000, a 26.1-percent decrease compared to $5,275,000 in the prior year.

Net sales for the six months ended June 30, 2008 were $121,276,000, an 8.7 percent decrease compared to the first six months of 2007. Net income for the six-month period decreased 12.7 percent to $8,028,000 compared to $9,192,000 in the prior year.

"Our financial results for the second quarter of 2008 reflect the recent acceleration of the decline in the recreational boating market which we have experienced for almost three years,” said Richard A. Hubbell, Marine Products' CEO. “During the spring selling season, the price of fuel increased dramatically, which we believe caused many consumers to forego the purchase of a new boat. Also, the declines in the residential housing market have continued, and are acute in important recreational boating markets. These factors, along with slower economic growth, have made the 2008 retail selling season very weak. Our order backlog is lower than at this time last year, and our dealer inventories are higher.

“Due to our lack of confidence in a rebound in demand in the beginning of this model year, continued high fuel prices, and other factors such as the general economy and prolonged drought in several of our important markets, we have made further cuts in unit production and direct costs as we begin 2009 model year production.

"Although we are in the most protracted downturn in our company's history as a public company, we continue to be pleased with the market's reception to our new products, and we believe that our financial strength and management expertise have positioned us to perform relatively better than our peers. Although we are cutting costs to manage our profitability at current production levels, we continue to develop new products and increase brand awareness among our consumers which will benefit our company in the long run. We find evidence of this in the available retail unit sales data through May, which indicate that Chaparral's market share has improved slightly, and that our unit sales have declined less than the general market for our category of recreational boat.”

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