Brunswick Corp. today reported its 2018 third quarter results. Consolidated net sales increased 15.1 percent, and were up 18 percent for the combined marine business. Operating earnings were up 17.2 percent, and were up 31.3 percent for the combined marine business.
"Our third quarter performance reflects the outstanding execution of our marine strategy, evidenced by the strong financial contributions from each of the propulsion, parts and accessories, and boat businesses," said Brunswick Chairman and Chief Executive Officer Mark Schwabero. "We concluded the primary marine retail selling season, leveraging a steady marine market and robust demand for outboard engines into significant top-line growth and margin expansion.”
Pricing actions helped the company largely offset headwinds caused by trade policy, tariffs, and other input cost increases, Schwabero continued.
During the quarter, Mercury Marine over-achieved versus planned run-rate production of its new 175 to 300 horsepower, V6 and V8 outboard engines, with the substantial demand for the products continuing to far exceed expectations, Schwabero said.
“Despite a mid-teens percent increase in year-to-date production levels of outboard engines greater than 75 horsepower, we expect demand will still outpace production for these horsepower categories into 2019, even as we execute against our planned investments and initiatives to further increase capacity,” he said.
Led by increased production of the Mercury’s new outboard engine lineup, continued success of the company’s parts and accessories business, which was augmented by the closing of the Power Products acquisition in August, and improving operating execution across the Marine business Brunswick delivered financial results in the quarter that demonstrate the effectiveness of of the camp’s current strategy, Schwabero said.
“Our boat business delivered strong top-line and earnings improvement in the quarter, led by Boston Whaler, Sea Ray Sport Boats and Cruisers, and Lund. The segment is well positioned moving forward, with dealer and consumer sentiment remaining favorable, pipelines appropriately positioned, and new product offerings leading to positive momentum in advance of the boat show season," Schwabero continued.
The Marine Engine segment reported net sales of $802.7 million in the third quarter of 2018, up 19.9 percent from $669.2 million in the third quarter of 2017.
Acquisitions, primarily driven by Power Products, contributed approximately 6 percent to the growth rate in the quarter. International sales, which represented 29 percent of total segment sales in the quarter, were up 14 percent compared to the prior year period.
For the quarter, the Marine Engine segment reported operating earnings of $128.1 million, which included $10.5 million of transaction costs and $9.4 million of purchase accounting amortization, each related to the Power Products acquisition. This compares with $115.2 million of operating earnings in the third quarter of 2017. Strong growth in both the outboard engine and parts and accessories businesses, including the effect of the Power Products acquisition, drove sales increases in the quarter.
Operating earnings comparisons were positively affected by these factors, as well as favorable impacts from changes in sales mix. The Boat segment reported net sales of $322.6 million for the third quarter of 2018, an increase from $309.3 million in the third quarter of 2017.
Net sales included $9 million and $21.3 million of Sport Yacht and Yacht sales in the third quarter of 2018 and 2017, respectively.
International sales, which represented 18 percent of total segment sales in the quarter, decreased by 15 percent compared to the prior year period.
For the third quarter of 2018, the Boat segment reported operating losses of $5 million, as losses from Sea Ray Sport Yacht and Yacht operations exceeded the positive earnings contributions from the rest of the boat portfolio.
Specifically, third quarter results included $9.4 million of restructuring, exit, integration, and impairment charges, as well as additional losses in excess of restructuring charges of $11.9 million related to the Sport Yacht and Yacht operations.
Operating earnings of $0.1 million in the third quarter of 2017 included $9.8 million of operating losses from Sport Yachts and Yachts. The Boat segment's quarterly revenue comparisons were influenced by the wind-down of Sea Ray Sport Yacht and Yacht operations noted above, offset by strong growth in the saltwater fishing category, due in part to the impact of hurricane activity on 2017 results.
"With three quarters completed, 2018 is shaping up to be another year of record earnings, led by robust marine revenue and margin growth, with excellent cash flow generation," Schwabero concluded. "In our combined marine business, we expect top-line performance to continue benefitting from a steady global marine market, increases in average selling prices, including benefits from customer migration to higher horsepower engines and boats with increased content, market share gains resulting from the unprecedented demand and acceptance of new outboard products, and our growing parts and accessories business. For the full-year, we anticipate solid improvement in both gross and operating margins in our combined marine business, given ongoing benefits from new products and acquisitions, with pricing actions mostly offsetting impacts related to cost inflation and tariffs.”