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Random Quote: I still miss my ex , but my aim is getting better !!
Here is a recent excerpt from Brunswick's earnings call. Essentially sales are falling off a cliff.
Brunswick Corp. BC, the world's largest maker of recreational boats, said on Friday that the drop in U.S. demand it was seeing for some boats was "unprecedented."
In a conference call with analysts to discuss Brunswick's third-quarter loss, Chief Finance Officer Peter Leemputte said the results "reflected the deep decline in markets for outboard powered boats as well as some share loss."
He said unit retail demand in 2007 for aluminum boats over 16 feet long was down 20 percent compared with 2004. Leemputte said that demand in the Upper Midwest, where Brunswick has a greater presence and where a painful restructuring of the auto industry is cutting deeply into consumer confidence, demand for such boats was down 43 percent "meaning half this market has disappeared.
Everyone's struggling right now. Talked to any building contractors, or realtors lately?
Talk to the guys that sell big trucks (dump trucks, 10 wheelers,etc.)...struggling.
I guess the folks in the upper midwest bought a bunch of boats, and then said, "hey wait...there's no water around here!"
Seriously tho, I can't imagine that section of the country being very strong. Plus w/ short seasons & fresh water, I would imagine a solid used boat isn't hard to find.
Take what they are willing to, or forced to, admit, and multiply it by two, and that is the situation.
Relative demand and ability to buy a new boat way down, prices up, huge overhang of used boats, and no way to continue to increase profits by increasing the composite size of the product line. This is one case where the theory and the empirical evidence are both in sync.
I would be surprised if unit sales weren't 30-40% lower than a year ago.
"Meanwhile, marine engine segment sales climbed 6 percent to $566.7 million on solid results from parts and accessories as well as a strong Mercury international performance."
Well, that's a relief. I thought that you were going to tell us about a new Bayliner submarine. I'm nervous enough about its boats, I don't think I'd climb into one of its subs.
Back to the point, let's not forget that the boating industry (and real estate, for that matter), saw unprecedented, unsustainable growth. So an unprecedented drop just brings things back to par. Someone who entered a coma in 2001 and will come out of it in 2009 will, without knowing what happened in between, probably be pleased to see unremarkable but decent growth in real estate and the boating industry.
__________________ Jeff
"Blue Goose"
23 Parker Walk-Around
Whitelhall Bay, MD
Brian - I read that article too . . . it's a rough rough time for boating. Average folks have no disposable cash . . . fuel prices have tripled in 4/5 years.
Everyone who purchased their boat (with a home equity loan) in the last 4 years is try desperately to sell their boat for what they owe . . . So there's a glut hardly used, low hour, tricked out used boats for less than 1/2 of what new boats cost.
It's an ugly ugly time for new boat sales unless you cater to the extremely wealthy (70ft + boats).
It's really not that hard to move losses from the "ongoing" pool to the "impairment" pool in a bad quarter, understating the former and overstating the latter. It is also common practice to goose up the impairment, so that you can take the unused reserves and release them to income later on. Bottom line is that companies use these one time charges to cover up what is really going on.
It is also interesting to note that they quoted the 20% reduction from 2004 and not 2005 (which was the revenue peak), or 2006. If you look at the reduction from either of those two years, the drop off is even greater.
It's great that engine sales are up, but where are they going - either to boats that are sitting in Brunswick inventory, or to other boat builders inventory. I hope their cost accountants are eliminating the profit sitting in their own boat inventory, but with all the acquisitions they have done over the last few years, I wouldn’t be surprised if they hadn’t set up procedures to do that.
Some are going to repowers, which is going to put even more downward pressure on unit boat sales in the future. I do think that Cummins has some definite advantages over Cat, Volvo, and Yanmar, so some of these gains are real.
The one saving grace is parts, where they actually still have some market power – there are few options for engine owners, at least for now, but if prices get too outrageous, OEM suppliers will enter the market.
Granted, the long term trend since 2000 will still be pretty close to flat, but that doesn’t make the changes over the past two years any less painful.
Brunswick submarine 
