Brunswick Expects Boat Production To Rise In 2010
CHICAGO (Dow Jones)--Brunswick Corp. (BC) said Thursday its third-quarter loss narrowed from a year ago and anticipates increasing production of
recreational boats and engines early next year to resupply its dealers.
Brunswick, the world's largest producer of recreational boats by sales, curtailed production sharply this year to clear out a glut of unsold
inventory. Third-quarter production of boats fell 70% from the same period in 2008. The company also resorted to steep discounts to move unsold boats
and engines.
As a result, third-quarter boat sales sank 62%, while the marine-engine sales fell 29%.
But the company said the majority of its boat and engine factories will be ramping up production entering 2010 to replenish dealer inventories that
have fallen to record-low levels.
If 2010 retail sales are flat with 2009, Brunswick said it would have to raise its production rate by 85% from 2009 levels.
"Increased production should provide improved revenue and reduced losses throughout 2010," said Chairman and Chief Executive Dustan McCoy during a
conference call with Wall Street analysts. He cautioned that 2010 retail sales might be lower than 2009, but added that price discounting should ease
as production begins to match dealers' sales levels.
Boat sales have taken a big hit during the recession as consumers reeled in spending on luxury items and tougher credit conditions made boats buying
more expenses.
The boating industry also has seen a wave of dealer closings and bankruptcies, fueling the oversupply of boats on the market at discounted prices.
Lake Forest, Ill.-based Brunswick has undergone a prolonged realignment of its operations for what the company expects will be smaller industry sales
volumes even when demand recovers.
Brunswick, which also makes bowling equipment and fitness machines, lost $114.3 million, or $1.29 a share, during the quarter ended Sept. 30, compared
with a year-earlier loss of $729.1 million, or $8.26 a share, in the same period a year earlier.
The third-quarter results were affected by charges of 24 cents per share for restructuring costs and a tax benefit that added 24 cents. Revenue from
the quarter decreased 36% to $665.8 million.
Analysts surveyed by Thomson Reuters had expected a $1.34 loss on revenue of $701 million.
Brunswick's gross margin fell to 11.4% from 17% on lower sales and production levels.
The company has been stockpiling cash during the downturn, reporting that its cash balance was $624.1 million, from $317.5 million at the end of
2008.
Brunswick's offer to buy back some of its $250 million notes earlier this month, however, fell flat, with bond holders tendering just $12 million.
Brunswick's stock was recently trading up 12.6% at $10.68 a share.
-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com
"Good judgment comes from experience. Experience comes from bad judgment."
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posted on 11-3-2009 at 09:36 AM
