Difficulties sourcing the parts stifle the BRP’s performance by preventing it from taking full advantage of the RV frenzy. The Quebec multinational warns that there will be hurdles to overcome at least until the end of the year. If the maker of Ski-Doo, Sea-Doo and Can-Am remain optimistic, investors saw things differently Friday after the release of first-quarter results. Summary.
Updated yesterday at 2:48 PM.
what happened ?
While revenue has remained flat in the three months to April 30, BRP has seen its earnings halve. One of the main reasons: Supply chain disruptions prevented the company from increasing deliveries to its agents. This is especially true for personal watercraft and three-wheeled motorbikes.
BRP prefers to see the glass half full. If sales at North American dealerships fell 9% in the first quarter, the drop is just over 20% industrywide, the Valcourt-based company says.
Its president and CEO, José Boisjoli, explained in a conference call with analysts that “the decline does not reflect a lack of consumer demand, but rather limited product availability.”
This does not seem to convince investors. On the Toronto Stock Exchange, on Friday at the close, BRP stock fell 10.4%, or $10.43, to trade at $90.15.
Longer than expected
Like most companies, BRP has not escaped shortages in semiconductors — the components in electronic chips that are necessary to power certain units — and parts such as discs and sensors. In the spring, I expected to see things gradually return to normal.
The lengthy restrictions imposed several weeks ago in China – particularly in Shanghai, the country’s economic capital – to stem the resurgence of COVID-19 cases have changed the situation.
“What surprised us was the absolute zero tolerance in China,” said Mr. Boisjoli. This leads to more disruption for us, but also for some suppliers. We think it’s going to be tough all year round. »
This situation prevents BRP from replenishing inventory at its agents. While pre-orders are up 80%, stock is down 67% from pre-pandemic levels.
And what about the economy?
With the global economy showing signs of faltering and interest rates continuing to rise as central banks try to rein in inflationary increases, could demand for recreational vehicles vanish? No yellow light yet, BRP responds to analysts.
“We’ve spoken with all of our divisions, asked them a lot of questions and don’t expect any slowdown at the moment,” said Mr. Boisjoli. Perhaps this is because our clients have above average family income. We do not feel this effect. »
As for higher interest rates, which leads to higher financing costs, the BRP chief believes that the financial backlash is still limited. He says the price of the product the company has built ranges from $15,000 to $20,000. The backlash is less pronounced than accommodation, for example.
Despite the tumultuous trading session on Friday, some analysts continued to be encouraged by the BRP outlook.
“The company will continue to face supply challenges in the coming quarters, but we believe these challenges, along with market concerns, are already reflected in the stock price,” said Cameron Dorksen of National Bank of Finance in a report.
As for Desjardins Securities, Benoit Poirier was pleased to see the company raise its forecast for adjusted earnings per share for the year. Earnings are expected in the range of $11 to $11.35 per share, compared to the previous range of $10.75 to $11.10 per share.
- BRP says it has more than 20,000 employees worldwide.
- 910 million
- If all goes according to plan, BRP’s profit could reach $910 million by the end of the year, the company expects.
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