Brunswick Corporation’s 2024 Q2 Earnings Reflects Soft Market – RVBusiness – Breaking RV Industry News
METTAWA, Ill. – Brunswick Corporation (NYSE: BC) – parent company to several RV industry companies including RELiON Battery LLC, Progressive Industries, ParkPower by Marinco, and Land ‘N’ Sea Distributing – released its second quarter 2024 financial results.
2024 Second Quarter Results
For the second quarter of 2024, Brunswick reported consolidated net sales of $1,443.9 million, down from $1,702.3 million in the second quarter of 2023. Diluted EPS for the quarter was $1.55 on a GAAP basis and $1.80 on an as adjusted basis. Second quarter sales were below prior year as the impact of continued lower wholesale ordering by dealers and OEMs, coupled with higher discounts in certain business segments, was only partially offset by annual price increases and benefits from well-received new products. Operating earnings were down versus prior year as a result of the impact of lower net sales and higher manufacturing costs primarily related to absorption from lower production, partially offset by significant cost control measures throughout the enterprise.
In addition, versus the second quarter of 2023:
Propulsion segment reported a 21 percent decrease in sales resulting from the enterprise factors listed above, partially offset by the impact of annual pricing. Operating earnings were below prior year primarily due to the impact of lower net sales and higher manufacturing costs, including absorption from lower production, partially offset by the lapping of prior year unfavorable capitalized inventory variances and accelerated cost control measures.
Engine Parts and Accessories segment reported a 2 percent increase in sales versus the same period last year. The Products business sales were up 7 percent, and Distribution business sales were down only slightly, at 1 percent compared to prior year, with both components of the segment delivering another quarter of sequential sales growth. Segment operating earnings were up versus prior year resulting from the higher sales, cost control across the businesses, and better operating efficiency as the transition to the Brownsburg, Indiana facility is now complete.
Navico Group segment reported a sales decrease of 8 percent, primarily driven by reduced sales to marine OEMs as they balance production levels to match retail ordering patterns, partially offset by strong new product momentum and slightly improved RV sales trends. Segment operating earnings decreased as the impact from lower sales and increased discount activity was only partially offset by lower operating expenses.
Boat segment reported a 23 percent decrease in sales resulting from softer wholesale orders, as its channel partners continued to order cautiously, and higher incentives and discounting, partially offset by the favorable impact of modest model-year pricing and share gains. Freedom Boat Club had another strong quarter, contributing approximately 10 percent of segment sales. The segment delivered adjusted operating margins within expectations as the impact of net sales declines and lower absorption from the reduced production was partially offset by pricing and continued cost control.
CEO David Foulkes Comments
“With high interest rates continuing to pressure consumer budgets and suppress discretionary spending, the introduction of new model year products at the beginning of the important month of June did not catalyze boat purchases as we had anticipated, and our second quarter results were slightly below expectations,” said Brunswick Chief Executive Officer David Foulkes. “Continued slower retail sales, combined with higher levels of discounting and carrying costs, have increased pressure on dealer and channel partner profit margins resulting in ongoing conservative wholesale ordering patterns which, in turn, is causing OEMs to maintain lower boat production rates through the main selling season, impacting Propulsion and Navico Group OEM orders.
“With significantly slower retail sales in the peak sales months, we now expect full year retail unit sales to be down approximately 10% versus our original forecast of flat. As a result of heightened demand stimulation efforts focused on clearing more aged inventory, our remaining field inventory is very fresh, with approximately 85 percent of field units being current. Our focus continues on leveraging our new products and adjusting production levels to maintain or gain share in key categories while diligently managing field inventory levels to end the year with weeks-on-hand at appropriate levels and units below prior year.
“Despite our propulsion business delivering lower sales and operating earnings versus the second quarter of 2023, year-to-date we continue to gain share in outboard engines, with more than 48 percent overall share of the U.S. outboard market. In addition, Propulsion’s controls, rigging, and propeller product category had a strong quarter with operating margins ahead of the same period in 2023.
“With boating participation continuing to be very solid in our major global markets, our engine parts and accessories business had a strong quarter, with sales and operating earnings up versus the second quarter of 2023, as we completed the full transition of engine parts and accessories distribution to our new, state-of-the-art facility in Brownsburg, Indiana.
“As anticipated, Navico Group had lower sales and operating earnings versus the second quarter of 2023 due to reduced marine OEM order rates and persistently slow RV orders but continued to show stability, sequential improvement in aftermarket sales, and overall sales and earnings consistent with first quarter results.
“Finally, our boat business had a solid performance given market conditions, with sales and operating earnings below second quarter of 2023, consistent with lower planned production levels. Freedom Boat Club continues to deliver steady membership sales growth and has added two more flagship locations in Denmark and the U.K., all while generating exceptionally strong synergy sales across our marine portfolio.
“Despite lower sales and earnings, the resiliency of our portfolio is being demonstrated, with our recurring revenue businesses and channels, including our engine P&A business, Propulsion’s repower business, Freedom Boat Club, and Navico Group’s aftermarket sales, contributing more than 50 percent of our Q2 adjusted operating earnings. In addition, our businesses delivered strong cash flow, enabling $170 million to be deployed for share repurchases year-to-date, further solidifying our focus on returning value to shareholders,” Foulkes concluded.
Review of Cash Flow and Balance Sheet
Cash and marketable securities totaled $593.2 million at the end of the second quarter, up $113.5 million from 2023 year-end levels.
Net cash provided by operating activities of continuing operations during the first six months of the year was $67.6 million including net earnings net of non-cash items and the seasonal impact of working capital build.
Investing and financing activities resulted in net cash used of $18.8 million during the first half of 2024 including $396.9 million of proceeds from the issuance of long-term debt, net of
$170.0 million of share repurchases, $101.1 million of capital expenditures, $80.9 million of purchases of marketable securities, and $56.8 million of dividend payments.
2024 Outlook
“With the majority of the retail selling season behind us, it is evident that the 2024 U.S. marine retail market is underperforming in peak season versus our initial expectations and is likely to end the year at unit levels similar to 2010. The macro-economic environment remains uncertain, and while there is now a higher probability of interest rate relief beginning in September, this would occur after the main selling season and will likely have an immaterial impact on our 2024 results, but potentially provide a tailwind for 2025. In this environment, our OEM customers and channel partners continue to order cautiously and we do not now foresee this pattern changing significantly through the
remainder of this season. In these challenging conditions our resilient, recurring revenue businesses and channels, including the engine P&A business, Propulsion’s repower business, Freedom Boat Club, and Navico Group’s aftermarket sales, are demonstrating their earnings and cash flow power. Through the balance of the year, we will continue to launch many exciting new products to support future share gains while focusing on delivering year-end inventory levels in line with historical norms, executing our strategic plan, investing in our long-term growth initiatives, and driving resilient EPS and free cash flow. Meeting anticipated retail boat unit sales for the balance of the year and ending the year with appropriate inventory levels will result in Brunswick reducing full-year ending boat unit inventory by approximately 7 percent or 1,500 units versus prior year inventory levels,” said Foulkes. “The result is the following updated guidance to match these market realities:
- Net sales between $5.2 to $5.4 billion;
- Adjusted diluted EPS in the range of $5.00 to $5.50;
- Free Cash Flow in excess of $350 million;
- Annual share repurchases of approximately $200 to $220 million; and
- Third quarter 2024 net sales between $1.2 billion and $1.3 billion, and adjusted diluted EPS in the range of $1.15 to $1.25.”
About Brunswick Corporation
Brunswick Corporation (NYSE: BC) is the global leader in marine recreation, delivering innovation that transforms experiences on the water and beyond. Our unique, technology-driven solutions are informed and inspired by deep consumer insights and powered by our belief that “Next Never Rests™”. Brunswick is dedicated to industry leadership, to being the best and most trusted partner to our many customers, and to building synergies and ecosystems that enable us to challenge convention and define the future. Brunswick is home to more than 60 industry-leading brands. In the category of Marine Propulsion, these brands include, Mercury Marine, Mercury Racing, MerCruiser, and Flite. Brunswick’s comprehensive collection of parts, accessories, distribution, and technology brands includes Mercury Parts & Accessories, Land ‘N’ Sea, Lowrance, Simrad, B&G, Mastervolt, RELiON, Attwood and Whale. Our boat brands are some of the best known in the world, including Boston Whaler, Lund, Sea Ray, Bayliner, Harris Pontoons, Princecraft and Quicksilver. Our service, digital and shared-access businesses include Freedom Boat Club, Boateka and a range of financing, insurance, and extended warranty businesses. While focused primarily on the marine industry, Brunswick also successfully leverages its portfolio of advanced technologies to deliver an exceptional suite of solutions in mobile and industrial applications. Headquartered in Mettawa, IL, Brunswick has 17,000 employees operating in 25 countries. In 2023, Brunswick was named by Forbes as a World’s Best Employer and as one of America’s Most Responsible Companies by Newsweek, both for the fourth consecutive year. For more information, visit www.Brunswick.com.
