Brunswick Corporation Reports $1.7B in Q3 2022 Net Sales
METTAWA, Ill. – Brunswick Corporation (NYSE: BC) released its third quarter 2022 financial results, highlighted by net sales of $1,698.2 million.
Among many businesses and brands in the marine sector, Brunswick also is the parent company of several RV-related companies including RELiON Battery LLC, Progressive Industries, ParkPower by Marinco, and Land ‘N’ Sea Distributing.
Comments from CEO David Foulkes
“We executed an exceptional third quarter as our new products, strategic investments, continued operational efficiency, and prudent cost control in a challenging macro-economic environment, together with a resilient marine market, resulted in record sales, operating margins, and earnings for any third quarter in our history.
“We delivered the quarter despite additional challenges, with Hurricane Ian significantly impacting our many Florida facilities and operations during the end of the quarter, certain specific supply chain shortages at Mercury and Navico Group that could not be fully resolved by the end of the quarter, and unfavorable changes in foreign currency exchange rates negatively impacting sales and earnings more than anticipated. On the positive side, aside from one distribution facility and approximately ten Freedom Boat Club locations, our Florida facilities are operational again, demand for our products remains strong, and boat field inventory levels are getting healthier as pipeline inventory remains nearly 40 percent lower at the end of the quarter versus the same time in 2019. Lastly, our U.S. Engine Parts and Accessories business had solid sales and earnings growth in the quarter.
“Our propulsion business continues to deliver exceptional results, with sequentially higher operating earnings and operating margin enabled by operating efficiencies, market share gains, and higher production enabled by capacity expansion. During the quarter, Mercury Marine gained 100 basis points of outboard propulsion retail market share in the U.S. and continues to expand outboard propulsion share in many global markets as recently seen at the Cannes Boat Show where Mercury had a record 65 percent outboard share on the water.
“Mercury was notably impacted by a couple of discrete supply chain issues in the quarter, one of which led to nearly 2,500 mid-range outboard engines awaiting one component for completion at the close of the period, which we expect to be mostly remediated in the fourth quarter. Despite these challenges, our propulsion business delivered accretive operating margins as operating investments and cost controls offset supply chain challenges. Additionally, the previously mentioned new high horsepower outboard engine capacity in the Fond du Lac, Wisconsin facility remains on budget and on track to come online in the fourth quarter of this year.
“Our parts and accessories businesses delivered strong sales growth, led by benefits from acquisitions completed in 2021, solid Engine P&A sales, and strong OEM sales from Navico Group. P&A segment operating earnings were down slightly versus prior year, primarily related to unfavorable changes in foreign currency exchange rates and continued slowness in retailer and distributor restocking patterns despite solid consumer sell-through. The distribution business in Florida was disrupted by Hurricane Ian, as transportation and certain warehouse locations were not available during the last week of the quarter. Lastly, the recently announced Navico Group operating model changes are mainly complete and are anticipated to begin yielding planned synergies in the fourth quarter.
“Our boat business posted robust top-line and earnings growth, with double-digit operating margins for the second consecutive quarter. We closed our Florida boat manufacturing facilities for most of the last week of the third quarter due to Hurricane Ian, with minimal damage to the facilities allowing for manufacturing and shipping operations to resume the following week. Freedom Boat Club had record same store membership sales increases in the quarter, but its Southwest Florida operations were significantly impacted by Hurricane Ian, with more than 100 boats damaged and a small number of locations unlikely to re-open until 2023. However, Freedom continues on its growth trajectory in the U.S. and Europe, and now has more than 360 locations, nearly 54,000 membership agreements covering 84,000 members network-wide, and a fleet size above 5,000 boats, all while generating exceptionally strong synergy sales across our marine portfolio,” Foulkes concluded.
2022 Third Quarter Results
For the third quarter of 2022, Brunswick reported consolidated net sales of $1,698.2 million, up from $1,427.2 million in the third quarter of 2021. Diluted EPS for the quarter was $2.26 on a GAAP basis and $2.67 on an as-adjusted basis. All segments delivered sales growth resulting from solid demand, new product performance, and pricing implemented since the third quarter of 2021, partially offset by unfavorable changes in foreign currency exchange rates, the impact from Hurricane Ian and supply chain challenges. Strong operating earnings growth was also enabled by these factors, together with benefits from cost containment measures, tempered slightly by continued elevated material and freight inflationary pressures and spending on growth initiatives including capacity expansion, ACES, and new product development.
In addition, versus the third quarter of 2021:
Propulsion segment reported a 14 percent increase in sales due to higher sales volume resulting from strong global demand, capacity increases, and market share gains. Robust operating earnings growth was enabled by increased sales and lower operating expenses, slightly offset by investments in capacity and product development.
Parts and Accessories segment reported a 19 percent increase in sales driven by acquisitions completed in 2021, with growth across all geographic regions excluding currency impacts. Segment operating earnings were down slightly as the earnings impact from sales increases was offset by outsized headwinds related to unfavorable currency exchange rates and continued material and freight inflation.
Boat segment reported a 27 percent increase in sales as higher sales volumes to dealers throughout the quarter more than offset the production and shipment impact from Hurricane Ian.
Freedom Boat Club, which is part of Business Acceleration, had another strong quarter contributing approximately 7 percent of sales to the segment. Growth in segment operating earnings and operating margin was enabled by increased sales volumes, favorable product mix, and sustained operational efficiency gains, partially offset by closures related to Hurricane Ian and ongoing supply chain disruptions.
Review of Cash Flow and Balance Sheet
Cash and marketable securities totaled $503.6 million at the end of the third quarter, up $136.1 million from 2021 year-end levels.
Net cash provided by operating activities during the first nine months of the year of $313.8 million includes net earnings net of non-cash items and the seasonal impact of working capital build.
Investing and financing activities resulted in net cash usage of $187.8 million during the first nine months of 2022 including the issuance of $750.0 million of 10-year and 30-year notes in the first quarter for general corporate purposes, net of $360.0 million of share repurchases, $299.3 million of capital expenditures, $95.7 million of cash paid for acquisitions of businesses, net of cash acquired, $82.4 million of dividend payments, and $58.4 million of long-term debt repayments.
2022 Outlook
“2022 is likely to be a record year for Brunswick. We continue to deliver historically strong financial results for our shareholders despite a turbulent macro-economic climate, and we are making smart cost decisions without sacrificing investments needed to drive our strategic plan”, said Foulkes.
“During the next several quarters, we will showcase a barrage of exciting new products coming to market, and we hope you will join us at Lake X on November 16 to experience first-hand our newest products and technologies, and our enterprise synergies in action. Despite external headwinds including increasingly unfavorable foreign currency exchange rates, cost inflation, remaining supply chain disruptions, and the uncertain medium-term impacts from Hurricane Ian, we still believe that we will deliver a record 2022, resulting in the following updated guidance for full-year 2022. We anticipate approximately:
- Net sales of $6.9 billion;
- Adjusted diluted EPS of $10.00; and
- Fourth quarter 2022 adjusted diluted EPS growth of more than 30 percent from Q4 2021.
“Finally, although we’ve talked about the impact Hurricane Ian had on our business operations and results, our almost 4,000 employees located in Florida endured the most significant hardship resulting from this storm. I want to offer heartfelt appreciation and thanks to everyone at Brunswick who has been working tirelessly to support their colleagues and our business partners during this very difficult time,” Foulkes concluded.
For more information, visit brunswick.com.
Source: https://rvbusiness.com/brunswick-corporation-reports-1-7b-in-q3-2022-net-sales/
