Difficulties in obtaining spare parts are holding back BRP’s performance by preventing it from fully capitalizing on the recreational vehicle trend. The Québec-based multinational warns that there are still obstacles to overcome at least until the end of the year. While the maker of Ski-Doo, Sea-Doo and Can-Am remains upbeat, investors took a different view on Friday following the release of its first-quarter results. Overview.
Updated yesterday at 2:48pm.
What happened ?
While sales were flat for the three months ended April 30, BRP saw profits cut in half. One of the main reasons: Supply chain disruptions have prevented the company from ramping up shipments to its dealers. This applies in particular to personal watercraft and three-wheeled motorcycles.
BRP prefers to see the glass half full. If sales at its North American dealerships fell 9% in the first quarter, the decline across the industry is just over 20%, argues the Valcourt-based company.
“The decline does not reflect a lack of consumer demand, but limited product availability,” President and CEO José Boisjoli said in a conference call with analysts.
This did not seem to convince investors. On the Toronto Stock Exchange, BRP shares fell 10.4% or $10.43 at the close on Friday to trade at $90.15.
Longer than expected
Like most companies, BRP has not been spared shortages in semiconductors — components found in electronic chips that are essential to the operation of certain modules — and parts like dials and sensors. In the spring, she expects a gradual return to normal.
The situation has changed as a result of the lengthy lockdowns in China, particularly in Shanghai, the country’s economic capital, that have been in place for several weeks to contain the resurgence of cases of COVID-19.
“What surprised us was the zero tolerance in China,” said Mr. Boisjoli. This creates more disruption for us, but also for some suppliers. We think it will be difficult all year round. »
The situation is preventing BRP from replenishing stocks at its dealers. While pre-orders are up 80%, inventories are down 67% from pre-pandemic levels.
And the economy?
If the global economy shows signs of weakness and interest rates continue to rise as central banks try to contain the surge in inflation, could demand for recreational vehicles slow? There is still no yellow light, BRP replies to the analysts.
“We’ve spoken to all our departments, we’ve asked them a lot of questions and we don’t expect any slowdown at this point,” Mr Boisjoli said. Maybe it’s because our customers have above-average family incomes. We don’t feel that influence. »
As for rising interest rates driving up funding costs, BRP’s chief says the financial backlash is limited. The price of a product made by the company ranges from $15,000 to $20,000, he says. The scope is less noticeable than, for example, in a residential building.
Despite a more turbulent trading session on Friday, some analysts remained encouraged by BRP’s outlook.
“The company will continue to face supply issues in the coming quarters, but we believe these challenges along with market concerns are already being reflected in the stock price,” National Bank Financial’s Cameron Doerksen said in a report.
As for Desjardins Securities, Benoit Poirier was pleased that the company raised its adjusted earnings per share guidance for the year. Earnings are expected to be between $11 and $11.35 per share compared to the previous range of $10.75 to $11.10 per share.
- According to BRP, it has more than 20,000 employees worldwide.
- 910 million
- If all goes according to plan, BRP’s profits could reach $910 million by the end of the year, the company predicts.