International News: Brunswick better positioned

Brunswick’s McCoy: “We’re not scared anymore”

By IBI Magazin. Admitting that Brunswick went through one of the worst years in its history in 2009, Brunswick chairman and CEO Dustan McCoy yesterday told financial analysts that the company is “better positioned than most of the industry” for an eventual recovery.

“We’re very proud of what we accomplished in the last year and the quality of the organisation that we have,” he told the analysts. His remarks were simultaneously broadcast over the Internet.

Retail boat sales in the marine industry, said McCoy, are “clearly lower” than they have ever been since 1965, when boat sales data started to be collected. Brunswick saw its marine sales decline by 41 per cent for 2009, with losses of US$586.2m.

The company responded by reducing boat production last year to 17,000 units. Those levels, the lowest in its history, were down by 65 to 80 per cent compared to 2008.

“We were focused on generating liquidity and we were very successful at that,” he said. “We also worked hard to keep our dealer based much healthier than the competition.” McCoy said its distribution network only declined by one per cent, compared to an industry average of about 20 per cent.

McCoy said the downturn in sales had initially sent tremors through the company. “But we’re not scared anymore,” he said. “We’re very comfortable with what we’re able to do.” He added that Brunswick will stay focused on “liquidity” and cost reduction. “We want to be at the point where we can make more money on smaller volumes when the market comes back,” he said.

McCoy expects that retail sales will decline by 10 per cent in 2010. “We’re still going to produce 12,000 to 14,000 units,” he said. “Our boat production needs to be at 50 to 60 per cent in order to meet these targets.”

Brunswick has focused on reorganising the company, and has cut its corporate and marine employee base by 60 per cent since it began restructuring in 2008. It has also reorganised its boatbuilding operations by closing facilities and rolling boat brand production into different facilities based on boat types.

Andy Graves, president of the Brunswick Boat Group, told the analysts that Brunswick will be a “much stronger company, having endured 2009.” Graves said the group “completely reassessed” its manufacturing model last year. “We have a cost structure that we’re operating in that is fundamentally half of what it was two years ago,” said Graves.

Graves said the boat brands would focus on international markets to increase sales. “Our international sales have increased dramatically, from 30 per cent two years ago to 40 per cent now,” he said. “We’ve got a much sharper market focus in Europe. We have also transitioned Sea Ray and Bayliner models to be manufactured in Poland and Portugal.”

Graves said Brunswick has a “core market” in Latin America and is in a ‘very strong position” in Canada. The company has also announced a partnership with a boat builder in Argentina to build Bayliners for the local market.

The boat division has pared back the number of boat brands to 16, or about a third of what it was two years ago, and has reduced the product offerings within each brand. “That complexity made it very difficult for the manufacturing guys,” said Graves. Brunswick now has about half the manufacturing plants it did five years ago.

“We are exceptionally well-positioned for the future, with an extremely strong brand position, and the strongest distribution network,” said Graves. “We are focused on international growth, and can build sales internationally. And we have the cost structure right today. We are uniquely position to use our advantages to win in this challenging environment.”

Mark Schwabero, president of Mercury Marine, told the analysts that international sales have become an increasingly important component of Mercury’s overall business. “We’re getting close to 50-50, US sales and international,” he said, adding that he expects to see growth in certain overseas markets.

Like Graves, Schwabero reiterated that Mercury took “aggressive” steps to lower its cost structure, including laying off 60 per cent of its salaried employees and beginning the phaseout of its MerCruiser facility in Stillwater, Oklahoma. “We have done what we needed to do to re-size the business,” said Schwabero.

Schwabero forecasts tighter emissions regulations, probably originating in California in 2014, but said Mercury is “uniquely positioned” to deal with any environmental regulation changes..