Finance fishing boats

Brunswick bets COVID-related boat sales boom will continue

Seeking to take full advantage of a historic boom, Brunswick has announced five new expansion projects over the past year. It adds 150,000 square feet to a factory in Reynosa, Mexico, creating more than 600 new jobs there when it opens in 2023.

Beyond that, it will add capacity to a Boston Whaler plant in Florida and facilities in Portugal and Minnesota. At the sprawling 3 million square foot Mercury Marine engine base in Fond du Lac, Wis., where 4,100 people work, Brunswick is turning underutilized distribution space into manufacturing. Even now, however, this factory is struggling to find enough workers.

If you add the cost of the expansion – about $100 million – to the investment in technology, is Brunswick moving too fast? Most observers do not think so. Even after the Navico deal, net debt stands at $375 million, which is easily manageable for a company whose Wedbush Securities projects will benefit from a 59% increase in 2021 net income to $641 million. dollars when the final results are counted. That equates to $8.18 per share, up from $5.07 in 2020. A further increase to $9.24 per share is expected in 2022. Capital spending will come from free cash flow, said CFO Gwillim .

The caution that has discouraged expansion so far stems from painful memories of the 2008 recession, when annual U.S. powerboat sales fell to a low of 132,000 from more than 300,000 in 2005, according to the NMMA. Sales have rebounded to 230,000 in 2020, with observers predicting an increase to 300,000 or more over the next two years.

“So far, boat builders have been cautious about increasing manufacturing capacity,” says David Gee, editor of Boating Industry magazine. “Now Brunswick is taking the lead, and as the world’s largest builder of pleasure craft, David Foulkes feels he has more leads than anyone else to take this step.”

For Gwillim, it’s a matter of simple math. There are more than 10 million registered boats in the United States, each lasting an average of 30 to 35 years. This means the industry must return to annual production of 300,000 boats just to replace aging products ready to go offline. “It’s not a demand bubble,” says Gwillim. “We are reasonable in that most of our expansion is in the form of additions to existing plants. We don’t build brand new facilities from scratch.

Wedbush’s James Hardiman predicts Brunswick’s revenue this year is expected to rise 13% to $6.59 billion, although that figure would be higher if Brunswick had more boats to sell. He rates the company’s stock, which recently trades above $100 (from under $80 a year ago), as a buy, with a further rise to $125 by the end of the month. year.