Difficulties in obtaining parts are putting a brake on BRP’s performance by preventing it from delivering more recreational vehicles to its dealerships. This pressure is there for good, warns the Quebec multinational.
Posted at 11:07 a.m.
Even if demand does not seem to fade for the Ski-Doo, Sea-Doo and Can-Am, investors seemed concerned on Friday after the publication of the results for the first quarter.
On the Toronto Stock Exchange, Friday morning, the action of the company based in Valcourt dropped 11.5%, or $11.53, to trade at $89.85. BRP’s profitability halved in the three-month period ending April 30 to 121 million, or 1.46 per diluted share, while its revenue was flat.
“As expected, the supply chain disruptions caused pressure on our profitability,” BRP President and CEO José Boisjoli said during a conference call with analysts.
Confinements in China to quell the resurgence of cases of COVID-19 infection have affected several BRP suppliers, explained its big boss. This forces the company to finish assembling some vehicles a little later than expected when parts like dials and sensors are finally delivered. For example, deliveries of personal watercraft were delayed in the second quarter.
BRP remains optimistic. As proof, it has slightly raised its forecast for adjusted earnings per share for the year. Even though sales fell 9% at the company’s North American dealerships, the decline is just over 20% in the industry, argued Mr. Boisjoli.
“The decline in retail sales does not reflect the absence of consumer demand, but rather the limited availability of products,” he said.
In the first quarter, BRP’s revenues remained stable at 1.8 billion. Its adjusted profit was $137.7 million, or $1.66 per diluted share, down about 40%. Analysts polled by Refinitiv were expecting revenue of $1.9 billion on adjusted earnings per share of $1.13.
BRP attributes the decline in profitability to its inability to increase deliveries and an increase in expenses due to the disruption of supply chains.
“Demand continues to be strong for recreational vehicles as retail sales are up 30% from two years ago (pre-pandemic) and pre-orders are up 80% year over year. last,” analyst Martin Landry of GMP Stifel said in a note.
Since supply difficulties will continue to give BRP a hard time, the company has warned that it will have to wait before seeing it replenish stocks at these dealerships, which are struggling to meet demand.