BRP reports flat retail sales in Q3 FY2024
BRP Inc. reported its financial results for the three- and nine-month periods ended October 31, 2023. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available in the section Quarterly Reports on BRP’s website.
“BRP delivered sound third-quarter results in the context of the current macroeconomic environment. Our team’s focus on operational excellence enabled us to improve gross margin despite reduced volumes. Our performance has led to solid retail sales growth since the beginning of the year, resulting in further market share gains in the North American Powersports industry,” says José Boisjoli, president and CEO of BRP.
“Like the rest of the industry, we have observed softening demand, particularly in international markets. We have proactively adjusted production and deliveries to manage network inventory and protect our dealer value proposition.”
“Importantly, since we became BRP 20 years ago, we have never shied away from investing in our future to build a resilient organization that is geared up to respond to market fluctuations. We remain well-positioned to drive long-term profitable growth thanks to our dedicated team, innovative and diversified product portfolio, and engaged dealer network,” concludes Boisjoli.
FY24 Q3 Results
The company reported a decrease in the volume of shipments and revenues compared to the three-month period in 2022. The results of the third quarter of this fiscal year were driven by a decrease in PWC and 3WV deliveries, as the third quarter of this fiscal year compares unfavorably to a strong third quarter last fiscal year, where shipments of PWC and 3WV were completed after peak retail season due to supply chain issues last year. The ORV deliveries were also negatively impacted during the third quarter from the lower delivery throughput at the U.S.-Mexico border following a three-week period of increased cargo inspections.
The decrease can also be explained by a softening in industry demand in the international market compared to the same period in 2022. The company’s North American quarterly retail sales were up for SSV, ATV and snowmobile, which were offset by lower retail of PWC, 3WV and Sea-Doo pontoon, resulting in overall flat retail when compared to the same period last year.
Furthermore, the company says production efficiencies have continued due to supply chain improvements, leading to an increase in the profit margin percentage for Q3 FY24 compared to the same period last year.
Revenues
Revenues decreased by $241.5 million, or 8.9%, to $2,467.8 million for Q3 FY24 compared to $2,709.3 million for the corresponding period in 2022. The decrease was primarily due to a lower volume of PWC, 3WV, SSV, and Sea-Doo pontoons sold, mainly explained by the late shipments of PWC and 3WV for the same period last fiscal year, the U.S.-Mexico border slowdown affecting ORV deliveries, the softening in industry demand in the International market, and higher sales programs across all product lines except PWC. The decrease was partially offset by a higher volume of Snowmobile and ATVs sold, a favorable product mix, and favourable pricing across all product lines. The decrease includes a favourable foreign exchange rate variation of $7 million.
Year-Round Products (48% of Q3-FY24 revenues): Revenues from Year-Round Products decreased by $99.2 million, or 7.8%, to $1,180.6 million for the three-month period compared to $1,279.8 million for the corresponding period in 2022. The decrease was primarily attributable to a lower volume of 3WV and SSV sold and higher sales programs. The decrease in SSV wholesale is partially explained by the U.S.-Mexico border slowdown, where the implementation of systematic cargo inspections adversely affected the Company’s ability to complete certain deliveries. The decrease in revenues was partially offset by a favorable product mix of SSV and ATV sold due to the introduction of new models and favorable pricing across all product lines. The decrease includes a favorable foreign exchange rate variation of $5 million.
Seasonal Products (35% of Q3-FY24 revenues): Revenues from Seasonal Products decreased by $152.2 million, or 14.9%, to $868.7 million for the three-month period ended October 31, 2023, compared to $1,020.9 million for the corresponding period in 2022. The decrease was primarily attributable to a lower volume of PWC and Sea-Doo pontoons sold, mainly due to late shipments in the same three-month period in 2022. The decrease was partially offset by a higher volume of Snowmobile sold, a favorable product mix due to the introduction of new models, and favorable pricing across all product lines. The decrease also includes an unfavorable foreign exchange rate variation of $4 million.
Powersports PA&A and OEM Engines (13% of Q3-FY24 revenues): Revenues from Powersports PA&A and OEM Engines increased by $16.5 million, or 5.5%, to $314.5 million for the three-month period ended October 31, 2023, compared to $298.0 million for the corresponding period ended October 31, 2022. The increase was attributable to a higher volume sold, coming from aircraft engine and mechanical gearbox sales for traditional and electric bicycles, and favorable pricing, partially offset by higher sales programs. The increase also includes a favorable foreign exchange rate variation of $5 million.
Marine [6] (4% of Q3-FY24 revenues): Revenues from the Marine segment decreased by $12.1 million, or 10.2%, to $106.7 million for the three-month period ended October 31, 2023, compared to $118.8 million for the corresponding period ended October 31, 2022. The decrease was mainly due to a decrease in the volume sold and an increase in sales programs. The decrease was partially offset by a favorable product mix and pricing across most product lines. The decrease includes a favorable foreign exchange rate variation of $1 million.
North American Retail Sales
North American retail sales for powersports products were flat for Q3 compared to 2022. This was mainly driven by the strong retail sales of snowmobiles, which completely offset the decrease in the retail sales of PWC and 3WV due to late shipments that occurred after peak retail season during the three-month period ended October 31, 2022.
Year-Round Products: retail sales increased on a percentage basis in the high-single digits compared to 2022. The Year-Round Products industry increased on a percentage basis in the low-single digits over the same period.
Seasonal Products: retail sales decreased on a percentage basis in the low-teens range and by high-single digits when excluding Sea-Doo pontoon, compared to 2022. The Seasonal Products industry increased on a percentage basis in the high-single digits over the same period.
The company’s North American retail sales for marine products decreased by 30% compared to the same period in 2022 as a result of softening consumer demand for the boating industry.
Gross profit
Gross profit decreased by $27.3 million, or 4.2%, to $627.4 million for the three-month period ended October 31, 2023, compared to $654.7 million for the three-month period ended October 31, 2022. Gross profit margin percentage increased by 120 basis points to 25.4% from 24.2% for the three-month period ended October 31, 2022. The decrease in gross profit was the result of a lower volume sold, as highlighted above, higher sales programs, and higher labor costs due to inflation. The decrease was partially offset by favorable pricing across all product lines, a favorable product mix of Snowmobile and SSV sold a decrease in logistics costs due to more efficiencies in the supply chain, and a reduction in certain material costs. The increase in gross profit margin percentage resulted from favourable pricing across all product lines and higher production efficiency from an improved supply chain, partially offset by a lower volume sold and higher sales programs. The decrease in gross profit includes an unfavorable foreign exchange rate variation of $19 million.
Operating expenses
Operating expenses increased by $39.7 million, or 14.7%, to $309.6 million for the three-month period ended October 31, 2023, compared to $269.9 million for the three-month period ended October 31, 2022. The increase was mainly attributable to an increase in R&D expenses to support future growth. The increase in operating expenses includes an unfavorable foreign exchange rate variation of $10 million.
Net Income
Net income decreased by $78.5 million to $63.1 million, or 55.4%, for the three-month period ended October 31, 2023, compared to $141.6 million for the three-month period ended October 31, 2022. The decrease was primarily due to a lower operating income, an unfavorable foreign exchange rate variation on the U.S.-denominated long-term debt, and an increase in financing costs, partially offset by a lower income tax expense and an increase in financing income.
Nine-month YTD results
Revenues increased by $718.1 million, or 10.3%, to $7,675.2 million for the nine-month period ended October 31, 2023, compared to $6,957.1 million for the corresponding period in 2022. The increase was primarily due to a higher volume of SSV, ATV and snowmobiles sold, increased deliveries of Sea-Doo pontoons, favorable product mix across most product lines, as well as favorable pricing. The increase was partially offset by higher sales programs, mostly due to rising interest rates, and a lower volume of 3WV, PWC and PA&A sold. The increase includes a favorable foreign exchange rate variation of $183 million.
Net income increased by $56.0 million to $556.3 million, or 11.2%, for the nine-month period ended October 31, 2023, compared to $500.3 million for the same period in 2022. The increase was primarily due to a higher operating income, lower income tax expense, and a favorable impact of the foreign exchange rate variation on the U.S.-denominated long-term debt, partially offset by an increase in financing costs.