Supply chain snags snarl BRP's growth, with more hurdles on the horizon

Employees work on the SeaDoo assembly line at the Bombardier Recreational Products plant, Thursday, June 12, 2014 in Valcourt, Quebec.THE CANADIAN PRESS/Ryan Remiorz

The head of BRP Inc. says supply chain woes crimped growth in its latest quarter, with more input obstacles expected on the Ski-Doo maker's path for the rest of the year.

First-quarter revenues held steady but net income dropped by half from a year earlier due partly to plunging Sea-Doo and off-road vehicle sales prompted by supply disruptions.

"The retail decline does not indicate the lack of consumer demand. Instead it reflects limited product availability," CEO Jose Boisjoli told analysts on a conference call Friday.

"We expect this trend to continue in the coming quarters as dealer inventory will remain low."

The announcement sparked a 11 per cent share price drop or $11.44 to $89.24 in midday trading Friday on the Toronto Stock Exchange.

Higher costs and COVID-19 lockdowns in Asia have pushed the company to seek alternate supply sources and base production around parts availability. That can mean having to manufacture units "that are missing a few components and retrofit them when we receive the parts," Boisjoli said.

Based in Valcourt, Que., BRP is among the many vehicle producers feeling the pinch of an ongoing global microchip shortage, which he deemed "difficult."

"Sometimes you can find substitutions, but sometime you cannot," Boisjoli said, noting that inflationary pressures are also heavy.

Despite the snarled supply networks, he said BRP is on track to deliver revenue growth of between 24 per cent and 29 per cent this fiscal year, and normalized earnings per share growth of 11 per cent to 14 per cent.

BRP reported a first-quarter profit of $121 million versus $244.4 million a year earlier, while its year-over-year revenue stayed essentially flat at $1.81 billion.

The maker of snowmobiles and personal watercraft said its profit amounted to $1.46 per diluted share for the quarter ending April 30, down from $2.79 per diluted share in the same period a year earlier.

Normalized net income for the quarter amounted to $1.66 per diluted share, down from $2.53 per diluted share a year earlier, BRP reported.

Analysts on average had expected normalized earnings of $1.13 per share and $1.88 billion in revenue, according to financial markets data firm Refinitiv.

- This report by The Canadian Press was first published June 3, 2022.