Sea-Doo Maker Mulls Output Boost as Jet Skis, ATVs BoomBy
BRP eyes next expansion as North American demand strengthens
Manufacturer is already investing C$25 Million in Mexico
Bombardier Inc.’s former recreational-products unit will study a new increase in manufacturing capacity as it rushes to meet surging North American demand for jet skis and off-road vehicles.
BRP Inc. is investing about C$25 million ($20 million) to expand output at two Mexican plants about 20 percent by April. With the company working full tilt in Mexico and running Saturday shifts, Chief Executive Officer Jose Boisjoli is already eyeing the next step-up in production abilities.
“Our next capacity increase is scheduled for the spring of 2018, and we are monitoring the trends in demand to determine when the next investment after that will take place,” Boisjoli said Sept. 1 in a telephone interview. “Often it takes one year to reach the next threshold between the moment you order the equipment and the moment you start production.”
BRP is bolstering production as demand expands for its Sea-Doo watercraft and Can-Am off-road vehicles. The recently introduced Can-Am Maverick X3 off-road vehicle helped fuel a 20 percent gain in second-quarter sales.
The Valcourt, Quebec-based company raised its full-year forecast for per-share earnings to as much as C$2.35, up three cents, after reporting second-quarter profit that exceeded analysts’ estimates. The projection still fell short of the C$2.37 average of analysts’ estimates.
The company’s shares have advanced 44 percent this year, the most among discretionary-goods makers on Canada’s benchmark S&P/TSX Composite Index. BRP was little changed at C$40.73 at 9:31 a.m. in Toronto following a 1.7 percent decline Sept. 1 after its earnings report.
BRP gets about half of its sales in the U.S., with Canada contributing about 18 percent.
“Because our products are discretionary, our business is closely linked to the unemployment rate and the real estate market,” Boisjoli said. “Unemployment is low, and real estate is going well right now.”
Still, the geopolitical outlook remains a question mark, as the U.S., Canada and Mexico hold talks on renegotiating the North American Free Trade Agreement.
“Consequences of a redesigned Nafta are so huge that I think common sense will prevail,” Boisjoli said. “There’s a presidential election in Mexico in 2018, and the U.S. will be getting closer to midterm elections, so both countries will want to move fast. Even if there are changes, we think there will be enough time for industries and companies to adapt.”