Overview

Brunswick Corporation’s financial performance in the second quarter and first half of 2024 was impacted by several factors. Net sales decreased 15% in the second quarter and 19% in the first half compared to the same periods in 2023. This was driven by lower wholesale ordering by dealers and OEMs, as well as higher discounts in certain business segments, only partially offset by annual price increases and benefits from new products.

Despite the sales decline, Brunswick continued to gain market share in outboard engines, with over 48% overall share of the U.S. outboard market. The Engine Parts and Accessories (Engine P&A) segment had a strong quarter, with sales and operating earnings up versus the prior year. However, the Navico Group and Boat segments saw lower sales and operating earnings.

Internationally, Brunswick’s net sales decreased 8% and 14% in the second quarter and first half, respectively, on a GAAP basis. On a constant currency basis, international sales decreased 6% and 13% over the same periods.

Financial Performance

Operating earnings and net earnings from continuing operations decreased in both the second quarter and first half of 2024 compared to the prior year periods. This was driven by the lower sales, higher manufacturing costs, and increased discounts, only partially offset by cost control measures.

Adjusted operating earnings, which exclude certain one-time charges, also declined in the second quarter and first half of 2024. Adjusted operating margin was 12.5% in Q2 2024 and 11.5% in H1 2024, compared to 13.8% and 14.4% in the prior year periods.

Segment Performance

Propulsion

• Net sales decreased 20.7% in Q2 2024 and 21.9% in H1 2024, due to lower production rates at OEM boat manufacturers.
• Operating earnings decreased 23.0% in Q2 2024 and 35.8% in H1 2024, impacted by lower sales and higher manufacturing costs.

Engine P&A

• Net sales increased 2.2% in Q2 2024, driven by the completed transition to the new distribution facility. However, sales decreased 3.1% in H1 2024.
• Operating earnings increased 13.9% in Q2 2024 due to the higher sales and pricing, but decreased 4.7% in H1 2024.

Navico Group

• Net sales decreased 7.8% in Q2 2024 and 16.7% in H1 2024, due to reduced marine OEM orders and slow RV orders.
• Operating earnings swung to a loss in Q2 2024 and H1 2024, compared to positive earnings in the prior year periods.

Boat

• Net sales decreased 22.6% in Q2 2024 and 24.3% in H1 2024, as dealers continued to order cautiously.
• Operating earnings decreased 53.4% in Q2 2024 and 51.2% in H1 2024, due to the sales decline and lower production absorption.

Strengths and Weaknesses

Strengths:

• Continued market share gains in outboard engines
• Strong performance in the Engine P&A segment
• Successful transition of distribution to the new Brownsburg, Indiana facility

Weaknesses:

• Significant declines in net sales and operating earnings across multiple segments
• Margin compression due to higher manufacturing costs and discounting
• Ongoing challenges in the Navico Group and Boat segments

Outlook and Future Prospects

Brunswick’s financial performance is expected to remain under pressure in the near-term, as the company navigates the challenging market conditions. Key factors that will impact the outlook include:

• Continued dealer and OEM caution in ordering patterns
• Ability to manage manufacturing costs and discounting
• Pace of recovery in the marine and RV markets
• Success of new product introductions

To address these headwinds, Brunswick is focused on accelerating cost control measures, optimizing its manufacturing footprint, and continuing to invest in new product development. The company has also revised its capital allocation plans, moderating capital expenditures and share repurchases for 2024.

Overall, Brunswick faces a difficult operating environment, but the company’s strong market positions, diversified portfolio, and ongoing cost and efficiency initiatives provide a foundation for weathering the current challenges. Successful execution of its strategic plan will be critical to driving improved financial performance and shareholder value in the future.