Ski-Doo maker BRP Inc. is boosting its presence in China through the creation of a joint venture with its long-time distributor in that country.
The Valcourt, Que.-based company says all of its product lines -- including Sea-Doo watercraft, off-road vehicles and Can-Am Spyder roadsters -- are currently sold in China and it has seen its business there grow more than 30 per cent annually over the past three years.
BRP is investing an undisclosed amount in a joint venture structure with distributor Smooth Marine Equipment Ltd. to enhance its presence in fast-growing China and accelerate dealer expansion. BRP will have a majority ownership stake in the new company.
The former recreational products division of Bombardier Inc. also unveiled first-quarter earnings on Thursday: normalized profit of $16.6-million or 14 cents per share, compared with $53.4-million or 51 cents in the year-earlier period. The analysts’ consensus estimate was 9 cents per share.
BRP has been operating in China for 14 years. It set up a regional office in Shanghai in 2012 and its dealership network has grown since then to 19 dealers, with plans to expand that to 30 within two years.
“In our view, this investment should also reduce the company’s North American exposure (65% of revenues in ) in the longer term and give BRP an opportunity to benefit even more from the strong growth opportunity in the Chinese market,” Desjardins Securities analyst Benoit Poirier said in a research note Thursday.
First-quarter revenue was $758.6-million, down from $804.3-million a year earlier.
On a non-adjusted basis, net profit in the first quarter was $28-million or 24 cents per share, up from $25.7-million or 25 cents.
“Our financial results for the first quarter were as expected and consistent with our outlook,” said BRP president and chief executive officer José Boisjoli.
“Our sales in international markets grew in the quarter despite the situation in Russia, but this was offset by the long winter affecting sales of off-road vehicles in North America. We continue to fulfill our strategic initiatives and we are very much on track to accomplish our annual plan.”
The company said it anticipates a stronger second half of the year as a result of robust spring snowmobile orders, the introduction of the Can-Am Outlander L all-terrain vehicle, the restart of the Sea-Doo Spark manufacturing in Mexico and new product launches.
“For the second quarter, we expect our financial performance to be similar to last year’s, factoring in the continued uncertainty in Eastern Europe.”
Sales in seasonal products in the first quarter declined by $22.1-million or 10.7 per cent to $184.6-million, mostly due to a decrease in traditional personal watercraft volume but partly offset by the new entry-level Sea-Doo Spark. The fall in volume was the result of a longer-than-anticipated ramp-up at the Querétaro, Mexico facility that caused delays in the delivery of some watercraft products.
Revenue from year-round product fell by $39.3-million or 9.7 per cent to $365.4-million, mostly on lower shipments of side-by-side vehicles arising from the introduction of the Can-Am Maverick models in the corresponding period last year. There was also a slip in ATV sales in Russia as a result of the political and economic instability in Eastern Europe, the company said.
Both seasonal and year-round revenue declines were partly offset by a favourable foreign exchange rate variation of $11-million and $22-million, respectively.
Industry rivals include Arctic Cat Inc., Polaris Industries Inc. and Yamaha Motor Co. Ltd.
BRP was spun off from parent Bombardier in 2003.
The three main investor were private-equity group Bain Capital, the Caisse de dépôt et placement du Québec and members of the Beaudoin and Bombardier families.
BRP launched an initial public offering in May of 2013. The shares traded at $25 per share on the first day of trading.