BRP Inc. is doubling down on efforts to win customers for its off-road vehicles and boats over the next five years, betting it can steal more sales from rivals as consumers continue to make big purchases despite recession fears.
The Valcourt, Que., maker of Ski-Doo snowmobiles and Sea-Doo watercraft unveiled an aggressive strategy Tuesday that aims to deliver annual revenue growth of 10 per cent a year, to $9.5-billion by fiscal 2025. The company believes it can generate a 15-per-cent increase in normalized earnings every year over the same time, to $7.50 a share.
“We believe there is still significant market share opportunity within our industry,” BRP chief executive José Boisjoli told investors and analysts gathered in Florida. “We have a solid momentum.”
Mr. Boisjoli is trying to convince investors that the party’s not over for BRP after a spectacular share price run from 2016 to early September, 2018. The shares have lost some ground since but have climbed about 25 per cent over the past two months on the back of strong results.
Hitting its new financial targets hinges on BRP’s plan to accelerate the growth of its Can-Am brand off-road vehicles, particularly side-by-sides, where the driver sits beside the passenger instead of in front. Since entering the side-by-side business in 2010, BRP has capitalized on a steady stream of product introductions to seize the No. 2 market share position behind rival Polaris Inc.
Desjardins Capital Markets analyst Benoit Poirier estimates BRP held a 17-per-cent share of the side-by-side market in 2018, which should grow to 20 per cent by 2020. BRP on Tuesday said it wants to win a 30-per-cent share by 2025.
BRP said it intends to push harder into nascent markets for side-by-side vehicles, such as Australia, Russia and Scandinavia. The company said it will increase spending on new products and technology to build share, and will need a second production facility dedicated to side-by-sides to achieve the 30-per-cent target.
A decision to add a new plant could come within the next 12 months, BRP vice-president Sandy Scullion said. “We believe that making that investment sooner rather than later will be a wise move,” he said.
BRP’s jump back into boat manufacturing is another key piece of its financial targets. The company has bought three aluminum boat-builders since getting back into the business last year, including pontoon watercraft maker Triton Industries Inc., and wants to make a mark in the sector with new technology that better integrates the engine into the hull of the boat to increase space for users.
In issuing their financial goals, BRP executives said they are assuming current economic conditions persist. And they said they are not assuming any competitors will exit outright from the industry. A recession, depending on its severity, could delay the company’s plans but won’t derail them, Mr. Boisjoli said.
“They are not seeing anything that concerns them just yet,” Morningstar analyst Jaime Katz said of the economic premise underlying the BRP plan. “The consumer is still strong. And so until you see the crack in the armour there, you want to assume that this is sort of normal.”
No one should presume that BRP’s rivals will cede share without a fight, Ms. Katz said. BRP needs to make sure it is introducing truly differentiated products that will stand out from competitors’ offerings when it manoeuvres into new vehicle categories, she said.
To sustain its sales growth past 2025, Mr. Boisjoli said, BRP is thinking about solutions to respond to consumers who want to rent vehicles instead of buying. The company also continues to explore the potential for electric versions of its gasoline-powered vehicles as part of a broader plan for sustainable development, he said.
“The day that the demand will be there, we will be ready," Mr. Boisjoli said. “We don’t know exactly when. We don’t know exactly where we’ll start. But the message I want to convey is we’re working for the long term."