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BRP bought Telwater last week for an undisclosed price, the third acquisition since June, 2018, after the company bought Alumacraft Boat and Triton Industries.Ryan Remiorz/The Canadian Press

BRP Inc., the maker of Sea-Doo watercraft and Ski-Doo snowmobiles, is jumping back into boat manufacturing as it tries to capitalize on three acquisitions over the past 13 months and bring innovation to a multibillion-dollar industry.

But the company’s timing might not be the best.

Boat sales in the United States, the world’s largest market, have fallen in recent months. And although dealers say it’s more related to unseasonably wet spring weather, many investors have taken it as proof that consumers are starting to shy away from bigger-ticket purchases – the start of what could be a multiyear funk for discretionary spending.

“Is it the perfect timing? No,” BRP chief executive Jose Boisjoli said in an interview. “I think there is a lot of uncertainty in the economy that is creating some slowdown. … But our move [with boats] is more a mid-term to long-term strategy.”

Mr. Boisjoli, a bespectacled engineer who had his first Can-Am brand BRP dirt bike at the age of 12, led the powersports manufacturer to a spectacular 253-per-cent share-price increase from the start of 2016 to last September as he introduced a steady stream of new products that took market share from competitors.

Now, as BRP stock comes off its highs – it is down 39 per cent from its peak last September – he’s trying to convince shareholders that the party isn’t over and that it can make money with recreational boating.

Roughly seven years after it exited the sport-boat business – a move that came after the Great Recession – BRP is getting its feet wet again. But this time, it isn’t selling jet-driven boats used for pursuits such as waterskiing. Rather, it is sticking to aluminum recreational boats, the kind used by anglers and outdoorspeople who would typically also use its all-terrain vehicles.

BRP last week closed its purchase of Telwater Pty. Ltd., Australia’s biggest maker of aluminum boats, for an undisclosed price. The deal, its third acquisition in the marine sector since June, 2018, comes after the company bought St. Peter, Minn.-based Alumacraft Boat, known for its aluminum fishing boats, for $80.9-million and Lansing, Mich.-based Triton Industries Inc., maker of Manitou pontoon watercraft, for $97.4-million.

Marine is a small segment for BRP at the moment, generating $492-million in sales for the year ended Jan. 31, 2019, or roughly 9 per cent of the company’s total annual revenue of $5.2-billion. That doesn’t include the contribution from Telwater, which will drive the number higher and bring geographical diversity. Telwater’s co-founder and managing director, Paul Phelan, is keeping a 20-per-cent ownership and will stay on with the company.

Controlling the three aluminum boat makers and having access to their more than 600 dealers is a way for BRP to sell more Evinrude engines, a key reason it decided to enter the industry. But Mr. Boisjoli said the company has a much broader strategic rationale for the move: It wants to make a mark in the sector with new technology.

BRP is currently developing a new family of boats with a better integrated engine so that consumers can buy a package instead of buying the boat and engine separately, the CEO said. To achieve the goal, BRP had to buy enough boat companies for a critical mass of product and sales capability.

The three purchases have delivered that and no further acquisitions are coming in the short term, Mr. Boisjoli said. The new technology should be available in three years, he said.

Whether consumer demand will be strong enough by then to justify BRP’s investment remains to be seen. Boats are big business, with sales of recreational boats, engines and accessories topping US$20-billion a year in the United States alone, according to information provided by BRP. Aluminum fishing boats and aluminum pontoon boats make up half of that total, Mr. Boisjoli said.

But there are already signs the boat market is sputtering. Registrations of new powerboats in the United States fell 14 per cent from the year before in June and are down 6 per cent year to date, according to analyst Joseph Altobello of Raymond James.

“[This] appears to be more than weather,” Mr. Altobello said in a recent research note, adding consumers might be showing increasing caution as a potential recession draws nearer. “We fear that the ‘late cycle’ concerns that have weighed on many marine stocks thus far in 2019 are also beginning to manifest themselves on the demand side, a dynamic which we believe is likely to continue.”

Still, demand for aluminum boats tends to hold up better than for more expensive fibreglass boats, Mr. Altobello said in an e-mail exchange. “A lot are used for lake fishing. Hard core,” he said.

That resilience is exactly what Mr. Boisjoli is counting on. People who fish are often passionate about it and pontoons are a family boat, he said. That gives them some added emotional resonance with buyers.

“Obviously they will be impacted if there was a major slowdown,” the CEO said. “But we believe they will be the last two [categories] to be affected. … Many investors, I believe, think that our products are purely discretionary. We don’t necessarily agree."

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