Brunswick (NYSE: BC) is developing, production and marketing of goods for sea recreation, including marine engines, spare parts and accessories for small boats, as well as finished boats and yachts, and manages related businesses: yacht clubs and yacht marinas.
Products are presented as recreational craft, and small fishing boats, as well as small courts for professional sports.
About company
The group of companies and its subsidiaries position themselves as the world leader in the production of yachts., pleasure craft and parts for them. At the same time, the issuer is one of the old-timers on the NYSE: its shares have been traded there for over 175 years.
In Russia, Brunswick shares are traded on the St. Petersburg Stock Exchange with 31 January 2019 under the ticker BC. Their long-term dynamics is positive, even the global crisis did not affect the rally, caused by coronavirus.
history of the company. Brunswick Corporation is the oldest and largest manufacturer of recreational and leisure products in the United States.. She started with the production of goods for billiards and bowling., did not immediately come to the production of small vessels.
The company was founded by a native of Switzerland, John Moses Brunswick. In America, he changed many professions and places of residence.. But, apparently, natural frugality allowed him to save money and open his own carriage shop in 1845.
Soon launched its own production of wood products, including billiard tables. The firm's stores were opened in Chicago, New Orleans, St. Louis, the main production facilities were concentrated in Cincinnati.
The company was first called J. M. Brunswick & Brother, then J. M. Brunswick & Brothers, then - Brunswick-Balke-Collender. By the 80s 19 century it was the largest manufacturer of billiard tables in the world. Brunswick died in 1886, as a result, the management of the company passed to his relatives.
Products diversified: in addition to billiard tables produced equipment for bars, bowling pins and balls. In 1906, the Muskegon plant was opened., manufacturer of hard rubber bowling balls.
During the era of Prohibition, the company's business was hit hard, because the bars, where they played billiards and bowling, closed en masse. I had to further diversify the business up to the production of rubber toilet seats. Then, Really, rubber production was sold. Produced cabinets for phonographs, piano cases, gramophone records. Own record label was promoted to such an extent, that even Duke Ellington himself considered it an honor to record there.
Since 1930, the corporation has abandoned non-core assets. In particular, record label bought by Warner Brothers. By that time, the shares of the corporation were no longer only listed on the stock exchange, but also publicly traded.
With the repeal of Prohibition, things got a little better., but a complete abandonment of non-core assets was still inappropriate. Equipment for bars was produced, but it was highly diversified.
During the Second World War, the corporation partially re-profiled into military products.. The war affected the company's business, no matter how cynical it sounds, positively: after the war, she produced more and more precision instruments.
In the 50's company, having received huge profits from diversified products, acquired 18 companies, producing golf equipment, roller Skates, fishing goods.
In 1960 there was a sharp turning point.: the corporation buys manufacturers of small pleasure boats and outboard motors for them. It will soon become its main product, what, Really, does not prevent it from investing also in the production of medical products.
Since 1960 the company has been called Brunswick Corporation. The decline in the bowling industry has forced management to look for an alternative to products for it. It was yachts and engines for them.
In the 80s and 90s, the emphasis on this line became even greater. There is a refusal of non-core assets, contraction of firm sectors, massive layoffs of staff and curtailment of management privileges, run by new CEO Reichert. At the same time, the corporation continues to absorb manufacturers of pleasure craft and motor boats..
In 1989, the market for small boats declined, The company has undergone another restructuring, leading to loss. At the same time, she continued the line for the production of ships, but for some time the enterprises did not absorb - they developed only their own production capacities. In the 90s, the group of companies also specialized in other products for outdoor activities.: sleeping bags, tents, hunting accessories.
One of the divisions of the company, Brunswick Next, even in the late 90s tried to become the world leader in the bicycle market, but not very successful, there were attempts to gain a foothold in the global market for simulators. The Asian crisis has added negative: had to cut the workforce, close a factory in China, then - the plant is already in the USA. To top it off, the company was accused of monopoly collusion against shipbuilders. Competitors won this process.
At the beginning of the 2000s, the company had to close its bicycle division due to competition from Asian manufacturers.. Leadership changed again. New CEO, George W. Buckley, quickly narrowed down all the company's assets to the production of ships and accessories for them, bowling equipment, billiards and exercise equipment remained, but their share was small. This did not lead at first to anything good - only to losses..
Nevertheless, the non-core asset divestment program continued for the next two years., profile ones expanded due to the line of navigation electronics and additional production of spare parts and accessories for ships. It didn't stop, however, in 2003 to acquire Valley-Dynamo, billiard table manufacturer, table football and hockey.
In the same 2003, the market for small boats began to recover., resulting in a significant profit. In 2004, on a wave of optimism because of this, the company acquired three enterprises for the production of aluminum boats., mostly non-walking, and fishing and having an official purpose.
Continued active expansion into the market of marine fishing boats. A significant milestone was the launch of the Verado powerboat engine in 2004., silent, economy and environmental friendliness. Motor division's revenue jumped immediately. But the acquisitions of shipping companies have not ended, they continued into the following year. In the industry, the corporation has already been recognized as a world leader.
Market entry of innovative products continued into the late 2000s.. In 2008, the world's first joystick control systems were introduced, from non-core products - cardio equipment and furniture for billiard rooms.
Further innovation hindered by economic downturn, because of what sales of yachts and boats were reduced by more than half. However, the corporation used this period to some extent to its advantage., because the crisis led to the disappearance of many of its competitors from the market. I had to restructure, reduce production capacity. But this did not prevent the group of companies from announcing the start of construction of a plant in Brazil during the crisis period..
The holding did not refuse simulators, even acquired manufacturing facilities in the fitness industry for the elderly. The trend for the acquisition of companies in this direction continued further. Like the trend for innovation: in 2017 an innovation laboratory was opened. For the same purpose, a joint venture was created between Brunswick and TechNexus.
In 2018, Forbes magazine named Brunswick one of the top 500 mid-sized employers in the US.. The company's expansion strategy has not changed.: it was still directed towards the acquisition of enterprises, associated with small boats.
A large business structure was created in 2019, specializing in marine engines, — Advanced Systems Group. She leads additional developments and marketing in this area of activity of the group of companies.. In 2020, the corporation took part in exhibitions and received numerous awards from Forbes magazine.
Composition of the group of companies. The strength of the group is the wide geographical diversification of enterprises. This ensures hedging of a wide range of economic risks., including the situation with coronavirus, which varies from country to country.
The group includes 164 companies in 44 jurisdictions, counting the US states individually.
The largest share of the group companies, certainly, is located in her homeland - in the USA, with almost a third of the total number of companies - in the state of Delaware, what is associated with a favorable tax regime. The UK is in second place.. Group companies are present on all continents, except Africa and Antarctica.
Shareholders. The company's shares are held primarily by institutional investors and mutual funds.. The largest shareholders are the world famous Vanguard and BlackRock. The presence of their shares in the capital of the group of companies is a positive factor, given their reputation in the financial world.
Key figures. Group CEO - David Foulkes. He has an estimated net worth of at least $15.9 million. There is information, that he owns no less 107 360 shares of the issuer headed by him, although the SEC claims, that he owns only 2,000 shares worth 10 076 810 $.
Until 2019, Foulks held the position of CTO in the group of companies, and then president of subsidiary Brunswick Marine Consumer Solutions; formerly technical director, president and head of product development at another group subsidiary, Mercury Marine; formerly vice president of a subsidiary of Mercury Racing.
This gave him knowledge in advanced design., technology and innovation. Further, he held senior positions already at the level of the group of companies as a whole., served as Vice President and Chief Technology Officer. Prior to joining the group of companies, he held various senior positions at Ford Motor Company, Shell Exploration.
Being from the UK, he graduated from Imperial College London with a degree in aviation and worked for some time in his native country in the civil service in the Ministry of Defense.
David Foulkes 58 years. except him, The company employs seven senior and five junior executives. The oldest member of the board of directors of Brunswick Corp is 73-year-old Jane Warner..
Geography of supplies. The Group's products are sold in more than 170 countries. Most of the sales are in the USA., although in the third quarter of 2021 it was slightly lower, than the results of all past 9 months of the year. This can be related to, that the deterioration of the situation with coronavirus in the country is more severe, than in many other regions of the world, — could positively influence the popularity of sea tourism as a safer, than ground.
But you should pay attention: revenue in all regions based on the results 9 months of 2021 showed the best results in terms of dynamics compared to the same period of the previous year, and here it is impossible to attribute anything to seasonal fluctuations. Quicker, it's caused by problems, that yacht travelers may face due to the newly introduced lockdowns.
Similar phenomena, undoubtedly, weaken the potential for a further rally in the issuer's shares. And the impact of the pandemic on the industry, and specifically on the business group is ambiguous.
Geography of revenue for 9 Months, million dollars
| 2020 | 2021 | Share for 9m2021 | Growth | |
|---|---|---|---|---|
| USA | 2375,4 | 3249 | 69,03% | 36,78% |
| Europe | 427,2 | 625,9 | 13,30% | 46,51% |
| Canada | 189 | 334,6 | 7,11% | 77,04% |
| Asian-Pacific area | 280,6 | 322,6 | 6,85% | 14,97% |
| rest of the world | 115,8 | 174,7 | 3,71% | 50,86% |
Geography of revenue for 3 neighborhood, million dollars
| 2020 | 2021 | Share in 3k2021 | Growth | |
|---|---|---|---|---|
| USA | 956,2 | 1092,6 | 71,77% | 14,26% |
| Europe | 132,7 | 169,7 | 11,15% | 27,88% |
| Canada | 72,8 | 110,5 | 7,26% | 51,79% |
| Asian-Pacific area | 106,7 | 93,9 | 6,17% | −12% |
| rest of the world | 46,1 | 55,7 | 3,66% | 20,82% |
What he earns
Products and brands. Goods, produced by the group, can be divided into three categories: engines, parts and accessories, watercraft. In the revenue structure as for the third quarter 2021, so for 9 months of 2021, engines accounted for the largest share with a small margin from the rest of the product categories.
Distribution of sales by groups in the third quarter and beyond 9 months is slightly different.. But for 9 months, sales in all categories showed significantly greater growth, than in the third quarter, compared to the same period of the previous year.
If we take a narrower range of products, then outboard engines have the largest share. The ratio of the segments is relatively the same as for 9 Months 2021, and in the third quarter of 2021, in both reporting periods, compared to the previous ones, the largest increase in sales was shown by water jet propulsion and aluminum watercraft.
First, probably, due to the growing use of water jets on yachts as an optimal drive, the second - exceeding the demand for fishing boats by the rush demand for yachts, which are mainly made of aluminum.
Revenue structure by three segments for 3 neighborhood, million dollars
| 2020 | 2021 | share | Growth | |
|---|---|---|---|---|
| Engines | 453,1 | 540,1 | 37,84% | 19,20% |
| Parts and accessories | 451,9 | 485,6 | 34,02% | 7,46% |
| Watercraft | 328,1 | 401,5 | 28,13% | 22,37% |
Revenue structure by three segments for 9 Months, million dollars
| 2020 | 2021 | share | Growth | |
|---|---|---|---|---|
| Engines | 1188,2 | 1666,9 | 37,75% | 40,29% |
| Parts and accessories | 1128,7 | 1478,2 | 33,48% | 30,96% |
| Watercraft | 869,5 | 1270,1 | 28,77% | 46,07% |
Financial indicators. Indicators in the third quarter of 2021 increased slightly compared to the same period of the previous year. For a period 9 months of 2021, absolutely all indicators increased significantly compared to the same period of the previous year, and the third quarter of 2021 also saw an increase, albeit less significant, but capable of positively influencing a further rally in the price of the issuer's shares.
Plans and prospects
Plans are centered around the development of business structures, swallowed up lately. 1 September 2021, the group acquired almost all assets of RELiON Battery (Relion). RELiON is a global supplier of lithium batteries and related products for various industries.
17 September 2021, the company acquired virtually all of the assets of SemahTronix, a global supplier of high complexity electrical harnesses for advanced products in the marine, mobile and defense industry.
Acquisition of SemahTronix Assets to Expand Integrated Systems Offering in the Future, giving our subsidiary ASG Connect access to high-quality connectivity systems.
9 July 2021, the group acquired Fanautic Club, one of the largest European boat clubs with 23 branches in major coastal cities and tourist centers throughout Spain. The acquisition of such assets will allow Brunswick to accelerate growth by increasing its investment in the watercraft segment..
The corporation plans to significantly expand the production capacity of the Reynosa plant, which will increase production at this enterprise by 60%. A group of companies bought a 150,000-square-foot plot of land near an existing boat and yacht manufacturing facility in the Mexican city of Reynosa., the plant now owns 385,000 square feet of land. In this regard, the production of the award-winning Bayliner brands is expected to increase., Trophy, Heyday, Sea Ray and Lund.
Flagler - Palm Coast was also opened, which in the future will increase 40% production of the world-famous Boston Whalers brand, and expanded the production capacity of the Portuguese "daughter" of the group Villa Nova, producing Bayliner brands, Uttern and Quicksilver. The production capacity of the plant in Minnesota will increase, where the additional piece of land was purchased.
In addition to production, distribution is also developing.. A subsidiary of the Mercury Marine group is building a distribution center with an area of 512 000 square feet in Brownsburg, Indiana, and plans to open a new facility next October. The distribution center will be located at the Ronald Reagan Logistics Center in Brownsburg..
At the same time, the distribution center in Fond-du-Lac will be converted into production. Mercury Marine says, that the Indiana facility is being designed for LEED Silver certification. Naturally, this will have a positive effect on the further rally of shares.
Risks
In 2021, the main risk factor may be the failure to successfully integrate new acquisitions, since the outgoing year was quite "productive" for such transactions.
News of business expansion has a positive impact on stock growth and, apparently, will continue to influence in the medium term. But any sign of, that this success is rather insignificant, will cause investor pessimism.
In general, the main risks have not changed since 2020.. These are high prices for fuel and electricity and the possibility of their further increase due to the unclear prospects for the end of the pandemic..
The pandemic itself has an ambiguous effect on the company's business.. On the one side, alternative types of tourism, including yachting., become more popular, than traditional ones like relaxing in crowded resorts, made or dangerous due to the risk of infection, or even impossible due to lockdowns.
On the other hand, the ongoing pandemic crisis may also lead to a general decrease in demand for the products of the group of companies, and demand volatility, and to a decrease in the income of the yacht clubs included in the group, including recently acquired, due to lockdown in ports, which leads to fear of clients to charter yachts.
conclusions
The outlook for the issuer's shares looks positive in the short to medium term. Main, that the group of companies was able to survive the pandemic with dignity, moreover, it improved its financial performance: has been able to benefit from the increasing popularity of alternative tourism.
In the second half of 2021, when the coronavirus situation worsened again and a new strain was announced, the group carried out regular acquisitions of promising enterprises. This year she greatly expanded the business, news about acquisitions and the start of construction of new production facilities will positively influence the further rally of its shares.
But it's impossible to say for sure, that this rally will continue in the long run. unknown, How will the situation with the acquired enterprises go?, given the volatility in demand for products in a pandemic.
While the pandemic only spurred demand, but if further more and more ports will declare a lockdown, then even on a yacht it will become impossible to escape in the ocean from the coronavirus. Plus, rising energy prices and a general decline in the purchasing power of the population of the whole world will negatively affect the popularity of this tourism.. Therefore, nevertheless, an unambiguously positive forecast can only be built for the short and medium term..
