MONTREAL — BRP is embarking on the manufacture of electric motorcycles, the Quebec manufacturer of recreational vehicles announced on Friday, at the same time as it unveiled results that exceeded expectations.
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The Valcourt, Estrie company wants to reach an annual production rate of 600,000 electric motorcycles, said President and CEO José Boisjoli during a conference call with financial analysts. The device is expected to be available from mid-2024 in North America and Europe.
The leader believes that the electric shift will be taken more quickly for the motorcycle than for the other segments of the recreational vehicle industry. In addition to the technical aspects, he mentioned that access to electrical terminals was easier for motorcyclists who use the road network than for other categories of recreational vehicles.
“We have seen that some cities limit access to the city center to combustion vehicles in favor of electric vehicles,” he adds. We believe this could also extend to motorcycles.”
The motorcycle market, estimated at between $8 billion and $12 billion, is the largest in the recreational vehicle industry, points out Martin Landry, of Stifel GMP. “We like that the advertised product is electric, which allows BRP to differentiate itself and leverage its battery investments. Dealerships are likely to welcome this new product, which could be used to attract new customers.”
Conflict in Ukraine
Chief Financial Officer Sébastien Martel also provided an update on the company’s decision to cut ties with Russia in the wake of the invasion in Ukraine. He mentioned that Russia represents “less than 5%” of the company’s revenue.
“The good news is that we have been able to redirect our vehicles [destinés au marché russe] to other markets that need it. We do not anticipate that our decision to no longer deliver vehicles to Russia will have a financial impact.”
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Mr. Boisjoli wanted to be reassuring about the impact of the war on the supply chain. Ukraine is a major producer of neon gas, an essential component in the production of semiconductors. The country accounted for nearly 70% of global production, according to rating agency Moody’s. The CEO says, however, that the activities of the suppliers do not seem to have been disrupted by this issue for the moment.
Financial results
The company also reported results that beat analysts’ expectations in the fourth quarter (ended Jan. 31) and said it expects another year of strong growth in fiscal 2023.
Revenue rose 29.3%, or $532.4 million, to $2.35 billion as BRP saw strong demand for “all” of its products. Adjusted net earnings per share amounted to $3, which represents an increase of $1.18.
Prior to the earnings release, financial analysts were expecting adjusted earnings per share of $2.53 and revenue of $2.29 billion. “The higher-than-expected profit is explained by higher-than-expected gross margins, ie 26% against a forecast of 23.8%, and revenues slightly above expectations”, summarizes Benoit Poirier, of Desjardins Capital Markets. .
The company also released its guidance for fiscal year 2023 (which ends on January 31, 2023). It expects to increase its revenues by 24% to 29% compared to the previous fiscal year. Adjusted earnings per share should increase between 8% and 12% to settle in the range between $10.75 and $11.10.
The company also announced a public stock buyback offer for cancellation of up to $250 million and increased its quarterly dividend by 23% to $0.16. “It’s proof of management’s confidence in the future,” said Mr. Poirier.
BRP cautioned, however, that the supply chain continues to be a challenge. She foresees that the first half of the year could be more “difficult”.
Dealer inventories are up 21% from a year ago, the first increase in nearly two years. They still remain 60% lower than the level before the pandemic, underlines Mr. Poirier.
BRP shares gained $8.42, or 9.51%, to $96.99 early in the afternoon on the Toronto Stock Exchange.
Company quoted in this dispatch: BRP inc. (TSX:DOO)
Stephane Rolland, The Canadian Press