Brunswick(BC) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Brunswick Corporation reported a 15% decrease in net sales for Q4 2024 compared to Q4 2023, with adjusted operating margins at 4% and adjusted EPS of $0.24 [21][22] - For the full year, sales were down 18%, with adjusted operating margins of 9.5%, resulting in adjusted diluted EPS of$ 4.57, a decline of 48% [23] - The company generated a record $278 million in free cash flow for Q4, contributing to a full-year free cash flow conversion of 92% [22][23] Business Segment Data and Key Metrics Changes - The Propulsion business experienced a 24% decrease in sales due to inventory moderation efforts, although market share in outboard engines increased [24] - Engine Parts and Accessories saw slightly lower net sales in Q4 but achieved growth in earnings and operating margins for the full year, aided by operational efficiencies [10][25] - Navico Group's sales were flat year-over-year, with improved performance in the Aftermarket business offsetting declines in OEM orders [26] - The Boat business reported an 18% decrease in sales for Q4, consistent with lower planned production levels [28] Market Data and Key Metrics Changes - U.S. new boat retail sales ended 2024 down by high single-digit percentages compared to 2023, with Brunswick performing slightly better than the industry in premium segments [7][15] - The U.S. outboard engine industry retail units declined by 8% for the full year, with Brunswick's Mercury Marine gaining 110 basis points of market share [15][21] Company Strategy and Development Direction - Brunswick is focused on cost containment, capital strategy execution, and managing working capital, which resulted in a free cash flow conversion of 92% [8][30] - The company plans to continue investing in new products and technologies to support strategic growth initiatives while managing inventory levels [11][30] - Brunswick anticipates a cautious outlook for Q1 2025 but remains focused on delivering steady free cash flow and resilient earnings per share [31] Management's Comments on Operating Environment and Future Outlook - Management noted that interest rate relief since September could serve as a tailwind for 2025, despite ongoing uncertainties regarding tariffs [12][13] - The company is preparing for various scenarios regarding tariffs and has significantly reduced exposure to China [12][36] - Management expressed optimism about strong boating participation and interest in new products, despite elevated discounting levels [14][31] Other Important Information - Brunswick completed$ 200 million in share repurchases in 2024 and increased its dividend for the 12th consecutive year [30] - The company celebrated its 100th anniversary of being listed on the New York Stock Exchange [46] Q&A Session Summary Question: Can you help us unpack the $1.25 cost savings in the EPS bridge? - Management indicated that the savings come from a combination of run rate savings from staff reductions and operational efficiencies achieved through production optimization [50][54] Question: How much of the$ 1.25 cost savings is structural versus temporary? - Management estimated that the savings are roughly 50-50 between structural and temporary [58][59] Question: What factors could lead to the low and high ends of the guidance range? - The high end of the range assumes a market that outperforms flat, while the low end assumes a market decline and unfavorable FX rates [66][69] Question: What is the outlook for the first quarter? - Management expects Q1 to be similar to Q4, with continued improvement in wholesale ordering patterns as the year progresses [33][75] Question: How does the company plan to manage tariffs and FX impacts? - Management is actively working to mitigate tariff impacts through inventory staging and pricing strategies, while also monitoring foreign currency fluctuations [36][102] Question: What is the industry outlook for 2025? - Management anticipates a flat retail market but sees potential tailwinds from lower boat loan rates and improved consumer sentiment [109][111]