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| Brunswick halts some brand production, will close S.C. plant
Brunswick Corp. will cease production of its Bluewater Marine brands — including Sea Pro, Sea Boss, Palmetto and Laguna — with the upcoming 2009 model year, which begins July 1.
As a result, Brunswick will close its production plant in Newberry, S.C., by the end of June.
The company estimates it will realize annualized pretax savings of nearly $9 million from these actions.
The decision to cease production of these lines was made May 7, according to documents filed today with the Securities and Exchange Commission.
“The U.S. marine industry has been in a prolonged slowdown since late 2005, driven by an uncertain economy, high fuel prices, the housing slump and other economic factors that have affected consumers’ confidence and eroded their discretionary spending,” said Dustan E. McCoy, Brunswick chairman and chief executive officer, in a statement.
“With this action, we believe we will solidify our presence in the highly fragmented saltwater segment by concentrating our efforts and leveraging our resources on such brands as Boston Whaler, Triton, Trophy and our sportfishing offerings from Hatteras, Cabo and Albemarle, while sharpening our market focus and providing necessary cost reductions,” McCoy added.
About 175 jobs will be affected by this action, and qualifying employees will receive assistance aimed at helping them transition to other employment. Transfers of employees to other plants will likely be minimal, but employees may apply for open positions at other locations, Brunswick spokesman Dan Kubera said this morning.
As a result of these actions, the company said it will record a pretax charge of nearly $25 million to $30 million in the second quarter of 2008 to cover asset write-downs and other costs associated with the plant closure. Of that total, close to 75 percent of the charge is non-cash and the remainder is cash.
These actions are not necessarily the last reductions Brunswick will announce, Kubera said.
“We have publicly stated that we could possibly reduce both models and brands going forward,” he said. “We are assessing the recovery potential for all marine segments in which we participate, their fragmented nature, the costs of our continued presence in certain of them and the position of our brands.”
However, Kubera added, it would be “nothing more than speculation” to try and identify any specific brand or model and its future.
Analysts say Brunswick’s actions are consistent with current market conditions and management’s long-term objective of streamlining operations.
“It is also a sign that management believes certain segments of the U.S. marine industry have been permanently (or at least indefinitely) impaired,” said Edward Aaron, analyst with RBC Capital Markets. He estimated these brands contributed roughly $30 million in revenue.
“We lowered our 2008 estimate to 28 cents, from 45 cents, bringing us further below consensus of 76 cents,” Aaron said. “The short-term financial impact of this news, while material, does not affect our investment outlook, which is based on expectations for 2009.”
Brunswick’s stock was trading at $16.55 mid-morning, down from an opening of $16.77. The stock closed yesterday at $16.81 per share.
The brands being discontinued have been under Brunswick’s umbrella for only a few years.
Sea Boss was founded in 2003 and acquired by Brunswick in 2004; Sea Pro was established in 1987 and bought by Brunswick in 2004; Palmetto was founded in 2001 and acquired by the company in 2005 and Laguna was established by Brunswick in 2006.
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Brunswick halts some brand production