BRP raises full-year guidance as demand holds up despite U.S. tariffs

BRP Inc. DOO-T has swung to a loss in its latest quarter but hiked its financial forecast for the year as the Canadian Ski-Doo and Sea-Doo maker bets it can weather the impact of U.S. import tariffs by boosting sales and capping expenses.

The powersports vehicle manufacturer, based in Valcourt, Que., on Thursday reported a net loss of $136.8-million or $1.88 per share for the three-months ended July 31 – the first full quarter reflecting Section 232 tariff changes. Gross profit fell 34 per cent from the same period last year, to $262.5-million, as the company digested the impact of the tariffs as well as the fallout from a supplier’s financial restructuring.

Revenue climbed 18.5 per cent to $2.2-billion, fuelled by higher shipments of off-road vehicles. The adjusted loss was 18 cents per share, better than the 66 cents analysts were expecting. The company warned its profit for the next quarter would be down about 50 to 60 per cent from last year because of the tariff impact.

“Looking ahead, we remain focused on navigating through the volatile geopolitical and trade environment and advancing our long-term growth prospects,” BRP chief executive Denis Le Vot said in a statement.

Mr. Le Vot was barely into his third month as BRP’s chief executive when U.S. President Donald Trump signed a proclamation in early April amending Section 232 import tariffs on finished products made with steel, aluminum and copper. The new rules impose a 25-per-cent tariff on the entire value of the finished good that contains any of the three metals, whereas previously, the duty was 50 per cent on the value of the metal used in the product.

The change hit BRP soon after, resulting in a 25-per-cent levy on the total value of BRP-made snowmobiles sold into the U.S. and affecting the majority of its off-road vehicle models sold into the country. The company does almost all its production at factories in Mexico and Canada, while the U.S. market makes up about 60 per cent of its global sales.

BRP suspended its financial forecast in mid-April, warning it faces a potential hit to its business of at least $500-million for the remainder of the year from the changes. The company subsequently lost more than one-third of its stock market value.

It reinstated the forecast a month later with its first-quarter report, saying it’s working to soften the impact of the U.S. levies with about $250-million worth of mitigation measures. That includes cutting overhead expenses, such as employee travel, and speeding up previously planned efficiency initiatives. It hasn’t announced any layoffs and hasn’t touched investments in research and development.

Now BRP is hiking that guidance, citing its “strong performance” in off-road vehicles that are generating market share gains, and “reduced net tariff costs” that it didn’t specify. Mr. Le Vot will host a call this morning where he should provide more details.

BRP now expects adjusted profit per share of between $4 and $4.50 for the full year, up from the previous estimate of $3 to $3.50. It said adjusted earnings before interest, taxes, depreciation, and amortization should come in at between $1.03-billion and $1.08-billion, up from the prior estimate of $925-million to $975-million. And it expects a slight increase in revenue from previous forecasts, to between $9.23-billion and $9.48-billion.

“Better than expected results and the guidance raise are clear positives as the company executes on its strategy to gain market share through an aggressive new product rollout strategy,” National Bank analyst Cameron Doerksen said in a research note. But he said he sees lower year-over-year earnings from the company in the coming quarters.

Despite the difficult trade environment, BRP is pushing to stay relevant with buyers. The company continues to roll out new products, such as an upgraded Spark watercraft with more horsepower, and also launched a financing program in the U.S.

Demand for its products is holding up, even with higher gasoline prices. Retail sales in North America climbed 1 per cent during the most recent quarter. The gains were higher in some other areas of the world, including an 8-per-cent increase in the Asia Pacific region.

BRP also announced a chief financial officer transition Thursday. Long-time CFO Sébastien Martel will retire in October and be replaced by Minh Thanh Tran, who’s currently executive vice-president of global corporate and product strategy at the company.