Brunswick Corp. reported a slight decline in engine sales in the fourth quarter and attributed a 16 percent decline in Boat Group revenue to pipeline reductions and reduced wholesale shipments.

The company reported consolidated net sales of $917.6 million in the fourth quarter, down from $961.1 million in the same period of 2018, which included $5.4 million in sales related to discontinuing the Sport Yacht and Yacht segments.

Diluted earning per share for the quarter were $0.92 on a GAAP basis and $0.82 on an adjusted basis.

Operating earnings declined as cost control benefits were exceeded by the impact of lower volume and production rates, the company said.

Engines

The engine segment reported a slight sales decrease in the quarter — $665.8 million in 2019 versus $669.5 million in 2018 — as continued demand for high-horsepower outboards and solid growth at Power Products were offset by forecasted reductions in outboards 150 hp and lower, as well as lower sterndrive sales.

“Mercury’s recent new product introductions continued to provide sales mix benefits in the fourth quarter due to increasing demand for higher horsepower engines,” said Brunswick CEO David Foulkes in a statement. “The recently completed manufacturing capacity expansion for these engines strengthened our capability to serve this growing segment of the market and access higher-margin dealer and international sales channels.”

Operating earnings in the engine segment were down in part due to the expiration of a tariff exemption received in December 2018, along with unfavorable foreign currency exchange impacts.

Boats

The boat segment reported a 16 percent drop in net sales for the fourth quarter, from $377.3 million in 2018 to $316.8 million.

The company attributed that decline to continued planned reductions in wholesale unit shipments to right-size the pipeline, particularly in aluminum and saltwater fish categories.

“Retail boat trends continued to stabilize in the second half of the year, and we executed disciplined pipeline reduction actions in the fourth quarter as planned, meeting our target of essentially flat weeks on hand versus 2018,” Foulkes said.

The company’s debut at the Consumer Electronics Show included the launch of the Sea Ray SLX-R 400e, with Brunswick’s proprietary Fathom e-power technology.

That technology, developed jointly by Brunswick’s advanced systems group, the boat group technology center and iJET Lab teams, illustrated the commitment to using technology across its portfolio to enhance the boating experience, Foulkes said.

Operating earnings in the boat segment for the quarter fell 35.8 percent, from $29.9 million to $19.2 million, due in part to production reductions.

Annual results, 2020 expectations

For the 2019 fiscal year, Brunswick reported consolidated net sales of $4.108 billion, down from $4.12 billion in 2018. Diluted earning per share in 2019 were $0.36 on a GAAP basis and $4.33 on an as adjusted basis.

“Our 2019 performance demonstrated the strength and resilience of our marine-focused portfolio,” Foulkes said. “We expanded gross and operating margins and delivered a 10th consecutive year of adjusted EPS growth, despite a weaker than anticipated marine market in the first half of the year.”

The “transformational changes” made to the business in 2019 will set the company up for further margin expansion and revenue growth in 2020, Foulkes said.

Annual earnings will also benefit from planned sales increases and continued margin growth resulting from improved operating efficiency, he said.

“However, as a result of the expiration and non-renewal of our Wave 1 tariff exemption related to 40- to 60-hp engines assembled in China, we now anticipate the full impact of tariffs on our 2020 pretax earnings to be between $30 million to $35 million, or an incremental $10 million to $15 million over 2019,” Foulkes said. “In addition, we expect foreign currency exchange rates to negatively impact 2020 earnings growth by 1 to 2 percent.”

The company narrowed its 2020 adjusted diluted earnings per share expectation range for 2020 to $5.10 to $5.40, a change from $5 to $5.50.