BRP is streamlining its business: Sale of the marine division in focus

The Canadian manufacturer of powersport vehicles, BRP, has announced its intention to sell its Marine and Marine Parts divisions. According to an analyst from RBC Capital Markets, this decision is expected to boost short-term profitability. The Quebec-based company explains the sale as a move towards a stronger focus on its core business in the powersports sector. "After careful consideration and given the current dynamics of both industries, we have decided to focus on our primary activities in the powersports sector and divest our marine businesses," said José Boisjoli, President and CEO of BRP, in a press release. The company has recently lowered its annual forecast for the second consecutive time due to a challenging economic environment. Analysts reacted in September by downgrading their price targets for BRP. RBC analyst Sabahat Khan has a positive view of the planned sale. In a note to investors, Khan emphasizes that the challenging boat market could improve BRP's profits in the near future. RBC rates BRP as "Outperform" and sets a price target of $99, while shares were traded at around $77.50 on Thursday, reflecting a decrease of approximately 1.25 percent compared to the previous day. Excluded from the sale are BRP products such as Sea-Doo watercraft, Switch pontoons, and jet propulsion systems. BRP plans to complete the sale by the end of April next year. According to Khan, the marine industry is currently facing significant challenges, including excess inventory and weakening demand following restrictive interest rates. Boats are among the high-priced products costing over $100,000, which have dramatically increased since the COVID-19 pandemic. The sale allows BRP to focus more on its position in the global powersports market. Despite a leading market position in various categories, BRP is a relatively small player in the global marine market. The company's forecasts for the Marine Division include a revenue decline of 40 to 50 percent in fiscal year 2025, with gross profit being negative since the fourth quarter of 2023. RBC expects the Marine Division to impact BRP's earnings per share by about $1.50 in this fiscal year.