Ski-Doo Maker BRP Warns Of Russia Sanctions Hurting Results

News By Tanvi Mehta, Reuters
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BRP Inc., the maker of Ski-Doo snowmobiles and Sea-Doo watercraft, warned that results for the rest of the year could be hurt by sanctions on Russia and a softer economy in South America.

Shares of the Quebec-based company, which in March had said uncertainty in Russia would hurt demand, fell as much as 4 percent last Friday.

“Russia is a special situation, very difficult to explain,” CEO Jose Boisjoli said during a post-earnings call after the company reported a smaller loss on North America demand.

The company said deliveries of off-road vehicles and personal watercrafts in the first half were hurt by the political and economic situation in Russia, its third-largest market as of financial year ended March, 2014.

The Canadian recreational vehicle maker, which also operates in Brazil, Chile and Argentina, said these markets were growing a bit slower than originally planned.

The company, whose rivals include Arctic Cat Inc., Polaris Industries Inc. and Yamaha Motor Co. Ltd., gets nearly a third of its revenue from international markets.

BRP, spun off from Bombardier Inc in 2003, maintained its 2015 adjusted profit forecast of $1.55 to $1.65 per share.

“Investors will remain skeptical as to whether or not management will achieve its full-year guidance as BRP will now need to derive (about) 80 percent of its normalized EBITDA from 2H FY15 to achieve its target,” Benoît Poirier, analyst with Desjardins Capital Markets, wrote in a note to clients.

BRP raised revenue growth forecast from seasonal products such as Sea-Doo Spark watercraft and Can-Am Spyder motorcycles to 12 to 16 percent from 9 to 12 percent for the year ending March, 2015.

The company’s second-quarter loss more than halved to $3.6-million or 3 cents per share.

BRP said it sold more of its flagship snowmobiles and watercrafts, which drove up seasonal product sales by 85 percent to $259.8-million in the quarter ended July 31.

Revenue rose by a quarter to $780-million, mainly driven by a 35-percent jump in revenue from North America. Revenue from international operations rose 8 percent.

Up to Thursday’s close of $25.85, the stock had risen 27 perent so far this year.

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