Briggs and Stratton released their 3rd Quarter Earnings Report April 19, 2007. The entire report and a link to the recorded Webcast is available at this link: Briggs & Stratton Q3 2007 Earnings Report and Webcast.
Here are a few points that came out during the Webcast session that you may not find in the written report:
One big topic was the announced closing of Brigg’s Rolla, MO engine plant this year. The Rolla plant manufactured utility type engines and not produce high-quantity runs of lawnmower engines. Many different utility engines are produced with small production runs and higher inherent costs. Also mentioned as a contributing factor for closing the plant was the high cost of environmental regulations in the US. Briggs is currently rationalizing the existence of other US plants and decisions will be made regarding any other plant closings by year-end 2007.
Some analysts asked why more vertical engine production (for small lawnmowers) wasn’t being shifted to China. Briggs replied that for the time being the intense seasonality of vertical shaft engines for lawnmowers will mean that production will remain primarily in the US, at least for the next two or three years. Briggs suggested that US production and shipping logistics could respond much quicker if a mass merchant (OEM) needed 40,000 engines by next Thursday, than if production was in China or outside the US.
Other questions were focused on generators and the huge generator inventories “hanging over” the marketplace both at the retail level and at the OEM level. Briggs stated that a normal hurricane hitting land will create the retail sale of 35 to 40 thousand generators. The generator inventory level at retail is currently around 100,000 to 120,000, while the normal level at retail should be 60,000 or less. So Briggs believes it will take at least two hurricanes making landfall in 2007 to get retail inventory levels back to a normal level.
Europe is a 2 million engine sales area for Briggs. In 2006 they saw lower European engine sales due to increased Chinese engine usage by a major OEM. But with their Czech plant starting up with a capacity of 800,000 to 1,000,000 engines initially annually, Briggs believes they will be more competitive in 2007 and 2008. Labor costs will be lower than in the US and engine transportation costs will be lower to Europe from the Czech Republic than from the US or China.
Another analyst asked about the strength of Briggs & Stratton’s mower brands. Briggs responded that some years ago a poll was done that indicated that even though they were not producing any end-products at the time, Briggs & Stratton was in the top five brands of lawnmowers consumers were considering to purchase. Snapper also showed up as one of the top five considered brands. Briggs still considers Murray a viable brand in the mass market, viewed by consumers as a low-cost functional product. Simplicity is considered the aspiration brand and is very strong in the mid-west and the northeast. And Briggs particularly appreciates Simplicity’s excellent product development group. Ferris is considered one of the top tier high-quality commercial brands.
Briggs & Stratton continues to look for other equipment brands that may become available for purchase.
1 comment:
B&S is a raft headed for the waterfall. They value the junk side of the business. As long as that is their focus they should all (management team) move to china.
One of the greatest household names is squandering it's name by pursuing the low end of it's business.
By sourcing in China knowledgeable users of engines might just as well start spec ing the Honda engine knock-offs. Look at the rental store business, all Honda knock-offs.
Murray was bankrupt, Snapper very close to being liquidated or sold to the Chinese. And now B&S is betting the future of the company on this business model.
If B&S needs a bigger bottom line then streamline distribution.
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