Canadian powersports vehicle maker BRP Inc. DOO-T +7.31%increase has swung to a loss for its latest quarter and suspended financial forecasts for the coming year, the latest company to pull its projections in the face of a rapidly shifting global trade environment.
The Valcourt-Que.-based manufacturer, known for its Ski-Doo snowmobiles and Can-Am offroad vehicles, saw a major sales boost during the COVID-19 pandemic but has since been reeling from softer demand. Dealers have been hesitant to carry a lot of inventory and promotions have increased to stimulate sales.
The company on Wednesday reported a net loss of $44.5-million or $0.60 per share for the three months ended Jan. 31, reversing a profit of $302.8-million or $3.95 per share the year before. Revenue fell nearly 20 per cent in the fourth quarter to $2.1-billion.
The results beat analyst expectations. On the basis of adjusted earnings per share, BRP reported $0.98 cents versus analyst predictions of $0.88 while revenue also came in slightly higher than forecasts.
“Looking ahead to fiscal 2026, the ongoing global tariff disputes have created economic uncertainty, making financial projections more challenging at this time,” BRP chief executive José Boisjoli said in a statement. “This uncertainty has also had a negative impact on consumer demand.”
The company’s decision last fall to put its boat business up for sale and focus resources on its snowmobile and off-road vehicles should allow it to solidify its industry leadership, the CEO said. Its deliberate effort to reduce shipments in recent quarters has protected the brand and should also better align deliveries with retail sales, he said.
But a big storm cloud is casting a shadow over the business. BRP is particularly exposed to tariffs that the Trump administration has either imposed or threatened.
Essentially all of the company’s manufacturing is outside the United States, with about 75 per cent of units produced in Mexico and the rest in Canada and Europe. It began shifting operations to the Spanish-speaking country nearly 20 years ago to capitalize on a large pool of young, reliable and low-cost workers and has since expanded capacity there several times.
The Trump tariffs have exposed the hazards of concentrating production in one country and laid bare the fragility of a North American trade pact now at the mercy of a president’s political impulses. National Bank of Canada analyst Cameron Doerksen has said BRP is the corporation “most at risk” from tariffs among the transportation and industrial companies he researches.
New tariffs stand to increase the price U.S. consumers pay for BRP vehicles at dealerships, hurting demand and potentially putting the company at a disadvantage against competitors that have manufacturing footprints in the United States.
Tariffs could also provoke a recession in Canada and other markets if the economy slows. That in turn would reduce sales of BRP vehicles, which are typically seen as a discretionary purchase that people cut during tough times.
Citi analyst James Hardiman sees BRP in an untenable situation, with its cost of goods sold coming into the United States via Mexico equating to more than US$1-billion in tariff impacts. Its tariff exposure is far greater than its earnings power, he said in a research note this month.
U.S. rival Polaris would also get hit but to a lesser extent, the analyst said as he recommended investors sell shares of both companies.
“Were 25-per-cent tariffs on Mexican and Canadian imports to be levied indefinitely (an unlikely but distinct possibility), we believe that both companies would immediately incur significant losses, impacting their long-term prospects,” Mr. Hardiman said. “Even in the absence of this scenario, however, the weakening of fundamentals in conjunction with the incremental Chinese tariffs is enough to weigh on valuations going forward.”
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