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Economic uncertainty stirred up by whipsaw U.S. tariff threats prompted BRP Inc. to push back its financial forecast for the coming year, with the trade limbo exacerbating weak consumer demand that drove the Ski-Doo maker to an earnings loss last quarter.
“There’s still the uncertainty around what’s going to happen on April 2nd, and I think that is influencing consumer behaviour,” said chief financial officer Sébastien Martel, referring to U.S. President Donald Trump’s pledge to impose 25 per cent tariffs on trade partners next week.The U.S. has already hit Canada and Mexico with 25 per cent levies on goods that are not compliant with the North American free trade pact. The reprieve Trump granted on March 6 for items that do comply — a climbdown from blanket tariffs rolled out two days earlier — is also set to expire in one week.Canada has hit back with its own duties on about $60 billion worth of American goods, and threatened tariffs on billions more if the U.S. does not back down. “It’s difficult to call. It’s been choppy, and obviously with the uncertainty created by all of this, the consumers are holding back,” Martel told analysts on a conference call Wednesday.
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“That uncertainty is a bigger overhang than the potential opportunity of buying a product with no tariffs today. It says a lot about the how the consumer is feeling.”
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BRP swung to a loss of $44.5 million in the fourth quarter, down from a $302.8-million profit a year earlier.As consumers and dealers bought less, North American retail sales at BRP dropped 21 per cent year-over-year in the quarter ended Jan. 31, largely due to lower demand for snowmobiles and market share loss in off-road vehicles. Its three-wheeled motorcycles saw retail sales fall about 30 per cent.A continental trade war bodes ill for a company with factories in all three countries — the direct result of free trade agreements dating back decades. Some 60 per cent of BRP’s revenue stems from the U.S. Most of the inventory sold there is made in Mexico — 70 per cent of total production happens south of the Rio Grande — or Canada, where Ski-Doos and some of its Can-Am three-wheelers roll off the line.
“It could have a sizable impact if tariffs were imposed on all goods crossing the border,” said Martel. Nonetheless, BRP beat earnings expectations in its latest quarter, triggering an eight per cent jump in its share price to $54.77 in late-morning trading on the Toronto Stock Exchange.On a normalized basis, the company’s diluted earnings hit 98 cents per share in the fourth quarter versus $2.78 per share the year before. Analysts had expected 88 cents per share, according to financial markets firm LSEG Data & Analytics.“All things considered, could have been much worse,” said Desjardins analyst Benoit Poirier in a note to investors.Revenue for the three-month period fell 20 per cent to $2.1 billion from $2.6 billion in the same period a year earlier.
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