Brunswick looks abroad as U.S. growth sputters

NEW YORK (Reuters) - The chief executive of Brunswick Corp. (BC.N: Quote, Profile, Research, Stock Buzz) said on Monday that the recreational boatmaker plans to significantly ramp up its overseas expansion, particularly in Europe, as it waits for its U.S. business to come back.

But Dusty McCoy, who has overseen an aggressive series of acquisitions at Brunswick, said a key part of the European expansion would come through internal growth, rather than deal-making, because purchase prices on the Continent had become too dear.

Speaking at the Reuters Manufacturing and Transportation Summit in New York, McCoy said Brunswick, which currently sells about 25 percent of its boats and engines overseas and derives more than a third of its total revenue abroad, hopes to see those numbers increase "significantly."

"We want to be a global player," McCoy said.

"We'll focus on Europe first and move to the rest of the world over time."

McCoy said Brunswick, which already operates engine factories in the United Kingdom and boat manufacturing facilities in Portugal and Sweden, is now the largest boat maker on the Continent "unit-wise." But he said he hoped to become even bigger by "migrating the company's manufacturing footprint outside the United States."

He said Brunswick was particularly interested in offering "large yachts that fit the Mediterranean boating style."

"We don't have a product lineup that would be competitive there," he said. "That's a market over time that's attractive to us."

But snapping up an existing boatmaker serving the market -- something Brunswick has done frequently in the past -- isn't in the cards for now. "Acquisitions in Europe are priced much too high on a multiple basis," he said. "So we are looking for organic growth."

McCoy said Eastern Europe was also attractive -- as a market and as a place to site plants. "We're seeing enormous growth in Western Russia," he said, "Great demand for our products there ... And we've also begun to manufacture a fair bit in Eastern Europe, and we find the work forces there to be highly skilled and able to adapt to our processes very quickly."

European boat buyers seem to be taking $70-a-barrel oil more in stride than their American counterparts, McCoy said, because they are used to paying higher prices at the pump. "They're not experiencing the sticker shock that many Americans are," he said. Even so, he said he expects European sales to be flat in 2006.

That's an improvement over the outlook in the United States, where Brunswick expects sales to be flat to lower this year because of high energy prices and rising interest rates.

He said the company, which cut production several times last year and idled a large number of workers, would consider idling its production lines again if demand didn't pick up in the coming weeks - critical ones in the highly seasonal boat sales calendar.

"As we've gone through the first quarter, we've run our manufacturing at a fairly stable rate," McCoy said. "But as we go through the second quarter, if we go further into the season and we don't see demand picking up, we'll begin to ramp down production again."

He predicted that any downturn in demand would be temporary -- even if energy prices remained high.

"Folks will adjust," he said. "Buyers are intelligent and very savvy and always manage over time to engage in activities that they find enjoyable, and boating is just one of those activities that people return to."