Wauwatosa-based Briggs and Stratton Corp. announced a “business optimization program” Wednesday expected to generate up to $35 million in savings annually by fiscal 2019.
The plan, which will cost $50 million to $55 million, includes expanding production of Vanguard commercial engines into the company’s existing large engine plants, adding capacity for Ferris commercial mowers at a new facility, implementing an upgraded enterprise resource planning system and other “operational excellence efficiency improvements.”
The company sources the majority of Vanguard engines overseas under a joint venture with Daihatsu Motor Co. The engines are used in a number of applications including commercial turf care, construction, fire and rescue, and golf course equipment. Briggs will be expanding production at its Auburn, Alabama and Statesboro, Georgia facilities.
Briggs plans to begin production of its Ferris commercial mowers in a new facility near its Munnsville, New York operation during the second half of fiscal 2018. The company will look to sell the current facility and a remote warehouse in fiscal 2019.
Todd Teske, Briggs chairman, president and chief executive officer, said the company has grown sales of commercial-oriented products by $180 million, or 70 percent, over the past five years. The new program would allow for “continued profitable growth.”
The company set a record for commercial-type product sales in fiscal 2017 at $434 million, a 7 percent increase. Revenue overall was down 1.3 percent, to $1.79 billion. Teske attributed the drop to lower-than-expected shipments of residential outdoor power equipment, merchandising inventory changes by North American channel partners and regional pockets of suboptimal growing conditions.
Net income for the year was $56.7 million, up from $26.6 million last year, although the company did incur the same level of pension settlement or restructuring expenses as fiscal 2016. Adjusted net income was up 3 percent, from $55 million. Earnings improved to $1.31 per diluted share from 60 cents last year, or an adjusted $1.25.
For the fourth quarter, net income improved from $5.4 million to $19.7 million, although it was down slightly compared to 2016’s adjusted figure of $20.1 million. Adjusted earnings were flat at 46 cents per diluted share, but up from a reported 12 cents last year.
Revenue was down 5.6 percent during the quarter, to $474.1 million. The engines segment saw revenue decline 7.2 percent, to $292.5 million and the products segment was down by 6 percent, to $203.4 million.
The company implemented a new method for recording overseas engine sales, but on a comparable basis engine volumes were down 4 percent, or approximately 80,000 engines.
Lower merchandising support at retail for pressure washers led declining sales for the products group.
“We have observed improved growing conditions throughout the season, but continue to see a cautious approach to reordering as channel partners have focused on controlling inventory to abnormally low levels,” Teske said.
The company is anticipating it will have revenue of $1.87 billion to $1.92 billion in fiscal 2018, an increase of 4.5 percent to 7.5 percent. The growth is expected to come from continued improvement in commercial products, along with modest market growth in the U.S. residential lawn and garden market.
