Wauwatosa-based Briggs & Stratton Corp. reported a dip in revenue during the third quarter, but an increasing emphasis on commercial engines helped drive net income up more than 33 percent.
“Our focus on growing higher margin commercial engines and products has been an important factor in driving our improved profitability over the last few years, and we continued to make progress during our fiscal third quarter,” said Todd Teske, Briggs chairman, president and chief executive officer.
Briggs reported revenue of $597 million, a 1.1 percent drop attributed to a decline in sales of small engines as OEM customers shifted orders closer to the peak season.
The company, however, did improve its gross profit margin from 21.1 percent to 22.6 percent through a favorable product mix that included a higher proportion of commercial engines and products, the positive impact of new engine innovations and improvements in manufacturing efficiency.
Engineering, selling, general and administrative expenses were up 4 percent, to $78.3 million, but the end result was a 33.5 percent increase in net income, to $35.8 million. Earnings improved from 61 to 83 cents per diluted share.
The company still is counting on a strong fourth quarter, projecting net sales for the year will be $1.86 billion to $1.9 billion. Hitting the low end of that guidance would put revenue up 2.8 percent for the year, but also would require a 9.1 percent improvement in the fourth quarter. The high end of the guidance would require a 17.1 percent improvement in the final quarter.
“As we have indicated throughout this fiscal year, both OEMs and retailers have been cautious in their ordering activity, choosing to produce and take inventory closer to the season,” Teske said. “We saw this particularly in the most recently completed quarter. We remain optimistic that the upcoming season will reflect market growth in the U.S. of 1 to 4 percent over the course of the mowing season.”
The company acknowledged in its guidance that customers could take a more cautious approach in building their inventory, shifting sales beyond the end of the fiscal year.
