The Polaris Covid-19 response is wide ranging and impactful. The management is suspending operations at eight plants across the United States, Mexico and Poland for a week. As part of the suspension the company is providing US employees with up to 10 days of pay. For dealers, they are allowing home delivery of products, providing product flooring support and covering flooring interest payments for off-road vehicles and motorcycles through May 31st.
Polaris Covid-19: Financial Response
On the financial side Polaris management announced a:
Drawing down of cash from their revolving credit facility
Reduction in capital expenditures
Suspension of share repurchases.
They have also withdrawn their financial guidance for the first quarter and full year.
This is not surprising given the current economic conditions brought on by the Covid virus. Similarly, BRP, maker of Can-Am products, withdrew their financial guidance for the year, suspended their dividend and drew down their $700 million revolving credit line. They are also considering reducing shifts and possibly suspending some plant operations.
Since the powersports industry in general is reliant on discretionary income, particularly in the recreational segment, they will be hard hit by the economic fallout from the Covid-19 virus. Polaris is more diversified than BRP with more commercial customers and products like Taylor-Dunn, Goupil, GEM and military vehicles. In addition, they have a large installed base and customers may choose to fix existing vehicles rather than purchase new ones. On the bright side Polaris points to the ability to maintain social distancing while still enjoying off-road vehicles.
Furthermore, the companies will be hit by sharply lower oil prices in important oil producing states and farmers still feeling the effects of the tariff wars. Several years ago these two sub-segments helped restrain growth in the side-by-side market. Oil prices were lower but not quite this low and farm income was low as well.
The BRP earnings call for Q4 and the full year for FY2020 revealed continued strong growth. Annual revenue increased 15% to $6,053 million (CA$) primarily driven by shipments of Year-Round products which includes side-by-sides. Net income increased by 63% and North American BRP retail sales for Seasonal Products and Year-Round Products increased 15%. BRP retail sales outpaced the industry in North America and International markets. For Q4 2020 total revenues improved 7.3% to $1,615.9 and net income jumped 57.1% to $118.2. Management stated that they met key five-year revenue and earnings goals a year ahead of schedule.
BRP Earnings Call Highlights
The following are some of the highlights of the Q4 2020 BRP earnings call that relate to side-by-sides.
BRP North American powersports retail sales increased 15% for FY2020 compared to mid-single digits for the industry
BRP continued their long streak of strong quarters as they continue to gain market share in the side-by-side market. They have emerged as the number one rival to Polaris. In large part this is because of a steady introduction of new models that meet customer needs. They are the only company that has come close to matching Polaris’ pace of new model introductions.
However, both companies are going to be challenged by the corona virus crisis as well as the sharp drop in oil prices. The oil rich states were a drag on the market several years ago when there was a less severe drop in oil prices. Tariff and flooding troubles in the farming states only adds to the problem. The effects of the corona virus are unclear at this point but are likely to be severe. Furthermore, products like side-by-sides that significantly rely on discretionary income are likely to be disproportionately affected.
Arcimoto and the Eugene Springfield Fire Department in Oregon started the first pilot program for the Rapid Responder vehicle. The Rapid Responder is a variation of the Arcimoto FUV designed specifically for first responders like fire, police and campus security departments. The three-wheeled, electric powered vehicle for emergency response offers a low carbon, small-footprint and lower cost option to traditional vehicles.
Rapid Responder Features
Arcimoto will disclose pricing and full specifications for the vehicle later this year when full production begins. As of now key specs include:
75 mph top speed
100 city mile range
Roof-mounted equipment rack
Rear cargo compartment
360-degree scene lights
This vehicle should find a nice niche in fire, police and security applications. The higher speed and range is an advantage compared to some of the first responder/security vehicles that the golf car and other low speed vehicle manufacturers offer. On the down side those four-wheel vehicles can carry a full stretcher. However, the Rapid Responder’s speed and small footprint should allow first responders to access the emergency scene faster. This can prove critical in many situations.