Workers place decal on snowmobiles at a BRP facility in Valcourt, Que.Christinne Muschi/The Globe and Mail
Ski-Doo maker BRP Inc. DOO-T has suspended its financial forecast for the coming fiscal year, warning it faces an estimated hit worth several hundred million dollars from new changes the United States has made to its tariff policy.
The company subsequently lost more than a third of its stock market value. Its shares were down 37 per cent in early afternoon trading Wednesday on the Toronto Stock Exchange.
Valcourt, Que.-based BRP said in a news release late Tuesday that a recent amendment by the Trump administration of Section 232 tariffs on steel, aluminum and copper imports that came into effect April 6 results in a 25-per-cent levy on the total value of BRP snowmobiles sold into the U.S. and affects the majority of its off-road vehicle models sold into the country.
BRP estimates the potential hit to its business to be at least $500-million for the remainder of the year, before any mitigation measures that could offset those costs. The company, controlled by Quebec’s Bombardier-Beaudoin family in tandem with Bain Capital and pension fund the Caisse de dépôt et placement du Québec, is three months into its fiscal 2027.
New BRP CEO sees no ‘point to make changes’ after strong year-end results
“Like many manufacturers, we are operating in a highly volatile and unpredictable tariff environment that continues to create uncertainty across the market,” BRP chief executive Denis Le Vot said in a statement. “Despite the material burden of these tariff changes, we expect that, with our solid balance sheet, the agility of our teams and the strong start of the year, we will be able to manage our business through this challenge.”
It’s a sudden and unexpected challenge for Mr. Le Vot, a French engineer with a career in the automotive industry who started as BRP CEO on Feb.1. Barely three weeks ago, he was expressing optimism and saying BRP was poised for revenue and profit growth in the year ahead as the company reported net income of $45.8-million on revenue of $2.5-billion.
The White House said earlier this month it would modify its import tariffs on finished products made with steel, aluminum and copper in an effort to simplify tariff collections and compliance.
A presidential proclamation ordered that such products will now be hit with a 25-per-cent tariff on the entire value of the finished good that contains any of the three metals. Previously, the duty was 50 per cent on the value of the metal itself that was used in the product.
“The magnitude of the impact is mind-blowing, but it is likely the worst-case scenario” for BRP, Stifel analyst Martin Landry said in a research note to clients, noting the projected hit represents about 60 per cent of BRP’s earnings before interest, taxes, depreciation and amortization on an annual basis.
“We expect BRP will likely raise prices to offset the impact, however, quantifying the impact this would have on volumes is hard to judge,” Mr. Landry said.
Industry players such as Canadian steel structures maker ADF Group Inc., have warned that the net impact of the new changes could mean higher costs for manufacturers that export into the U.S. Other companies, however, could benefit.
“Tariffs create a situation that’s complicated for everyone,” said Jérome Pécresse, who leads mining giant Rio Tinto’s global aluminum and lithium business, adding it’s important to remain calm and master the things within your control. “Today’s winners can be tomorrow’s losers, and vice-versa.”
BRP, whose other brands include Can-Am, Sea-Doo and Lynx, does almost all its production at factories in Mexico and Canada. Its biggest market is the U.S., although it is pushing to boost sales in other parts of the world.
“This is a major expense headwind,” TD Cowen analyst Brian Morrison said. It will probably hurt BRP more than its rivals because the company makes the vast majority of its powersports vehicles outside the U.S., he said.
Shares of Polaris Inc., a BRP competitor based in Medina, Minn., that also manufactures in Mexico, were down 12 per cent in afternoon trading. Yamaha Motor Co. Ltd. and Honda Motor Co. Ltd. are also rivals.
“The size of the cost impact fundamentally changes the profitability profile for BRP and injects a high degree of uncertainty into the outlook,” National Bank of Canada analyst Cameron Doerksen said in a note. The White House could modify the rules yet again given that multiple industries have likely been caught up in the changes, but “there is no visibility” on whether or when such a decision will come, he said.