Canadian manufacturer of personal watercraft and all-terrain vehicles BRP, said it will maintain low-cost production in Mexico even if Donald Trump withdraws from NAFTA, according to Canadian news outlet CBC News.
BRP has just over US$ 760 million in trading volume between Mexico and the U.S. If Trump pulls the U.S. out of NAFTA, he would have to give six months’ notice and then exports from Mexico would be taxed according to “most favored nation” tariffs, which are between 1.4 and 2.9 per cent.
That would cost BRP approximately US$ 15 million to US$ 19 million a year, which “we could manage”, chief executive Jose Boisjoli said during a conference to release its third-quarter results.
“Some of it could be passed down to the suppliers, some of it passed (to customers) through pricing increases,” he said, adding that he would not consider pulling out of Mexico entirely.
“Being in Mexico with access to a skilled labor force, obviously, there’s a cost advantage there but also having access to the supply base in Mexico is very beneficial to us.”
Chief financial officer Sebastien Martel told analysts that despite the higher tariffs, BRP benefits from access to lower-cost skilled workers and supply base in Mexico.
Boisjoli said in an interview that the situation is similar to Russia's decision to add a new tax on imported goods after years of rumors.
Shares of BRP went up 9.6 per cent to US$ 21.51 after the company reported third-quarter earnings per share that came in well ahead of expectations and raised its full-year outlook.
BRP’s revenue, which jumped seven per cent to US$ 820 million, was boosted by strong sales of Can-Am off-road vehicles following the introduction of two new products.
This helped to offset a decline in snowmobile sales, which were affected by a slow production ramp-up. Adjusted earnings per share jumped 50 per cent to US$ 0.71, well ahead of the US$ 0.57 expected by analysts.
BRP, which was spun off from Bombardier Inc. in 2003, also boosted its full-year guidance on a stronger sales outlook for all its divisions except parts, accessories and clothing.
The company now expects full-year revenue to rise five to nine per cent, up from an earlier forecast of four to eight per cent, and sees adjusted earnings per share coming in at US$ 1.42 to US$ 1.49, up from earlier guidance of US$ 1.39 to US$ 1.46.
BRP has three manufacturing facilities in Mexico, two in Ciudad Juarez build all-terrain vehicles, including one that just opened in April, while a Queretaro plant produces jet skis.