Coachmen Industries Inc.’s Claire Skinner, chairman, president and CEO, and CFO Joe Tomczak were scolded by two investment analysts during a conference call held this week because of what the analysts believe is too modest of an outlook for the company’s RV-related profits.
The conference call was held to have a discussion about Coachmen’s third-quarter earnings. Coachmen, a New York Stock Exchange-listed firm, reported pretax RV-related income of $2.6 million on RV sales of $114.6 million for the third quarter, which yields a profit margin of 2%.
During the first nine months of this year, Coachmen’s RV sales totaled $335.5 million and its pretax RV-related profit amounted to $3.1 million, yielding a pretax operating margin of 1%.
Comparitively, Winnebago Industries Inc.’s operating margin is running close to 10%, and Monaco Coach Corp’s has “historically, gotten up to 8.5%,” said Robert Male, an analyst with Kornitzer Capital Management, Shawnee Mission, Kan.
“You can look for us to get back to the 5% range on a pretax basis in the next year or two,” Tomczak said. “Beyond that, we’ll have to look at some structural changes in the business, but I think 5% definitely is in the realm of possibility.”
Regarding the type of structural changes being considered, Tomczak said, “Perhaps streamlining plant structures, different types of facilities, different ways of processing.”
He added, however, “We’re not doing any of those changes right now ,so I can’t give you specifics. But, yeah, there’s a challenge out there for our production guys to really look at how we make an RV.”
Skinner noted that Coachmen is a full-line producer with product mix, including entry-level towables and folding campers, which inherently provide lower profit margins.
Robert Rodriguez, CEO of Los Angeles-based First Pacific Advisors, argued that Coachmen should be doing better than a 5% profit margin after its restructuring of the past two years, which included the consolidation of Shasta Industries into the Coachmen Recreational Vehicle Co. and the closure of three factories, one of which reopened last summer.
“It seems surprising that you’d talk about getting back to just the number where you were at previously (before the restructuring),” Rodriguez said. “There are companies in the towables area that have considerably higher operating margins.”
Tomczak replied that the company’s forecast is modest because “we’re still in a recovery mode and we are making progress, but it is incremental progress on a year-over-year and quarter-over-quarter basis. So, we’re not there yet, but we are making improvements.
“The downsizings and cost-savings that we did over the last two years will have an effect and are having an effect on our results. So, it is very possible that we should be able to get over where we were in the past.
“But I’d hate to go on record with a prediction that we’d be dramatically improved from that considering that we’re still in the process of this recovery, and we also do have some mix issues to deal with. We are seeing a big surge right now on our towables side, which does carry a lower profit margin.”
Rodriguez reiterated there are RV manufacturers with product mixes that are “reasonably comparable” with Coachmen’s and “who have achieved higher operating margins, and that’s the competition you’ll be up against.”