Marine Products Corp. (MPX)

Marine Products sinking.

Marine Products engages in the design, manufacture, and sale of recreational fiberglass powerboats in the sportboat, deckboat, cruiser, and sport fishing markets primarily in the United States. It offers its sterndrive and inboard-powered sportboats under Chaparral brand and outboard boats under Robalo brands. The company sells its products through a network of 148 domestic and 24 international independent authorized dealers.

Housing concerns are looming in US, which is dispiriting customers from making big-money purchases like boats. Likely slowdown of boating events due to weak environment could be another negative factor for the company. Marine Products is sailing through rough weather as it is facing revenue declines in the past several quarters. Company is facing hurdles like production inefficiencies and high labor costs, which is affecting its margins. Chaparral line accounts significantly to the business but is currently experiencing a slowdown. On a positive side, Robalo sales are picking up however they do not contribute much to the business.

Looking ahead, company is experiencing uncertainty in designing the product, as dealers are unsure about the market demand given the transition period. Engines have been one of the most important components in manufacturing and their prices are forecasted to rise in the future. This would put additional pressure on the margins, which would be fuelled by weak consumer demand. Slack demand has resulted in about 16.7% decline in the number of boats sold for Marine Products, thereby propelling the company to lower its 2007 earnings outlook. Hence, looking at the soft industrial environment and poor company performance, Marine products could submerge.