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Lippert CEO details impact of tariffs in Q2 earnings call

Lippert CEO details impact of tariffs in Q2 earnings call

Lippert Industries’ CEO Jason Lippert first announced the positives in the company’s second quarter earnings call for 2018. He followed this with a discussion on the impact steel and aluminum tariffs have had on the firm.

He said, “We’re happy to announce another record quarter with Q2 revenues reaching $684 million, up from $547 million or 25 percent from the same quarter last year. LCI’s OEM segment grew to approximately $617 million in sales for Q2, up from $503 million or 23 percent from the same quarter last year. Our aftermarket segment grew to $68 million in the quarter, up from $45 million or 51 percent up from the same quarter last year. Diluted earnings per share grew from $1.59 per share to $1.86 per share during the same period.”

All of this positive news, Lippert said “unfortunately, does not mitigate the effect that the recent tariffs have had on LCI and the RV industry as a whole. The Trump administration tariffs and even the anticipation of the Trump tariffs, have had an adverse impact on domestic steel and aluminum prices in the last few quarters.”

He added, However good the intentions were, it does not change the fact that aluminum prices have risen over 25 percent since last September of last year and steel prices have risen over 30 percent. LCI currently purchases approximately 300,000 tons of steel annually and 40,000 tons of aluminum, almost all domestic. Due to foreign competition over the years, the steel industry has made it clear that they have raised prices recently to get back to more normalized margin in their businesses. Nucor, one of the nation’s leading steel producers and a large supplier to LCI, announced just last week, its highest second quarter earnings in the company’s history, doubling profits from their Q1 of 2018.”

Finally, he added, last quarter, we spoke of how we initiated price increases to address the impact of steel and aluminum tariffs and expected to see the impact of these increases in late Q2 and early Q3 of this year. It’s always difficult to pass along increases of this magnitude, especially considering how much of a moving target it has been. But we worked very closely with our customers to make sure they understand this tariff-related increase has largely been out of LCI’s control. Because many of the tariffs and increases on our raw materials have moved so quickly, we weren’t able to capture 100 percent of it, but we continue to work toward good resolutions with our customers.”

“We are being creative with our customers to try to minimize the increases where possible, by reorganizing component and product content, as well as getting creative on the product build cost through value-added, value engineering and other cost savings ideas,” Lippert added. “In addition, we’re confident that our OEM partners will do their best to re-content their product lines, so the retail customer does not feel much of the inflationary impact of these increases. Our customers are excellent at making sure price points and products, best meet the retail price point expectations of retail customers.”

Even with the challenges the industry has faced with the tariffs and customer re-contenting, Lippert reported the company’s content per towable RV increased significantly this past quarter. He added, “We are committed to be known as a value-added engineered products company for the recreational and industrial markets. We aren’t interested in manufacturing me-too products that can easily be copied. Our R&D pipeline, while full of new RV products, is developing innovative products for cargo and equestrian trailers, European caravan and motorhomes, pontoon and power boats and several aftermarket product categories.”

Many of LCI’s new products will debut at the Elkhart Open House in September.

SOURCE: Lippert Industries press release

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About Ronnie Wendt

Ronnie Wendt is the editor in chief of RV Daily Report. She's been a writer/editor for more than 25 years, working in law enforcement, aviation, supply chain and now the RV industry. She's not a stranger to RVs, however. She grew up camping, and still camps as many weekends as she can every year.

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