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HARLEY’S HARD REALITY

With any benefit from various initiatives outlined in its “More Roads” master plan yet to materialise, Harley-Davidson had a tough time in 2018, as full-year results to 31 December reveal. BDN financial editor Roger Willis reports.

Annual revenue from motorcycles and related products rose by just 1.1% to £3.769bn. Financial services turnover was 2.2% up, adding £567.6m. So total revenue increased by a slim 1.2% to £4.337bn. But operating profit plunged by 19.9% to £541.3m and pre-tax profit was 20.5% down on £520.9m. However, because of the lavish year-on-year cut in US corporate taxation courtesy of President Trump, net profit was actually 1.9% up at £403.2m.

The impact of absorbing punitive tit-for-tat tariffs on exports to Europe, rather than passing that cost burden on to customers, had become obvious in fourth-quarter figures, though. Harley incurred an operating loss of £45.2m on motorcycles and related products in those final three months. Overall quarterly operating profit was reduced to a mere £2.8m, translating into a pre-tax loss of £3.1m and negligible net income of £376,000.

The brand’s wholesale bike shipments worldwide during the year were reduced by 5.3% to 228,665 units. Global retail sales fell by 6.1% to 228,051 motorcycles, illustrating particularly sharp inventory management. US dealers took the hardest hit, shifting 10.2% fewer machines at 132,868. International sales were a marginal 0.4% up to 95,183.

Best news was to be found in Europe, where the decision to maintain prices without passing on a massive EU import duty hike was amply rewarded by customers. As a result, Harley’s biggest overseas market grew by 3.5% to 41,179, outstripping a 1.8% improvement for the European 601cc-plus segment in which its products reside.  

The Asia Pacific region registered a 5.4% decline to 28,724. Of the two largest components within it, Australia sank by 21.2% while Japan made a 15% recovery. Latin America was positive, achieving 7.6% growth to 10,167. Canada was 3.9% down at 9690.

Wall Street investors reacted badly to these results, wiping 5% off Harley’s share price.

     

 

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