On the face of it, half-year profitability at the motorcycle division of Kawasaki Heavy Industries looks dreadful — but actually isn’t, writes BDN financial editor Roger Willis.
Divisional revenue over the six months to 30 September improved by 5.5% to £1.005bn. Within that, turnover from wholesale motorcycle shipments into developed countries was 4.5% up to £353m, despite static year-on-year volume of 64,000 units. Bikes for emerging markets yielded £272m, a 9.2% rise, as volume rose by 14% to 163,000. Utility vehicles, ATVs and personal watercraft added 6.4% to reach £231m. And revenue from general-purpose petrol engines was 0.9% up to £149m.
In striking contrast, the division suffered an operating loss of £32m, more than doubling a £14m loss in the equivalent period of its previous fiscal year. This doesn’t reflect reality, of course, but is due to Kawasaki’s arcane accountancy practice of front-loading costs into the first half and booking profits into the final two quarters. Presumably some corporate taxation advantage is to be gained from this exercise.
Clues are easily visible in Kawasaki’s previous full-year performance and forecasts for this year. In its 2017/2018 fiscal, operating results moved from that £14m loss at the half-way mark to a £22m profit after nine months and then an annual profit of £106m. The company had originally predicted a slight reduction in annual earnings for the division this time round, to £104m. But obviously recent revenue-growth success is such that the full-year profit forecast has just been upgraded to £111m.