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HIDDEN THREATS HIT HARLEY

Although Harley-Davidson topped analyst estimates in results for the first half of 2021, with a bounce-back into firm profitability, investors on the New York Stock Exchange weren’t amused. An admission of major headwinds facing the company saw its share price slashed by 7.2% on the day these results were announced. BDN financial editor Roger Willis reports. 

First-half revenue from motorcycles and related products (parts, accessories, apparel and general merchandise) grew by 44.9% to £1.874bn. Total turnover was 36.6% up to £2.158bn. 

Numbers were boosted by a dramatic 37% increase in global wholesale shipments to dealers, rising to 111,478 bikes, compared with the equivalent six months last year when production was disrupted by Covid-induced factory shutdowns. Harley’s high-profile launch into the adventure market apparently wasn’t a significant factor. It had only shipped 4068 samples of the reputedly fast-selling new Pan America by the end of Q2.

Nevertheless, the company climbed safely back into bottom-line black ink. Half-yearly operating profit stood at £458.1m, against a periodic operating loss of £6.3m in 2020. And net profit reached £340.3m, versus a previous net loss of £16.5m.

Worldwide retail motorcycle sales volume rose by 17.6% to 109,509. The US domestic market, which has been awash with savings hoarded during lockdowns and government economic stimulus cash handouts, was key driver. A consumer frenzy among American bikers drove Harley sales on home turf 37.5% higher to 75,722.

However, overseas action was altogether less attractive. International sales slumped by 11.3% overall to 33,787. Although Canada managed 39.8% recovery to 5245, that was a lonely beacon of good news. The EMEA region — dominated by tariff-imposing EU countries and the UK — sank by 18.7% to 15,191. Asia-Pacific was 6.8% down to 11,779 and Latin America plunged by 47.5% to 1572.      

Commenting on his company’s performance, Harley-Davidson chairman and chief executive Jochen Zeitz wasn’t entirely upbeat. “We are encouraged by the signs of consumer positivity in the market,” he opined. “However, we remain mindful of the significant supply-chain challenges that we expect to continue to impact the sector.”

Qualifying notes in the results statement also painted a bleak picture for Harley’s exports to Europe. So far, it has failed to mitigate the impact of EU revocation of the Binding Origin Information (BOI) clauses that allowed the company to supply its European market with motorcycles produced in Thailand at a reduced tariff rate.

A list of detrimental unknowns followed, focusing on risks related to BOI revocation. These included uncertainties regarding the quantity and mix of motorcycles the company imports into the EU; whether it will be granted temporary relief from the effect of revocation or be successful in appealing against it; the size and duration of EU tariffs; and to what extent the company can attempt to pass on the impact to its European dealer network.

$-£ currency translation at forex rates on 21 July 2021

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