An untypical profit warning, issued more than two months ago by Pierer Mobility Group, alerted investors to trouble ahead. But the breadth of business difficulties at Europe’s largest motorcycle manufacturer during the first half of 2024, revealed in late August’s full results statement, was nevertheless shocking
Pierer Mobility Group revenue slumped by a painful 27.4% to £847.4m in the first half of 2024. Approximately 93% of this total was attributable to motorcycle operations and the rest to bicycles. Then an overall operating profit of £81.6m in the equivalent period last year was replaced by a £164.1m operating loss. The main factor behind such negativity was the bicycle segment’s £99m operating loss, of which about £63m was attributable to special write-offs. Group net profit of £44.6m in the first half of 2023 morphed into a net loss of £144.8m this time around.
Net debt grew from £653m on 31 December 2023 to £1.236bn at 30 June 2024. Negative performance was partly to blame. But an increased capital commitment, supporting Pierer’s global dealer network in the face of high interest rates, also had a key role.
However, Pierer Mobility’s motorcycle business had to carry its share of the can. Global revenue from motorcycles was 26.7% down to £787.9m. An associated £98.5m operating profit during the first half of 2023 turned into a first-half 2024 operating loss of £65.6m. Operating margin went from plus 9.2% to minus 8.4%.
Total worldwide six-monthly motorcycle sales volume for the various Pierer brands suffered a 21.2% decline to 147,496 units. The gap between that and the 113,072 sold by nearest European competitor BMW Motorrad in the same period narrowed significantly. KTM was hardest hit, 25.2% down to 108,536. Husqvarna dropped by 17.9% to 26,120 and GasGas was in arrears by 8.9% on 7805.
On a brighter note, the recent Pierer take-over of primarily European distribution for Chinese affiliate CFMoto has already begun to pay off, more than tripling the brand’s sales to 3587. And MV Agusta, latest recruit to the Pierer Mobility ownership portfolio, is benefiting too. Its premium-priced unit sales considerably more than doubled to 1448 in the first half of this year.
Europe delivered 61.5% of Pierer’s revenue from motorcycles. North America, including Mexico, was responsible for 25.4%. Other markets worldwide contributed 13.1%.
Reviewing half-yearly development in its most important motorcycle markets, the Group noted a positive trend in Europe, where overall demand increased by 4.7%. But registration figures for core Pierer brands (KTM, Husqvarna and GasGas) had declined by about 5%.
The North American market, (in contrast to Europe, also including motocross models) retreated by 3.9%, while Pierer core brands plunged by 18.4%. Overall PTW sales in Australia and New Zealand were negative too, 6.6% down, and Pierer core brand registrations there fell by 10.1%.
The relevant Indian motorcycle market segment recorded a strong 16% increase. Against that backdrop, Pierer’s strategic manufacturing partner Bajaj sold more than 31,000 KTM and Husqvarna bikes to domestic customers in India, although market share declined to 4.7% from 5.6%. Elsewhere among main Asian countries with Pierer Mobility Group presences – Hong Kong, Thailand and China – significant declines in the region of 25% were recorded.
Despite so much bad news and what it describes as a “persistently challenging environment”, Pierer Mobility Group’s executive board now expects a significantly better second half of the year. This will, it says, be supported by a higher-margin product mix, particularly in the off-road market.
For 2024 as a whole, the board is forecasting an annualised revenue reduction of between 10% and 15%. In the motorcycle segment, it assumes that the cost savings introduced will be able to compensate for negative effects of declining sales, to such an extent that a flat to slightly positive operating profit can be generated for the full financial year. On the downside, an operating loss of somewhere between £93m and £110m has already been factored in to meet the bicycle division’s extraordinary impairment and restructuring requirements.
Savings already in place focus on 373 workforce redundancies so far since the beginning of this year, 309 of them in Austria. But total Group headcount has only fallen by 160, because the takeover of MV Agusta added 213 employees in Italy. Development of existing dealers and further expansion of the dealer network will be key issues. In addition, the Pierer executive board stresses confidence in a high level of working capital and solid financing structure. It also highlights the fact that MV Agusta’s integration process is going according to plan.
€-£ currency translation at forex rates applicable on 27 August