After admitting to a profitability collapse for its substantial pedal-bicycle business in 2023 half-year results published at the end of last August, Pierer Mobility has abruptly exited pedal-pusher territory.
Announcing an aggressive focus on core premium powered two-wheeler brands KTM, Husqvarna, GasGas and MV Agusta instead, from the 2024 financial year advent, Pierer’s board of directors has now realigned the group’s product segments into “motorcycles” and “e-mobility”. The latter will feature an expanded range of more heavily promoted e-bicycles from the Husqvarna and GasGas brands. In addition, the segment will include all electric PTWs produced by Pierer – e-motorcycles, e-minis and stand-up e-scooters.
The demise of Pierer’s pedal-bicycle interests came from an excess of post-Covid inventory among bicycle dealers across Europe, leading to a rash of discounting. Divestment of the bicycle division has already seen the R Raymon brand sold back to its founders Susanne and Felix Puello. Disposal of the Felt brand to a consortium fronted by Pierer ex-director Florian Burguet should be completed in the first half of 2024.
In order to secure group profitability, management will implement cost-cutting measures in the double-digit million euro range
The Pierer board has also made moves to tackle the impact of what it describes as “unfavourable economic conditions” in Europe for the motorcycle business, due to significantly higher interest rates pushing up the cost of dealer inventories. Dealers will benefit from extended payment terms and higher discounts. And with sufficient liquidity reserves available, Pierer has promised support for suppliers too, to cushion their increased financial burdens associated to rising interest rates.
But these interventions will lead to a significant reduction in total assets and thus to a higher group equity ratio, negatively impacting on cash flow for the 2023 financal year, as will decline of the bicycle division’s revenue stream. Guidance for the 2023 annual result has therefore been adjusted by the Pierer board, which expects sales growth limited to 7-9% and a reduced operating margin of 5-7%.
Most controversially, Pierer is to relocate some production for mid-range motorcycle models and certain R&D activities to strategic partners Bajaj Auto in India and CFMoto in China during the coming year. This is reportedly intended to exploit cost advantages, and accelerate development and industrialisation processes. Up to 300 jobs at the company’s main plant in Mattighofen and other Austrian locations will be sacrificed.
Generally, Pierer Mobility’s pre-results outlook statement was stern. “We expect the global economic environment to be difficult in 2024, a year of consolidation which will be used to strengthen our core business,” opined the board of directors. “In order to secure group profitability, management will implement cost-cutting measures in the double-digit million euro range.”