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Extremely unpleasant news concerning Pierer Mobility AG (with the KTM, Husqvarna, GASGAS and 50.1% of MV Agusta Motor brands) from the stock exchange in Zurich and from KTM headquarters in Mattighofen and Wels in Austria. The Pierer Group went public with another profit warning on Monday evening, after which the share price in Zurich plummeted by up to 23% on Tuesday.
After ten record years, Pierer Mobility AG had already lowered its business forecasts and sales figures for 2024 for the first time in March, announcing terminations. Over the course of the year, more bad news came to light from Europe's largest motorcycle manufacturer, which also suffered immense losses in the bicycle business with its FELT, R Raymon, Husqvarna, and GASGAS brands.
As early as July 2024, it became apparent that KTM CEO Stefan Pierer had called for a serious cost-cutting program, which resulted in additional terminations at the motorcycle plant and did not stop with sports activities.
The off-road brand, Husqvarna, was ordered to withdraw from the Moto3 and Moto2 classes, while GASGAS will have to withdraw from the Moto3 and MotoGP classes (with Hervé Poncharal's Tech3 team) after the 2024 season, where the KTM brand will once again take center stage, as it will in the Motocross World Championship and the Dakar Rally
.
Since yesterday, it has become clear that the current financial year will be even more unpleasant than feared, and the financial difficulties will last longer than expected. Alarm bells are ringing among shareholders and the danger level is rising.
The overall economic conditions have deteriorated further and the slump in sales in the two-wheeler sector will last longer than expected, Pierer Mobility AG announced in an ad hoc announcement on Monday evening after the market closed.
The conditions for a rapid financial recovery of the motorcycle and bicycle manufacturer from Upper Austria can only be described as “worrisome”.
The high stock levels in the motorcycle sector are causing dealers grief, with market development in the second half of the year falling again short of expectations. As a result, the high levels could only be reduced slightly, despite heavy discounta. As strategic partners, both dealers and suppliers are receiving further financial support in these difficult times, for example, with payment terms being extended for dealers.
As a result of these measures, working capital was increased and, consequently, the company's net debt and interests payable also rose.
Bicycle segment: restructuring in full swing
The Pierer Group reports that the restructuring process will be completed in 2024. This will result in an additional extraordinary devaluation that is higher than originally assumed.
The reduction of the cost structure in the core business, with a reduction in workforce, and the consolidation of all research & development activities for the group brands, has already been largely implemented. The resizing of the entire bicycle division will be systematically continued in the upcoming year. The goal is to continue to operate the bike division profitably with a business model focused on niches and premium products.
Guidance 2024 canceled
As a result of these circumstances, Pierer Mobility will fall short of expectations in the current financial year, both in terms of sales and profits, as well as reduction in working capital and net debt, therefore, it is canceling its guidance for the 2024 financial year. A new review of non-cash adjustments will also be carried out by the end of the year. This occurs when income or expenses have been recognized in the income statement but no cash has actually been received or paid.
Pierer Mobility AG reduces size of executive board
Pierer took over KTM in 1992, after the company went bankrupt. After reorganization, there were 150 employees and 6,000 motorcycles were sold.
In order to save costs, Pierer withdrew the Red Bull KTM factory team from the 125cc and 250cc GP classes after 2008, due to the global economic crisis, following the collapse of Leman Brothers in the USA and the subsequent worldwide banking crisis, Even after the Covid pandemic, the Pierer Group continued to set new records in sales.
Both the two-wheel group (Pierer Mobility AG) and the automotive group (Pankl AG) recorded an increase in sales as compared to the previous year. The listed company, Pierer Mobility AG, increased its turnover by 9.2% to €.2,661.2 million in the 2023 financial year. At Pankl AG, turnover increased by 11.9% to €.936.2 million.
The 2023 financial year was characterized by a major offensive strategy, with a total of 72 new and revised models from the three core brands. During the 2023 financial year, KTM sold 280,206 motorcycles, Husqvarna sold 67,462, and GASGAS set a new benchmark by selling 29,532. With this effort, Pierer Mobility brought an amazing total number of 377,200 motorcycles onto the market.
However, Pierer Mobility is currently facing many uncertainties. Management is, therefore, unable to provide a concrete new economic outlook for its clients, business partners, and shareholders.
