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The listed company, PIERER Mobility AG, with the brands KTM, Husqvarna Motorcycles, and GASGAS, had reported record years for more than ten years. But, in 2024, one piece of bad news follows the next, as sales figures are declining, with falling sales figures that have led to huge inventories, and the share price falling from 82 Swiss Francs to around 8 Swiss Francs since February 2022. Late on Tuesday evening, they announced that KTM AG has a financial requirement in the three-digit million range despite layoffs and rigorous cost-cutting measures. On Wednesday, the share price plummeted another 30 percent.
In the 2022 financial year, the Pierer Group, Europe's largest two-wheel manufacturer, increased its turnover by 19.4% to a new record of 2,437.2 million Euros. Pankl AG, which is part of Pierer Mobility, also increased its turnover by +18% to 836.5 million Euros last year, therefore, achieving a record turnover.
The 2023 financial year also went really well for Pierer Mobility: the company achieved a record turnover and sold significantly more e-bicycles and motorcycles. However, the economic outlook clouded over, which is why the company decided to cut 300 jobs in Austria and decided to relocate parts of production to Asia for cost reasons.
In the previous year, the Pierer Group sold 157,358 bicycles and 381,634 motorcycles: 2% more motorcycles than in the previous year. In Europe, sales amounted to around 140,000 motorcycles. Approximately two thirds of its motorcycles were sold in non-European markets, primarily in North America, India, and Australia.
However, KTM's CEO, Stefan Pierer, had already spoke of “adverse economic conditions in Europe,” in January 2024. “In order to secure the Group's profitability, management will implement cost reduction measures in the double-digit million range in the 2024 financial year,” Pierer announced. Expectations had to be sharply revised, especially in the badly affected bicycle market. The stakes in the FELT and R Raymon brands were sold, and the expansion plans in the bicycle sector were abandoned.
KTM's parent company, Pierer Mobility, generated a significantly lower operating result (EBIT) last year, which is attributable to the restructuring of the bicycle division. The key figure amounted to 160 million Euros in the past financial year and was, therefore, 32% below the figure for 2022. Earnings before interest, taxes, depreciation, and amortization (EBITDA) fell by 15% to 324 million Euros.
Pierer's managers also had to accept high costs for motorcycle dealers, in addition to restructuring the bike division. As a result, profits fell significantly in 2023, although sales increased from 2.44 billion Euros to 2.66 billion Euros. However, the significant rise in interest rates increased the cost of warehousing, meaning that Pierer had to grant dealers longer payment terms and higher discounts, until today.
Suppliers also suffered, and continue to suffer, from the high interest rates, and Pierer had to help stabilize the financial situation. This was reflected in the free cash flow, which fell from minus 3 million Euros in the previous year to minus 411 million Euros.
In spring 2024, Pierer Mobility already decided to take major cost-cutting measures. The Husqvarna and GASGAS brands will be withdrawn from road racing in the GP classes Moto3, Moto2, and MotoGP and will also no longer take part in the Dakar Rally. GASGAS will also withdraw from the Cross World Championship and Husky will also retire. The core brand, KTM, will once again be much more prominent in the future, and the brand profile will be consolidated with “Ready to Race”.
Pierer Mobility AG caused a stir as recently as October 21st, 2024 when the sales and earnings forecasts for this year had to be cut, because the restructuring is taking longer than expected. Pierer Mobility AG is still in crisis mode.
On Tuesday, it was announced that KTM AG needs a financial injection for 2025: a three-digit million sum is involved. Production also needs to be scaled back.
The Pierer Executive Board is now working on a concept to secure the financing of KTM AG, which is the heart of the Group and has, so far, been responsible for more than 95% of sales.
Incidentally, Pierer Mobility also acquired a 50.1% majority stake in MV Agusta Motor in March.
Negotiations are now underway to secure the necessary bridge financing in the three-digit million Euro range, meaning at least 100 million Euros. This is a huge sum, which makes it clear how much pressure the motorcycle manufacturer from Mattighofen has been under.
As expected, negotiations are now being held with the Indian core shareholder, Pierer Bajaj AG, and with existing financial creditors.
However, KTM AG not only needs a huge cash injection to secure liquidity, but they must also be put back on a stable economic footing both operationally and financially. In order to further reduce inventories, production is now being cut back and the administration is being reduced.
The overhead area will be significantly adjusted again, according to the latest Pierer Mobility statement, which refers to a “far-reaching restructuring”.
This means that between 280 and 300 will be fired. It was already announced at the end of August that an additional 200 employees would have to be let go, out of a total of around 6,000 employees to date.
In January and February 2025, there will be a production stop and short-time working, a company spokesperson confirmed today in an online report in the “Oberösterreichische Nachrichten” (OÖN) newspaper on Thursday afternoon.
The primary goal is to stabilize costs and sales at a redimensioned level from the 2025 financial year onwards and, therefore, create the basis for sustainable competitiveness and profitability.
The company will switch its production at its Upper Austria site from a two-shift to a one-shift operation and will lay off 280 to 300 employees as a result. Furthermore, approximately 1,000 employees in production will not have to go to work in January and February, meaning that production will come to a standstill.
In full operation, KTM normally produces a motorcycle every two minutes. However, according to the company, employees will continue to be paid at the rate of 30 hours. This is an internal agreement between the employees and the employer, according to Pierer Mobility. The interruption in production is intended to reduce stock levels, KTM CEO Stefan Pierer told OÖN on Thursday.
