PIERER Mobility AG
October Corporate Update
It has been no secret that PIERER Mobility AG, more generally known to the likes of me and you as KTM Group, has recently encountered some stiff headwinds.
A decline in revenues across all the brands and the segments they operate in saw the group, as a whole, down 27 per cent in the first half of 2024 compared to their results in 2023. This amounted to an operating loss of just under € 200 million.
The main factor behind the negative result was the Bicycle segment at € -117 million, of which around € -75 million was attributable to special write-offs/effects. The result in the Motorcycles segment amounted to € -78 million.
Still, in the first half of 2024, the group generated revenue of € 1,007 million (-27%). Around 93 per cent of this was attributable to the Motorcycles segment and 7 per cent to the Bicycles segment. A fairly significant downturn in the USA was a sizeable factor in the negative results.
In response, KTM announced that they would cut some staff and reduce production volumes, that the loss-making bicycle division would undergo a major restructuring, and that they expected a significantly better second half of the year.
However, KTM recently made an Ad hoc announcement to financial markets indicating that the forecast rebound had not eventuated.
PIERER Mobility AG Statement
“The difficult macroeconomic conditions are lasting longer than expected. The European economy is stagnating, with the important German market in particular in recession. In the USA, consumer purchasing power remains low due to the high cost of living and the long period of expensive consumer credit.
“The second half of the year at PIERER Mobility is generally characterized by a high-margin product mix, especially in the offroad segment. However, the available registration data for the overall motorcycle market in the USA for the period from January to September 2024 shows a decline of 6.3%. September was also the weakest month since January 2024 with a decline of 14.6%, meaning that a rapid recovery cannot be expected.
“In Europe, the registration data for the overall motorcycle market from January to September 2024 is at the previous year’s level due to increases in the low-price segment. However, they show a slowdown in momentum.
“Despite the slight reduction in inventories, further destocking remains an important objective. However, PIERER Mobility remains clearly committed to supporting dealers and suppliers as a strategic partner in these difficult times. As a result of measures taken in this regard, working capital and consequently the company’s net debt and interest expenses increased.
“The balance sheet restructuring will be completed in 2024. This will involve an additional extraordinary impairment requirement that is higher than originally assumed.
“The reduction of the cost structure in the core business with a reduction in the headcount and the consolidation of all R&D activities for the Group brands has already been implemented to a large extent. The redimensioning of the entire bicycle division will be systematically continued in 2025. The aim is to operate the bicycle division profitably with a business model focused on niches and premium.
“As a result of these circumstances, PIERER Mobility will fall short of expectations in terms of revenue and earnings, as well as with regard to the reduction in working capital and net debt in the current financial year, and is revoking its guidance for the 2024 financial year. A new review of non-cash value adjustments will also be carried out by the end of the year.
“In the course of the reorientation of PIERER Mobility, the Executive Board of the listed holding company will be reduced from six to two members: Stefan Pierer (CEO) and Gottfried Neumeister (Co-CEO).”
KTM aim to stamp out misconceptions
Recently I interacted with CSO Mr. Florian Kecht during a press event put on by KTM in Mattighofen. He underlined the faith in their ability to turn things around.
Florian also underlined that the group had realised that their strategy to relentlessly chase growth had to end, because it was leading nowhere. He said that they saw this coming at the end of 2023, and a decision was taken then to change tack in order to protect the brand and the company. Growth of around ten per cent each year was proving not sustainable and that they needed to make major changes, including a cultural change within the company.
So when 2024 started the whole company was set on a path of transformation, switching from a growth at all costs strategy, to instead becoming premium once again.
To help reduce stock levels the production line was reduced from 12 shifts to six shifts and the quantity of motorcycles produced in Austria was reduced by almost 40 per cent.
Florian also moved to shift conceptions about exactly how much of their motorcycle production is done in China, and clearly expressed his frustrations about how much misinformation was circulating in regards to this.
He underlined that out of the 250,000 motorcycles that is in the forecast for 2025, only 12,000 of them will be assembled in China. That two models out of somewhere near 200 models across their portfolio were produced in China, the 790 Duke and the 790 Adventure. With that deal part of the KTM – CFMOTO tie-up.
However, as part of the KTM and Bajaj strategic alliance, some smaller capacity models designed and developed in Austria, are assembled in India.
All premium models (690/890/990/1290/1390), and every single KTM off-road model is designed, developed and assembled in Mattighofen, Austria. I saw the 2025 Champion Edition EXC models coming down the production line with my own eyes while visiting the Mattighofen production line last month.
Florian stated that the majority of the € 80 million of funds lost in the first six months had been spent supporting their dealers with promotions and activations in the aim of getting customers through their doors.
KTM spend € 100 million per year on racing activity and that there were no plans for KTM to step away from racing, or their ‘Ready To Race’ ethos. KTM plan to continue being the most engaged and committed company in global two-wheel motorsport activities.
However, Florian did indicate that racing activities were to concentrate on the KTM brand. That means some of the Husqvarna and GASGAS branded racing teams would in the future instead race under the KTM logo, and that some others currently racing as Husqvarna or GASGAS might be cut from the program.
Florian Kecht
“KTM is shifting its focus to prioritise the “READY TO RACE” brand. This decision comes from the challenge of finding enough top-tier racers to compete across all teams and disciplines, including MotoGP, AMA Supercross and Motocross, FIM Motocross, FIM Hardenduro, Cross Country, and Rally. By refocusing our motorsports efforts, KTM aims to concentrate the resources and energy on fewer, but potentially more impactful, racing categories.”
KTM will debut 22 new models on their largest ever stand at EICMA in a couple of weeks, underlining their plans to keep the throttle on as Europe’s biggest manufacturer of motorcycles. However, they are undergoing a transformation in how they go about business in the aim of coming out the other side a smarter and more focused company.
