Sunday, February 19, 2006

Ducati Posts Loss for 2005, Revenues Fall by 11%

Sales Fall on Most Bike Lines, Multi-Strada and Sport Classics Bright Spots

Ducati lost money in 2005 after a small profit in 2004. But even worse, Ducati’s total revenues fell by 11% in 2005.

The FY 2005 Earnings Release stated:

Revenues for 2005 were Euro 320.8 million, down 11.7% compared to 2004. This was due to the reduction in motorcycle volumes, combined with an unfavourable mix. Revenues from motorcycles for the period decreased 13.1% to Euro 247.2 million and accounted for 77.1% of total revenues. Motorcycle-related products, including spare parts, accessories and apparel, were Euro 70.4 million, down by 3.8% over previous year.’

Gross margin for 2005 amounted to Euro 58.5 million or 18.2% of revenues versus Euro 86.7 million or 23.8% last year, caused by a reduction in motorcycle volumes, a negative product mix and as well as extraordinary devaluation of approximately Euro 15.0 million.[1]

Ducati did not even have a positive EBIT (Earnings before Interest and Taxes). Companies that do not have profits often use EBITDA (Earnings before Interest expense, Taxes, Depreciation and Amortization). You saw a lot of use of EBITDA from the dot com companies that weren’t turning a profit. Here, Ducati fell short on EBIT alone.

Ducati mentioned “unfavourable” product mix as one reason for poor results. Here was there motorcycle mix in 2005:

Motorcycle product % Change

Superbike 6,094 10,213 (40.3%)
Supersport 1,030 1,426 (27.8%)
Sport Naked 16,585 18,026 (8.0%)
Sport Touring 1,397 2,997 (53.4%)
Multistrada 6,156 3,898 57.9%
Sport Classic 3,274 0 n.a.

Total 34,536 36,560 (5.5%)

Superbike and sport touring got killed. Even Monster sales were down. Higher price bikes probably have higher margins and the lack of sales in these categories brought Ducati down. [Author's Note: The Author did his share for the Home Team, buying a Ducati 999 Superbike in October of 2005]

Multistradas were the only area where sales improved. But they were way up. As an anecdote, when the Author stops by PJ’s Triumph Ducati here in Albuquerque, the bikes he sees being delivered to smiling customers are Multistradas and Sport Classics. He thinks the burnt orange Sport is hot.

The Author made it a goal for thisblog to learn more about the motorcycle industry and write about it. He is also am trying to learn more about the Chinese motorcycle industry. But information can be hard to come by. [Author's Note: When Sunny the Dog ate the Author's Flash Drive, the dog destroyed a post about the Chinese motorcycle industry the Author had written.] China made over 17 million motorcycles last year. It led the world in motorcycle production.

Ducati is taking some steps to improve financials and the steps are outlined in the earnings release. Cutting costs, another public offering.

Writing about motorcycles is more fun than writing about interest rate movement, inverted yield curves and trade deficits. But the Author is here to serve and he will keep up on all fronts.




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