A SIMPLE QUESTION. NO SIMPLE ANSWER.

Federico Minoli, states in his Desmoblg of May 16, 2006:

Everyone – really everyone - was in agreement that Ducati has a great name: a symbol of technology, modernity and youth. Their main question was: how come, with a name like Ducati, you aren’t selling more motorcycles?[i]

That is the central question facing Ducati management. What can they do to sell more motorcycles, and higher margin motorcycles?

DUCATI’S POSTS A PROFIT FOR FIRST QUARTER 2006

Ducati posted a profit of 1.5 million euros for the first quarter of 2006, reversing a loss of 2.6 million euros for the same quarter in 2005. This profit came despite lower revenues, 78.2 million euros in 1Q2006, down 4.5% from 81.9 million euros in 1Q2005.[ii]

Ducati states:

[Revenue Decline] … was due to a reduction in motorcycle sales, offset by a positive product mix, increased sales in accessories, as well as a positive exchange rate effect [AUTHOR’S NOTE: The U.S. Dollar has declined against the euro and the current dollar to euro exchange rate (5.18.2006) is .7799]. 7,337 units were sold in the period. Revenues from motorcycles for the period decreased 8.6% to Euro 60.2 million against the same period last year and accounted for 77.0% of total revenues. Motorcycle related products, including spare parts, accessories and apparel, amounted to Euro 16.9 million, up 9.9% on the first quarter of 2005.

MOTORCYCLE SALES FIGURES TELL AN INTERESTING STORY

Ducati Units
Motorcycle shipments: 1Q2006 1Q2005 % Change

North America 2.502 1.710 46.3% [AUTHOR'S NOTE: Sorry about the lack of formatting on these columns. No time right now to correct it.]
Main European market 2.845 4.997 (43.1%)
Japan 555 513 8.2%
Rest of World 1.435 1.745 (17.8%)

Total 7.337 8.965 (18.2%)

Motorcycle product mix: 1Q2006 1Q2005 % Change

Superbike 1.147 2.120 (45.9%)
Supersport 176 259 (32.0%)
Sport Naked 3.933 4.174 (5.8%)
Sport Touring 550 389 41.4%
Multistrada 666 2.023 (67.1%)
Sport Classic 865 0 n.a.

Total 7.337 8.965 (18.2%)

Overall, bike sales were down 18.2%. However, Ducati sold 46% more bikes this past quarter than in the same quarter 2005 in the United States. This increase coming despite the declining dollar (making euro denominated import products more expensive).

Consistent with the entire year of 2005, Superbike and Supersport sales are way down. Even Monster sales are down. And Multistrada sales plummeted 67.1%.

SO, BACK TO THE QUESTION…OR HOW DOES MR. BLANDINGS BUILD HIS DREAM HOUSE?

Desert of the Real Economic Analysis is primarily an investment, finance and economics blog. But motorcycles are one of the Author’s first loves. And just as Mark Twain wrote in “Life on the Mississippi” that he wanted more than anything to "be a pirate when he grew up”, the author pines to get into the motorcycle business.

But looking at Ducati financials, the left side of the Author’s brain, the one that does the investment analysis, asks “Why?” The Author owned Ducati stock briefly in 2001 and made a positive return. He would not buy it now. Stocks are stocks and motorcycles are motorcycles.

The 1948 comedy “Mr. Blandings Builds his Dream House”[iii] is one of the most delightfully funny films in the comedy cannon. It stars Cary Grant, Myrna Loy and Melvyn Douglas in a “comedy of errors” as the Blandings build their dream home in rural Connecticut. It is a quintessential “proof” for Murphy’s law, as nothing works as promised, everything must be done and redone, and costs exceed budget by Halliburtonian proportions.

Sounds much like a Ducati, doesn’t it?

Anyway, Mr. Blanding explains at the end of the film that “Some things [building the house] you do with your heart, not with your head.” Yep. Evidently so.

RIDE WITH YOUR HEAD AND FLY WITH YOUR HEART IN THE DESERT OF THE REAL!

[i] http://blog.ducati.com/.
[ii] http://www.ducati.com/company
/pr_eng_1981_0_1q06_150506_eng.pdf
[iii] http://www.imdb.com/title/tt0040613/#comment