KTM Hails ‘Sensational’ First Quarter Motorcycle Sales in Europe

(Bloomberg) -- Sales of motorcycles across Europe continue to be strong despite challenges ranging from Brexit to trade tensions to political turmoil, the region’s leading bikemaker says.

“I’ve been totally surprised,” said Stefan Pierer, chief executive of Austria’s KTM Industries AG, whose unit sales grew by 10% last year to 261,000. “Europe has been sensational this year.”

Pierer said he had expected concerns such as the Yellow Vest protests in France, Italy’s debt burden, and Britain’s departure from the European Union to cut into sales. But the industry’s growth in the region topped 21% in the first quarter, with KTM slightly outpacing rivals at about 22%, he said at the company’s headquarters in Mattighofen, Austria. The company says the data reflect robust consumer confidence, as most of its European sales are of bikes ridden for weekend fun rather than commuting.

In North America, dominated by Harley-Davidson Inc., industry sales declined by 4.5%, with KTM posting a drop of 1.1%. April was somewhat softer than March, KTM said.

KTM, which also owns the Husqvarna brand, has doubled its annual unit sales over the past five years. Pierer had predicted revenue growth of 1% to 5% this year and next, before new models kick that up to about 10% in 2021. By 2022, Pierer aims to expand unit sales to 400,000 and revenue to 2 billion euros, including KTM bikes sold by Indian partner Bajaj Auto Ltd.

Earnings before interest and taxes will remain between 8% and 10% of sales, while capital expenditures likely peaked at 184 million euros in 2018 and will fall below 160 million euros annually from 2019 to 2021, he said. Free cash flow will improve as new models are introduce and spending on updated facilities winds down.

KTM’s new offerings include a 390 cubic centimeter, single-cylinder enduro bike this year and a touring model with a lightweight two-cylinder engine in 2020. Husqvarna will introduce an 800cc travel enduro for 2021, and Pierer is considering a 1300cc V2 similar to the KTM Super Duke.

Dealers have groused that they need steep markdowns to clear inventory after KTM imposed ambitious sales targets in recent years. To reduce the overhang, Pierer is trimming production in Mattighofen this year. And he’s accelerating plans to take over Pexco, a unit that makes bicycles and e-bikes, expecting full control by 2021.

“E-bikes have become a huge market,” Pierer said. “The market has exploded, and as a large manufacturer you have to be there.”

--With assistance from Matthias Wabl.

Reporter on the original story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

Editors responsible for the original story: David Rocks at drocks1@bloomberg.net, ;Erhard Krasny at ekrasny@bloomberg.net, Paul Sillitoe

©2019 Bloomberg L.P.