Weak Dollar Slashes KTM Earnings

KTM Power Sports AG says revenue for its half-year ended March 31 totaled €288.1 million ($451.2 million), up 9.5% compared to last year. However, EBIT decreased 30.4% to €15.7 million ($24.6 million).

KTM says first-half earnings were "significantly influenced by the weak U.S. dollar," and already warns that its previously projected year-end EBIT of around €40 million may not be realized. "The weak dollar and a decreasing demand in the U.S. for OEM engines caused by the general economic surrounding conditions will negatively influence the margin situation in the remaining business year," the company acknowledged in a statement.

"The continuing dollar-euro exchange rate will notably weaken the EBIT for the current business year," says Stefan Pierer, CEO of KTM Power Sports AG. "In order to increase efficiency, we currently run a selective product policy in the USA and have again conducted price adjustments."

The KTM Group restructured in the first half of its 2007/08 fiscal year, separating into KTM-Sportmotorcycle AG and KTM-Sportcar GmbH. KTM-Sportmotorcycle AG is the operational core of KTM Power Sports AG. The OEM supplies 17 sales subsidiaries and five joint ventures that distribute to 1,400 dealerships worldwide.

KTM says the growth in revenue during the recent half-year came as a result of increased sales in off-road racing segment and sales of spare parts, garments and accessories. The second half of the year will include the impact of an expanded 690 line, a new 990 Supermoto and the 1190 RC8.

KTM says it anticipates its expanded product line to help increase sales to about 95,000 units this business year.

KTM Power Sports AG ended its 2006/2007 fiscal year Aug. 31, 2007, with revenue of €566.1 million, or 12.2 percent growth compared to revenue of €504.5 million in the prior 12-month period. The company sold 90,306 units in 2006/2007, up 7 percent from 83,985 units in the previous period.

The joint project between the KTM group and India's Bajaj Auto Ltd. to develop liquid-cooled 125cc and 250cc four-stroke engines for on-road applications is expected to begin operations in 2010 at Bajaj facilities in India. Unveiled in November 2007, the project is expected to include a range of scooters and "promises a lot of potential for the further development of KTM," Pierer says.

ATVs and an expanded on-road lineup are sure to garner KTM increased sales. The manufacturer is busy working with dealers to prepare them for the new product segments.