Austria-based motorcycle manufacturer KTM is planning to reduce motorcycle production in 2009, eliminate 300 full-time employees and re-assign other full-time employees to part-time status, according to a January 30 report appearing on Austriantimes.at. Read the full report here: ~http://austriantimes.at/index.php?id=10903~ More, from a press release issued by KTM: Despite economic crisis positive operating profit in the first quarter First quarter 2008/09 >> Revenue: 132.2 million EUR (-11.5% compared to last year) >> EBIT: 4.5 million EUR (-76.3 % compared to last year) >> Vehicle sales: 20,300 >> Development for series production of a Sport Enduro with electric drive >> capital Mattighofen KTM Power Sports AG, one of the world-wide leading manufacturers of Off-Road and street motorcycles, ATVs and the super sports car X-Bow, reduced sales to 20,300 vehicles (-4,465 compared to last year) due to a deterioration of market conditions in the automotive and motorcycle industry. Revenue was down 11.5% on the previous year from 149.4 million EUR to 132.2 million EUR. Despite the economic crisis and the decreasing demand on the automobile and motorcycle markets, KTM was able to achieve a positive EBIT of 4.5 million EUR (previous year 18.9 million EUR), due to the early initiated counter measures like the selective product policy towards high margin vehicles, price increases as well as adjustments in capacity. “We have already started to do our homework in business year 2007/08 and early reacted to the upcoming crisis. That way we could counter steer a bigger loss in profits and adjust our production plan”, says Stefan Pierer, CEO of KTM Power Sports AG. Business Development In the Sportmotorcycle Division sales of 126.2 million EUR (-15.5% compared to last year) were achieved. The drop in sales was caused by the reduction in the Offroad segment, especially in the Enduro models in the United States. Admitted EBIT dropped by 33.7% from 19.2 million EUR last year to 12.7 million EUR. If extraordinary and non-recurrent income are discounted a 13.8% increase from 8.7 million EUR last year to 9.9 million EUR can be reported. In the Sportcar Division sales of 6.5 million EUR and EBIT of minus 7.9 million EUR were achieved. The loss is due to material and manufacturing costs that were higher than planned for the first series running until the end of January 2009. In the first quarter of 2008/09 114 vehicles were sold. Other Events In the first quarter of 2008/09 the prototype of the KTM Zero Emission Bike, a noiseless and emission-free Enduro motorcycle, was presented. KTM sets another important step for future developments with this new drive concept. Mass production is planned for 2010. The project focusing on developing new small-engined Street motorcycles together with Bajaj Auto Ltd. is running according to plan. Bajaj Auto Ltd. increased its stake in KTM to 25.86% in September 2008 and indicated its interest in raising it to 30%. Together with Lease Consult GmbH, rental and leasing options for the X-Bow super sports car and selected Street motorcycles through KTM Financial Services GmbH have been developed and preparations for structured distribution in Austria, Germany and Switzerland have been initiated. Towards the end of business year 2007/08, KTM began to hedge USD/EUR exposure in particular for a planning period of several years. Given the US dollar’s strong gain against the euro during the first quarter 2008/09, we recorded a loss in value in the financial result totaling 28.1 million EUR. The average hedging rate for these transactions is however much more favorable than the USD/EUR exchange rate forming the basis for our budgets and calculations. Outlook KTM’s Management Board plans to implement a capital increase from authorized capital in the second quarter of business year 2008/09 in order to be prepared despite the continuing difficult surrounding conditions and to drive the further development of future technologies in the two and three wheel segments. Last year’s forecasts for 2009 of a decline in GDP in real terms of -0.3% in the United States and -0.1% in Europe are no longer realistic from today’s point of view. KTM therefore assumes that purchasing power will continue to fall over the remaining business year. The economic environment for the automotive and motorcycle industry in particular could continue to worsen in the United States and Europe. KTM has responded to this szenario by scaling back production by up to 20% from last year and will continue implementing the ongoing improvements and cost-cutting measures in order to reduce the capital tied up in the short term to an optimal level in the second half of the year. From today’s perspective, KTM aims to sell 600 X-Bows in the Sportcar Division over the 2008/09 fiscal year. If this figure can be achieved, the operating result will stabilize at around the projected minus 14 million EUR. In the Sportmotorcycle Division KTM is planning to reduce turnover by around 20%. In view of the drop in sales, the planned operating result in the Sportmotorcycle Division will compensate to a great extent for the operating loss in the Sportcar Division despite the catchier economic environments.