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Ducati Revs
By Rich Smith
November 24, 2006

As the Fool's newest newsletter service, Motley Fool Global Gains, matures, I'm sure we'll often run into foreign companies that report their financial achievements in new and ever more interesting ways. Current case in point -- Italian motorcycle-maker Ducati Motor Holding (NYSE: DMH), whose Q3 2006 report I previewed last week. Whereas American companies, and their Wall Street analysts, routinely focus the amount of profitable pennies per share accruing thereto in any given quarter, all the while mentioning firmwide results almost as an afterthought, Ducati takes another road entirely:

It doesn't tell you the per-share results at all.

Before we begin our march through the earnings news, therefore, let's run down the per-share performance. To do this, simply take the firmwide results and divide by shares outstanding. For the first three quarters of 2006, Ducati lost $0.018 per share, an improvement from the $0.13-per share loss it had incurred by this time last year. With each American Depositary Receipt comprising 10 common shares, that means holders of Ducati ADRs saw an $0.18-per-ADR loss last week.

That's nice to know .

But it's also distracting. At the Fool, although we acknowledge the common focus on profits per share, we prefer to think of companies as just that -- entire companies. From that perspective, therefore, let's also look at how Ducati describes itself as a whole.

* Revenues of $293.7 million rose 1% over last year, helped by an improved product mix.
* A 7% decline in the cost of goods sold, combined with those sales gains, lifted the firm's gross margin 620 basis points to 27.6%.
* Operating costs rose 3%, and taxes more than doubled, eating away at the gross margin gains and leaving Ducati with a $5.8 million firmwide loss year to date. So far, therefore, the firm is falling short of analyst predictions that it will break even on the bottom line this year.

Long story short, Ducati has a long road ahead of it before it can catch up to profitable rivals such as Japan's Honda (NYSE: HMC), or America's Polaris (NYSE: PII) and Harley-Davidson (NYSE: HOG). But at least it's on the right road. Losses are shrinking, and the firm continues to make good on CEO Federico Minoli's promise to "maintain a tight control on sales and production in order to avoid excessive [inventories]." While the firm's inventories didn't contract as much in this quarter as they did in the first half, at 2% down from a year ago, they're still headed in the right direction.

Declining sales and money-losing operations don't make the cut at Motley Fool Global Gains, where we prefer to seek out the best international stocks for our subscribers. But if Ducati continues to make progress in its turnaround, sure, we'll take a look. Meanwhile, if you're interested in peeking in at what we've already scoped out for our members, take a free tour of the publication.

Fool contributor Rich Smith does not own shares of any company named above.
 

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Simple fix: The Italian government should simply wave all taxes on Ducati until they become solvent. After all, governments are in place to help their people, right? ;)
 

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Ducati's been losing money for a while. But the trend is improving, and like the article said, they were predicted to break even this year. I think the 1098 indicates a change in philosophy for DMH, similar to the change that happened at Triumph. Rathering than pricing their bikes well above the those of the Japanese big four and relying on Italian mystique (or British in the case of Triumph) to sell a small volume of bikes, they're going to meet the big four head on by offering a better bike in the same approximate price range and going for volume as opposed to mark-up.
 

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PeterS4R said:
Ducati's been losing money for a while. But the trend is improving, and like the article said, they were predicted to break even this year. I think the 1098 indicates a change in philosophy for DMH, similar to the change that happened at Triumph. Rathering than pricing their bikes well above the those of the Japanese big four and relying on Italian mystique (or British in the case of Triumph) to sell a small volume of bikes, they're going to meet the big four head on by offering a better bike in the same approximate price range and going for volume as opposed to mark-up.
Agreed. They're moving inventory and sales have maintained [thumbsup]. Sounds like they're turning a corner. Freaking taxes ! For the company to drop from a .13 loss to less than .02 is a great stride for them. I hope they continue on the positive trend.
 

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yeah, reading between the lines, the problem is the Italian government and their tax structure. it would be in their best interest to give Ducati a break to ensure all those jobs, but who ever said Italian governments are far-sighted. hell, most only last 18 months or so anyway. and yes i'm pissed off about it, i'm Italian and love Ducati and want them to succeed. the same thing goes for Alfa Romeo, which is being sacked by the parent company Fiat. still hoping for the best for Ducati and Alfa though.

[thumbsup]
 

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This article is good and kind of funny. It sticks with the short term analysis by saying Ducati will most likely fail to break even, but then it speaks shortly about the long run while ignoring Ducatis product changes namely the 1098. Interesting............

I don't know about all this "Ducati is meeting the Japanese competitors head on" rhetoric. Ducati sbk's still sell at a bbig premium (around 30% over Japanese rivals). They have narrowed the gap from the 999 era, but it's still not meeting the Japanese head on, nor should it imo.

I'm not sure I approve of Ducati's marketing efforts. Have you seen their ads? Miserable. Sorry, but glamour shots of scrawny metro-sexual Italians doesn't make money fly out of my wallet. No offense to our Ducatisti brethern, but they need to keep Italian motorcycle culture in Italy. Lock needs to get himself a budget for NA only ads. That said, I do love the tacit marketing of the new sbk's. The new 8** will be the "baby sbk" and it will be at least as gnar as a gsxr 750 and by all accounts their is no way a 999 with more hp and reduced weight (1098) will not be miles ahead of the Japanese liter bikes.

It's like lambo in the 80's. Make people believe you have to be a hoss to ride a Ducati......narcissisim will do the rest [laugh]
 

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So if I do a sear for Ducati in a symbol look up I get the following results.

DMH - Ducati Motor Holding S.p.A. (ADR)

DMHGF - DUCATI MOTOR HOLDING SPA

What is the second one? I have not been able to figure it out?

Thanks!
 

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My in-laws get me one share a year. I get the stock certificate in the mail and hang it up. The first year has Foggy in full leathers with bike. I own 7 shares now. I see it as an investment in art, not as part of my portfolio.

Mary
 

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Discussion Starter · #14 ·
rodeoclown said:
So if I do a sear for Ducati in a symbol look up I get the following results.

DMH - Ducati Motor Holding S.p.A. (ADR)

DMHGF - DUCATI MOTOR HOLDING SPA

What is the second one? I have not been able to figure it out?

Thanks!
DMH is an ADR which is actually 10 shares of ownership per share of DMH stock.

the OTC stock is a per-share version. Ownership is the same, but your broker may have limitations or charges for non-listed stocks (i.e. OTC)
 

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Thanks for the info that helped. I figured DMH was the one to go with but just couldn't really understand why they needed two listings?

2/22 I wish I would have bought some when I first started looking! $11 today $14+ [clap] :-[

Thanks
 

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Everybody and their sister is going to be riding a 1098 in '07.
Vive Ducati!
 

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5K shares [laugh] Heck if I had enough to buy 5k I might get a Desmosedici?

Unless you are telling me I would have a 1098 in addition to having 5k shares [thumbsup]
 

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I'm not sure if anyone gives a rats rear end, but ADR's are used to list foreign stocks on American stock exchanges, it's the only way. I hate taxes but the Italian unions demand too much also. It reminds me of our airline industry. Sorry pilots if I step on your toes or hurt your ego, but when there are thousands of unemployed but capable pilots willing to work for 60k but can't because the unions have their schemes intact driving up costs so much that companies go out of business or have to be sold.
 

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The thing that worries me about DMH (besides NO net earnings) is that the volume traded is so thin. It takes only a few hundred shares to push up prices. I'd be worried about such an illiquid stock. As much as I like their products, IMHO they are a poor investment at this time unless you like to play dice in the dark.

Also, have you guys noticed that the switch gear, covers, etc. on newer Ducatis are getting more plasticky? Maybe it's me, but I hope they aren't squeezing profitability out of cheaper parts. Let them sell more shirts and $13 oil filters!!
 
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