Free Essay

Ducati

In: Business and Management

Submitted By vinsgomez
Words 5120
Pages 21
2006 - 2008 Strategic Plan Capital Increase Road Show
May 2006

Disclaimer
These materials are not intended for potential investors and do not constitute or form part of any offer to sell or issue, or invitation to purchase or subscribe for, or any solicitation or any offer to purchase or subscribe for any Ducati Securities, nor shall they form the basis of, or be relied on in connection with any contract or commitment to purchase Ducati Securities. Any recipient of this document considering a purchase of Ducati Securities in a rights issue following publication of an Italian prospectus in connection therewith is hereby reminded that any such purchase should be made solely on the basis of the information contained in such Italian prospectus. The information in these materials includes forward-looking statements, concerning in particular economic and financial trends, which have been made by the management and are based on current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions. In light of this, the events described in the forward-looking statements may not occur. These materials are not being issued in the United States of America and should not be distributed to United States persons or publications with a general circulation in the United States. These materials are not an offer to sell or issue Ducati Securities in the United States. No public offering of Ducati Securities will be made in the United States. Ducati Securities have not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be sold or issued in the United States absent registration r an exemption from registration under the Securities Act. The distribution of these materials in other jurisdictions may be restricted by law, and persons into whose possession these materials come should inform themselves about, and abide by, any such restriction.

2

Introduction

Presentation Team

Name

Position

Years with Ducati

Federico Minoli

Chairman and CEO

11

Enrico D’Onofrio

CFO

5

3

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
4

Company Overview

Ownership Structure

BI - Invest International Holdings Ltd 15,57%

BS Investimenti 6,99%

Other 52,34%

Hospitals of Ontario Pension Plan 7,43% Seragnoli Giorgio 5,02% Columbia Wanger Asset Management 6,45% Amber Capital LP 2,85% Lehman Brothers Holdings Inc 3,35%

5

Company Overview

Company Snapshot
2005 Revenues by Product
Other Accessories & Apparel 1.0% 9.1%

Founded in 1926, Ducati is today the leading European manufacturer and distributor of high-performance sport motorcycles Ducati is recognized throughout the world for its distinctive product, racing pedigree and “cool” brand Ducati sells approximately 35,000 motorcycles in 61 countries, with 4.4% worldwide market share in the sport segment of the high displacement road market

Spare Parts 12.9%

Motorcycles 77.0%

2005 Revenues by Region
Rest of the World 6.2% Italy 27.8%

Japan 8.5%

US/ Canada 18.8%

Rest of Europe 38.7%

6

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
7

Market Overview
Total 2-Wheel Market
28.5 MM units (1)

The Motorcycle Market
High Displacement Road Market
1.2 MM units (2)
Maxi scooters Touring Superbike

Ducati Relevant Market
642,000 units (2)

54
High Displacement

137
Sport

256

27,3

1,2
407

642
Naked

239 116

31 Sport
Touring

Small Displacement

Cruisers

Dual

The 28 Million unit 2-wheel market is dominated by small displacement commodity vehicles used in developing countries The 1.2 Million unit high displacement road market includes all vehicles above 400 cc registered for road usage (excluding off-road unregistered vehicles) sold primarily in developed countries. It is divided into four segments: “Sport”, Cruisers, Touring and Maxi Scooter segments The Sport segment of the high displacement road market accounts for approximately 644,000 units; it is the only market where Ducati competes (Ducati Relevant Market) and is divided in 4 sub-segments, which are: Superbike, Naked, Dual and Sport Touring
____________________

(1) Approximately, 2005 data (2) Excluding Japan

8

Market Overview
After experiencing a yearly double digit growth rate until 2001, Ducati relevant market has since leveled off Despite weak macroeconomic conditions, market volumes were slightly up since 2001 Over the past 4 years, the market has experienced a shift among different subsegments

Ducati Relevant Market – Evolution by subsegment(1)
(UNITS x 1000)
CAGR + 1.4%
633 608 575 92 93 587 96 593 111 97 116 642

CAGR 96-01

CAGR 01-05

+ 8.6%

+ 6.0%

CAGR + 13.9%
434 383 317 75 163 145 107 148 101 47 122 53 69

525 81

259 215 245

239

245

256

256 + 19.3%

- 0.3%

Dual

61

In particular, there has consistently been a decrease in Superbike segment in favor of naked motorbikes Market is expected to show modest growth going forward driven by Naked and Dual subsegments
____________________

Superbike

179

195

214

203

212

232

239 + 16.2%

+ 2.8%

Naked

Sport Touring

41

50

43

43

48

39

35

31

- 1.8%

- 7.9%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: Giral (1) JAPAN excluded

9

Market Overview

Ducati Market Share*
%

Market performance clearly divided between Japanese mass market producers and premium price Europeans Among the Japanese, Suzuki and Honda alternate as # 1 player year after year Ducati is a solid # 2 player among the Europeans after BMW with 4.4 % market share BMW has a wider product range with single, twin and four cylinder engines Harley Davidson competes in the Sport segment through Buell only

SUZUKI 19,9 18,6 14 9,1 4,4 3,2 1,5

25.0

HONDA

YAMAHA

KAWASAKI

BMW

DUCATI

TRIUMPH

BUELL

APRILIA

1,2 1,3

KTM

MV AGUSTA

0,5

______________________________

Source: GIRAL, Ducati analysis * Ducati Relevant Market is defined as Superbike, Naked, Sport Touring and Dual above 398cc bikes * 2005 Data

10

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
11

Strategic Plan

Summary of Conclusions

Ducati will return to profitability by revising its long range strategic plan in light of recent market developments and of the currently unsatisfactory results. Renewal and semplification of the product line up, focus on high margin products, reduction of fixed costs and a capital increase are the main focal points of the long range plan. Ducati’s growth phase (1996-2001) took place thanks to precise brand positioning; promotion of the unique product character; distribution through Ducati Stores; Community marketing; development of accessories and apparel; turn around of the production plant. The stabilization phase (2002-2004) was caused by external factors such as the decline of the US dollar, internal errors such as the relocation of the US subsidiary, and structural factors such as the crisis of the Customer Acquisition Model which was based on client loyalty and on gaining new clients. In particular the product showed some weakness both with the M620 entry model due to aggressive competition from the Japanese, and with premium model 999. A scorecard which summarizes Ducati’s performance between 1996 and today shows significant steps forward in the areas of Brand, distribution, marketing, racing and the factory, but a poor performance in the product area.

12

Strategic Plan

Summary of Conclusions

2005 was a year of discontinuity with a forthcoming new shareholder and a sizable capital increase making possible a change of strategy reflected already in the 2005 results.

The relaunch strategy is based on a turn around in the product area aimed at restoring the Customer Acquisition Model. Products will be focused on high margin models with significant changes in design, quality, performance and profit. Other factors (brand, distribution, marketing, Corse, and factory) although subject to continuous improvement will not be changed compared to the past.

Key factors for product relaunch are a new organization structure in the product area; a new design brief; the renewal and simplification of the product range in all families; a focus on high margin products; an improvement of quality levels.

Prerequisites for the product success are a significant investment in R&D; reduced pressure on sell in to decrease dealer stock; global sourcing; reduction of Company fixed costs.

13

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
14

Era Analysis: the growth phase
Growth Phase
1996 Units 12,639
CAGR

Key Success Factors

2001 40,016 •

Key factors Successful evolution of existing products (Monster, 916) Focused niche brand Product character Community Marketing Dedicated distribution network Related products Flexible manufacturing operation

+ 25.9%

Revenues
(€ MM)

105.3
CAGR

407.8

• • •

+ 31.1%

EBITDA
(€ MM)

11.8
CAGR

66.1



+ 41.1%

• • 6.0
CAGR

Capex
(€ MM)

29.4

+37.4%

From 1996 to 2001 Ducati underwent a successful turnaround which involved all areas of the company.
All figures based on IT GAAP 15

Era Analysis: the growth phase

Evolution of Existing Product

Monster

1993

916

1994

ST2

1997

st2

Monster S4

2001

998

2001

ST4ABS

2001

st4abs

16

Era Analysis: the growth phase
Japanese players adopt a generalist strategy competing in every segment of the market with high quality and technological products at low prices Ducati and Harley compete in specific niches where a highly characterized product can demand a premium price Both niche brands are pushing the boundaries of their original niche while remaining loyal to their respective DNA and heritage Ducati has been particularly successful expanding towards lifestyle with Monster family and towards comfort with Multistrada and Sport Touring
Function

Focused Niche Brand

Performance

Lifestyle

Comfort

17

Era Analysis: the growth phase
Five distinctive features build the unique character of Ducati’s product while providing winning performance Desmodromic distribution has been exclusive to Ducati since the 70’s with legendary high revving capabilities

Product Character

Desmodromic Distribution

L – Twin Cylinder Engine

Trellis Frame

Distinctive Design

Sound

BRAND CHARACTER AND PERFORMANCE

L-Twin engine “Pompone” and the light and flexible trellis frame give Ducati’s body a distinctive look Sexy Italian design has won Ducati more awards than any other brand Sound is the distinctive, highly recognizable voice of any Ducati motorcycle

SBK SUPERBIKE

SS

MONSTER

SPORT TOURING

MULTISTRADA

18

Era Analysis: the growth phase
Events
World Ducati Week (45,000 motorcyclists) Centopassi Speed Week Ducati Riding Experience

Community Marketing

Museum
250,000 visitors since 1998 Organizes Motogiro d’Italia vintage race

D.O.C. Desmo Owners Club
130 Ducati Clubs worldwide 45,000 members

Motorcycles Accessories Apparel

Racing
Professional racing Grass root racing

Manufacturing Plant
Plant fully open to visitors Ducatisti inside and outside meet together

Advertising
Uses Ducati employees and Club members for institutional campaigns (Ducati People)

The essence of community marketing is to devise entry doors to the Ducati world and to provide a “Ducati experience” to community members
19

Era Analysis: the growth phase
Wholesale sales to subsidiaries in Italy, US, UK, Germany, France, Japan, Benelux and Scandinavia (81% total sales) Wholesale sales to 49 importers in all other countries (19% total sales) Retail sales through independent dealers with mono or multibrand stores All product development, advertising, community marketing at central level Subsidiaries and importers focused on selling, local marketing and distribution development Central third party warehouse serves all subsidiaries and importers (except Japan) for bikes, accessories, spare parts and apparel Owned Stores
3 stores directly owned and managed by Ducati Bologna Airport Museum store Factory outlet

Dedicated Distribution Network

Wholesale

Country Subsidiaries (I, UK, D, F, USA, J, NE)

Country Importers

Retail

“Flagship” Mono Brand
150 dealerships making 60% of registrations Comprehensive retail concept supplied by Ducati Full offer of Ducati products

Multi-Brand
673 stores making 40% of registrations Traditional multibrand environment – focused on high performance racing bikes

20

Era Analysis: the growth phase

Related Product

Motorcycle Related Products % Sales on Total Sales

Within the sales of motorcycle related products, Ducati has approached in only 5 years the results achieved by Harley Davidson

23% 21% 19% 17% 15% 13% 11% 9% 7% 5% 1996 1997 1998 1999

Harley-Davidson

Ducati

2000

2001

21

Era Analysis: the growth phase
Overview Single production facility located in Bologna of 124,487 sqm Focus on engine and motorcycle assembly and testing Direct machining of two strategic components: Crankshaft Camshaft Manufacturing outsourced to a network of sophisticated third-party suppliers. Key suppliers include Brembo, Eaton and Magneti Marelli Increased purchasing power through increasing supplier concentration ~65% of cost of raw material are represented by 20 suppliers 467 direct workers fully dedicated to production Average daily production: 180 units Maximum daily production: 250 units

Flexible Manufacturing Operations
Key Production Improvements
1996 Batch & queue 2001 Lean production model in manufacturing, sourcing and logistics processes (Porsche model) Outsourcing 166 Direct material Suppliers Compliant with regulatory standards, winner of Sole 24Ore Best Factory Award

Insourcing 208 Direct material Suppliers Non compliant

22

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
23

Era Analysis: The Stabilization Phase

Key Factors

Growth Phase
1996 Units 12,639
CAGR

Stabilization - Decline
2001 40,016 2004 • 36,560 •
- 3.0%

2001 40,016 •

Key factors Successful evolution of existing products (Monster, 916) Focused niche brand Product character Community Marketing Dedicated distribution network Related products Flexible manufactur -ing operation

Key Factors Negative Forex Mismanage ment in the US Underperforming Customer Acquisition model Product discontinuity Related products growth Plant Efficiency Brand strength

+ 25.9%

Revenues
(€ MM)

105.3
CAGR

407.8



407.8

382.8



+ 31.1%

- 2.1%

• EBITDA
(€ MM)

• 66.1 39.1 •

11.8
CAGR

66.1

• •

+ 41.1%

- 16.1%

• 29.4 26.1 •

• Capex
(€ MM)

6.0
CAGR

29.4

+37.4%



- 3.9%

All figures based on IT GAAP

24

Era Analysis: The Stabilization Phase
(€ MM)

Negative Forex(1)

413,0

413,0

399,1

388,2

401,6

382,3

12,7%

13.3%

13,4%

11.6 %

10.2 %

2002
Normalized sales Normalized EBITDA Margin

2003
Actual sales Actual EBITDA Margin

2004

In 2003 and 2004 Forex penalized both revenues and EBITDA levels
____________________

(1) Revenues and costs in US$ have been converted in Euro with 2002 average exchange rate 0.9471

25

Era Analysis: The Stabilization Phase

Mismanagement in the US

US Sell-in (units)

7.619 6.801

7.000

- 39 %
5.044 5.298 4.618

2000

2001

2002

2003

2004

2005

Internal organisational mistakes caused major issues in our US operations, which after 3 years of struggling have only recently stabilized allowing growth to resume.
26

Era Analysis: The Stabilization Phase

Customer Acquisition Model

PR IU EM M

M ED IU M

EN TR

Y

SS 651 MTS 620 Monster Dark

SUPERBIKE

DUAL SPORT TOURING

NAKED

The Ducati Customer Acquisition Model developed in 1997 has deteriorated due to the impossibility to generate margin in the entry segment and the diminished rate of upgrade due to the lower appeal of premium models
27

Era Analysis: The Stabilization Phase
Monster 1993 Monster Dark Fuel injection S4 S4R

Product Discontinuity
Monster S2R 2004

Evolution

MH 900

2001 Limited edition sold on internet 2005-2006 Sport Classic

Paul Smart

2005

Evolution
916 1994 996 998 999 2004

998 Testastretta

Discontinuity

Moreover Ducati is experiencing problems with product appeal in the premium price SBK segments due to a style and discontinuity issue on the 999 – 749.
28

Era Analysis: The Stabilization Phase

Related Product

Motorcycle Related Products % Sales on Total Sales

Within the sales of motorcycle related products, Ducati has equalled in only 7 years, the results achieved by Harley Davidson

23% 21% 19% 17% 15% 13% 11% 9% 1998 1999 2000 2001 2002 2003 2004

Harley-Davidson Ducati

29

Era Analysis: The Stabilization Phase

Plant Efficiency

2000
Volumes produced Plant Efficiency(1) # Bikes Produced/# Employees(2) units # Bikes Produced/# Direct Employees Throughput time WIP stock Material stock hours days days units 39,549 N.A. 80,4 84,5 14.5 4.7 31.2

20012001
40,665 93,5% 87,1 91,8 10.5 4.1 27.9

2002
41,392 94,2% 89,0 105,6 10.3 4.0 23.1

2003
36,661 95,6% 89,5 107,2 10.2 3.0 27.4

2004
35,538 95,7% 98,2 112,8 10.0 2.9 20.3

The Lean Plant Approach generated significant improvement of efficiency ratios.

____________________

(1) Plant Efficiency equals the ratio between the total man hours spent at producing versus the total amount of hours of presence in the company (2) Nr. Bikes Produced / Nr. Employees includes all direct and indirect employees and is weighted on the same nr. of working days as of 2000

30

Era Analysis: The Stabilization Phase

Brand Building

The success of our branding and community marketing is testified by: Free product placement in blockbuster movies Request of co-marketing from successful brands Widespread usage in third parties’ advertising Usage of the brand by personalities

31

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
32

Ducati’s Score Card
CONCEPTUAL
Yesterday Product (overall)
Design Technical Performance Reliability

Today BBB+ C A+ B AAB-

Plan AAAB+ A+ B+ AAB+

AA+ A D B+ C B B+ C

Brand Distribution Marketing Racing Plant

Since acquisition Ducati has significantly improved marketing, brand, distribution network, racing and the factory but has lost its traditional strengths in the product area. To return to success it is indispensable that Ducati restores its product excellence guaranteeing continuity to elements that were successful in the past.

33

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
34

Relaunch Strategy
Growth Phase
1996 Units 12,639
CAGR

2005: Discontinuity Year
Stabilization - Decline
2001 40,016 2004 36,560 • • • Key Factors Negative Forex Mistakes in the US Customer Acquisition model Product discontinuity Related products Plant Efficiency Brand Building

Discontinuity
2005 34.500 • Key Factors Adverse Market Evolution Bike Mix deterioration Unsatisfactory performance but Debt position improved for 17M€ One-off Items (28.2M€)

2001 40,016 •

Key factors Successful evolution of existing products (Monster, 998) Focused niche brand Product character Community Marketing Dedicated distribution network Related products Flexible manufacturing operation

+ 25.9%

- 3.0%

• 320.8 •

Revenues
(€ MM)

105.8
CAGR

407.8

• • •

407.8

382.8

+ 31.0%

- 2.1%

• • 66.1 39.1 • •

EBITDA
(€ MM)

11.8
CAGR

66.1



18.6 (*)



+ 41.1%

- 16.1%

• Invest
(€ MM)

6.0
CAGR

29.4



29.4

26.1

31.0

+37.4%

- 3.9%

The arrival of a new controlling shareholder and of a sizeable capital increase create the financial and political opportunity to build a discontinuity and adjust Ducati strategy.
All figures based on IT GAAP except for 2005 IFRS (*) Adjusted for one-off restructuring accrual reserve, inventory devaluation and write off penalties 35

2005 Discontinuity

Market Evolution
(‘000 units)
Δ 2005/2004 High Low Total Price* Price*
575 525 608 587 593 633 642

-1% -11% 0%

6% n.a. n.a.

1% -11% 0%

383 300 Sport Touring Superbike Naked Dual 317

434

-3% 3%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

6% 6%

3% 5%

The Ducati relevant market (particularly in Italy) is stable but is polarizing towards the low end naked segment.

* High price: € 10,000 +; Low price: €6500-€7500

36

2005 Discontinuity

Bike mix

100%=34,536
High Margin (999) Average Margin (MTS1000, SS/ST, 749, S4R, Classics)

100%=36,560 15%

10% 42%

48%

Low Margin (MTS620, S2R, M620)

48%

37%

2005

2004

The overall result of the product problems has been a decrease in sales and a shift towards a low product mix.
37

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
38

Relaunch Strategy

Strategic Direction

KEEP

CHANGE

• Brand • Dealer Network • Marketing • Racing • Factory

• Product: - design - reliability - performance - range - profitability • Fixed cost base

Build on existing strengths

Shift approach to product and fixed costs
39

Relaunch Strategy

New R&D Structure

PRODUCT DIRECTOR (C.Domenicali)

R&D PLANNING AND CONTROL (F.Strano)

DESIGN COORDINATOR (A. Ferraresi)

PRODUCT MARKETING DIRECTOR (L.Taxis)

ENGINE DEVELOPMENT DIRECTOR (G.Mengoli)

VEHICLE DEVELOPMENT DIRECTOR (A.Forni)

ELECTRONIC SYSTEMS DIRECTOR (E.Borsetto )

R&D SERVICES (A.Volpini )

DESIGN

QUALITY DIRECTOR (C. Salomoni)

The CEO of Ducati Corse (Claudio Domenicali) has been appointed as R&D director to accelerate the transfer of technology from race bikes to production bikes.
40

Relaunch Strategy

New Customer Acquisition Model

M ED IU M

PR IU EM M

Short term: Medium term:

Long term:
EN TR

Sport Classic (GT) Monster S4RS Hypermotard (2007) Desmo 16 (2007) New Model (2007) 2 New Models

Y

Short term Medium term
Monster Dark

Monster 695 New Model (2008)

SUPERBIKE

DUAL SPORT TOURING

NAKED

The Customer Acquisition Model will be revised to allow only one entry door, and more premium models.
41

Relaunch Strategy

Product Range Plan

2005 no. Families no. Models no. Entry models % sales low end 6 24 7 48%

2008 4 12 1 24%

The product development plan is focused on high end models and on reducing the complexity of the medium and low-end models.
42

Relaunch Strategy

New Design Brief

“Reduce to the Max”
Authentic (only true racing features are present) New Ducatis should be Essential (anything without a direct functional purpose is banned) Small (dimensionally and visually) Sexy, attractive Sporty

43

Relaunch Strategy

New Design Brief

44

Relaunch Strategy
1 2 3 4

Quality

999

Zero Series 100% Parts from Production tool

Sport Classic

1

2

3

1

1

1

2

2

2

Pre-Series Prototype Track day

Start of Production High Speed Test Road Test

Pre-Series 100% Parts from production tool

Road Test 10.000 Km

5 Months

2 Months

New product introductions (starting with Sport Classic family) are expected to deliver better reliability thanks to the overarching changes in the development and testing processes implemented in 2005.
45

Relaunch Strategy

Conditions for Success

Product-focused investment New Product Strategy Global sourcing Reduction of structural costs Reduction of dealer stock

In order to transform product renewal into commercial and economic success there are several basic conditions that need to be fulfilled, all of which have been incorporated into the industrial plan.
46

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° °

RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
47

Restructuring Plan

Sell in / Sell out
(Volumes /000)

34.5 34.6

2005A

2006E Sell In

2007E Sell Out

2008E

Sell-out (registrations) during 2006-2008 will be stable and around 2005 levels. Sell-in (shipments) will be in line with registrations in 2008 whilst they will lag behind registrations in 2006 and 2007 to favour the reduction of stock at dealer level.

Please note that the diagrams and charts contained in the slide are intended exclusively to indicate the expected trend and should not be considered as accurate information in quantitative terms.

48

Restructuring Plan

Bikes - Sales Breakdown by Margin

€ 247 MM

2005A
Low Margin High/Medium Margin

2008E

Strong focus on high margin motorbikes will turn into a more favourable revenue mix in the future.

Please note that the diagrams and charts contained in the slide are intended exclusively to indicate the expected trend and should not be considered as accurate information in quantitative terms.

49

Restructuring Plan

Overall Sales

€ 321 MM

Sales '05

Volume effect

Product Mix

Sales '08

Bikes

“Others”

A modest sales growth path is expected in the period, especially after 2007, mainly driven by an expected higher average selling price given a more favourable product mix

Please note that the diagrams and charts contained in the slide are intended exclusively to indicate the expected trend and should not be considered as accurate information in quantitative terms.

50

Restructuring Plan

EBITDA Evolution
14%

5.8%

EBITDA 2005 Reconciliation
EBITDA 2005A Restructuring Reserve Devaluation of Inventory Penalties EBITDA Adj* EBITDA Adj* Margin% (0,3) 13,0 5,0 0,9 18,6 5,8%
5.8%
Ebitda Adj. '05* Sales Effect Global Sourcing Structural Costs Ebitda '08

14% 12% 10%

2005

2006

2007

2008

A better revenue mix and the implementation of efficiency measures - expected savings on both structural costs and on the components purchasing process - will progressively enhance Ebitda levels
Please note that the diagrams and charts contained in the slide are intended exclusively to indicate the expected trend and should not be considered as accurate information in quantitative terms.

51

Restructuring Plan

Net Result
(% on Sales)

Net Profit

2005A

2006E

2007E

2008E

(41.5) (13%)
Net Profit % on Sales

Net result will still be negative in 2006, will virtually break even in 2007 and will be positive in 2008.

Please note that the diagrams and charts contained in the slide are intended exclusively to indicate the expected trend and should not be considered as accurate information in quantitative terms.

52

Restructuring Plan

Net Debt

€ 137 MM

1

NFP '05

Capex

Others

Ebitda

Capital Increase

NFP '08

Net financial position will improve thanks to Capital increase and EBITDA generation, partly offset by CAPEX and other negative cash items (restructuring costs, working capital, tax, interest). As for financing capacity, Ducati will have available credit lines for about €220 million guaranteed for 5 years.
Please note that the diagrams and charts contained in the slide are intended exclusively to indicate the expected trend and should not be considered as accurate information in quantitative terms.

53

Restructuring Plan

Summary

To summarise, Ducati will return to profit and cash generation by revising its strategic plan by:

Focusing on high margin products Reducing fixed costs

The capital increase of €80M will fund R&D investments, restructuring costs, and will strengthen the financial structure of the Company.
54

AGENDA
SECTION 1: INTRODUCTION Company Overview Market Overview SECTION 2: STRATEGIC PLAN SUMMARY OF CONCLUSIONS “ERA ANALYSIS” - The Growth Phase 1996 -2001 - The Stabilization Phase 2001 – 2004 THE DUCATI SCORECARD TODAY RELAUNCH STRATEGY - 2005 Discontinuity - Relaunch Strategy ° ° ° ° ° ° RESTRUCTURING PLAN SECTION 3: OFFER STRUCTURE
55

Offer Structure

Structure of the Rights Issue

Issuer

Ducati Motor Holding SpA

Shares offered

1 newly issued ordinary share offered every 1 Ducati ordinary share

Amount

Approx. € 80 mln of which: € 24 mln underwritten by WM, WM II and WM III(*) (corresponding to approx. 29.9%) The remaining part of the rights issued will be underwritten by a syndicate of banks

Issue price

€ 0.4985 per share

Lead Manager

UniCredit Banca Mobiliare

(*) Controlled by Bi-Invest International Holdings Ltd, BS Investimenti SGR and HOOPP (Hospital of Ontario Pension Plan), respectively

56

Offer Structure

Timetable

The exercise period would last 3 weeks starting from 8 May 2006, with a 2 weeks trading period for the rights Unexercised rights would be offered through a 5 days auction pursuant to article 2441, section 3 of the Civil Code

8 May

Start of the exercise period and of the trading period for the rights

19 May

Last day of trading for the rights

26 May

End of the exercise period

June

Auction of the unexercised rights

57

APPENDIX

58

Company Overview

Organizational Structure

Chairman and CEO Federico Minoli

Enrico d’Onofrio

CFO

Human Resources

Danilo Bernardini

Annalisa Dimonte Patrizia Cianetti

Community

Quality

Carlo Salomoni

Sales

R&D and Product Development Claudio Domenicali

Operations

Cristiano Silei

Gianfranco Giorgini

59

Company Overview

Company Structure

Ducati Motor Holding S.p.A.

100% Ducati UK Ltd (UK) 100% Ducati North America Inc. (US) 100% Ducati France s.a.s. (France) 100% Ducati Motor Deutschland GmbH (Germany) 100% Ducati North Europe B.V. (Belgium) 100% Ducati Japan K.K. (Japan) Ducati Corse S.r.l. (Italy) Ducati Retail S.r.l. (Italy)

99%

100%

85% Ducati Consulting S.r.l. (Italy)

60

Company Overview

Company Snapshot

2005 Employees by Function
Community/ Quality PR 3% 3% Manufacturing 52%

One 124,487 sqm centralized production plant in Bologna 1,134 employees at 31 December 2005

Finance, IT, HR Services 6% Commercial (incl. After Sales) 10%

Ducati Corse 10%

R&D 16%

61

Market Overview
Ducati Relevant Market

Market Segments

Superbike Superbike/Supersport derive from motorcycles competing in the speed race tracks

Naked Essential bikes without any fairing

Sport Touring The combination of sporty and touring functionalities

Dual Multi-purpose sportsbike offering road performance with off-road inspired look

Cruiser Classically styled in the American tradition, visual performance priority

Touring Touring bikes are high wind protection and comfortable bikes with all the functionalities for long range trips

62

2005 Discontinuity

2005 Results

2005
Registrations Shipments Production Average price Revenues Operating Results One-off items Interest and taxes Net Result Net Debt Net Debt/Equity (units) (units) (units) (Euro) (M€) (M€) (M€) (M€) (M€) (M€) 34,631 34,536 33,581 7,699 320.8 (2.8) (30.8) (7.9) (41.5) 137 1.15

2004
35,887 36,560 35,538 8,265 363.4 9.1 (12.6) (3.5) 154 1.00

Difference

(1,256) (2,024) (1,957) (0,566) (42.6) (11.9) (30.8) 4.7 (38.0) (17)

63

2005 Discontinuity

One-off items

Net Result 2005 Reconciliation (41,5) 13,0 9,3 5,0 0,9 (13,3)

Loss 2005A Restructuring Reserve Devaluation of discontinued R&D projects Devaluation of Inventory Penalty for orders cancelled to suppliers Loss 2005 Adjusted

2005 Net Result reflects one-off adjustments related to Relaunch Strategy.
64

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