Refinitiv Newscasts - Breakingviews TV: Bike blues

Shimano

19/05/2021 12:50

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Source: Reuters

Description: Japanese parts-maker Shimano is riding high on pandemic-related
pedal-power demand, yet supply-starved retailers are frustrated it won’t
crank up capacity further. The $20 bln family-run firm risks losing market
share if it doesn’t hit a higher gear, says Jennifer Hughes.
Short Link: https://refini.tv/3eWyv8i

Video Transcript:

Being in high demand isn't always easy. Japanese bike parts giant Shimano is
enjoying a surge in cycling interest and its factories are hitting their top
gear. However, its wariness to invest in big new capacity is also frustrating
the industry. Retail inventories around the world has shrunk dramatically and
wait times for some bike components have blown out almost a year. Now, Shimano
celebrated its centenary in March with blockbuster first quarter numbers.
Fishing gear still makes up a fifth of its business. But it was a
three-quarter jump in its bike unit sales that really drove overall operating
profiting up 157%. The company has net cash of $2.8 billion. Now, that's
enough to cover its last 10 years of capital spend with some to spare, so
funding isn't an issue here. Reluctance is more likely linked to its
experience of past booms and busts in cycling. There's also the fact that it
would take two years before new facilities came online, meaning the current
demand could have passed by then. But industry insiders believe the people
will stick with habits formed during lockdowns, especially those who keep
working from home. They point to government's interest in improving health and
easing city congestion. Shimano's brand and its estimated two thirds share of
the mid to high-end market give it some protection, although it does have
fierce competitors like Campagnolo from Italy and American company SRAM.
Investors appear worried however- Shimano now trades on 27X its expected
earnings. That's down from a decade high of 38X, just four months back. If it
doesn't find a higher gear, it could lose speed quickly