Harley-Davidson expects to incur about $45 million to $55 million in increased costs this year because of the ongoing global trade conflict.
The company projects that steel and aluminum tariffs will add between $15 million and $20 million to its costs and European tariffs an additional $30 million to $35 million, CFO John Olin said during the motorcycle manufacturer’s second-quarter earnings conference call.
If Harley-Davidson is unable to mitigate the impact of the tariffs by 2019, Olin said the annual impact would be $90 million to $100 million, representing the majority of its profit in the EU market.
Last month, the company entered the front line of the trade war when it announced plans to move production for European markets overseas to avoid European Union tariffs that increased to 31 percent from 6 percent. The company still has not determined which one of its overseas facilities will manufacture its European bikes.
“We made the best decision given the circumstances, the best decision for our customers, business and dealers in this critical market,” CEO Matt Levatich said during the call.
Harley-Davidson said it is working with all of the governments it can, including the Trump administration, to have the tariffs removed.
The company’s stock surged as much as 9 percent Tuesday, boosted by a better-than-expected earnings report.
Net income in the latest quarter fell to $242.3 million, or $1.45 per share, from $258.9 million, or $1.48 per share, a year ago. Excluding manufacturing optimization costs, Harley said it earned $1.52 per share.
According to Thomson Reuters consensus estimates, Harley was expected to earn $1.34 per share.
Its top-line results for the quarter also beat analyst estimates but were down from the year-ago period. Harley-Davidson reported $1.53 billion in revenue, outpacing analyst estimates of $1.41 billion.
Shipments during the quarter dropped by 11.3 percent, but the company still expects to ship 231,000 to 236,000 bikes in 2018. Revenue from motorcycles fell 3.3 percent from the same quarter a year ago.
Harley-Davidson said its international retail motorcycle sales rose 0.7 percent in the second quarter from a year earlier, but its U.S. retail sales were down 6.4 percent.
On July 30, the company will announce an accelerated strategy that will address how it plans to increase ridership and deliver growth. The strategy will include new products, improvements to its dealer network and broader access to its merchandise.
Originally published at CNBC