In spite of the rough situation in the international ski market, Elan has budgeted a small increase of 3.5 percent in alpine ski production to 640,000 pairs in 2007. This is almost entirely attributed to higher OEM orders by Rossignol, which is shutting down one of its French production plants, while business with other partners is going to be flat. Orders for alpine skis under the Elan brand haven’t been as badly hit as those of other brands, but their sales should still decline at low double-digit rates for the year.

The market’s downturn comes after several years of restructuring for the Slovenian company, which has spun off many activities and focused investments on its ski, marine and sports facilities units. The group reached sales of about €117.5 million in 2006, up by 13.1 percent. The marine division boasted the fastest expansion, with sales up by 20 percent to €42.7 million, while winter sports sales increased by 8.7 percent to €74.3 million.

The Elan brand saw its sales rise by 4.3 percent in volume to 318,000 pairs of alpine skis in 2006, but the increase was larger in euros due to a continued increase in average selling prices. Elan’s best-selling model was the Black Magic, retailing at about €350 per pair, and the award-winning Waveflex technology further lifted the overall price mix.

Hefty marketing investments in Germanic countries inflated Elan’s sales by 20 percent in Austria and by 7 percent in Germany. The brand also continues to ride high in several Eastern European countries, with a market share of about 20 percent in the Czech Republic and even more than 30 percent in Poland, where sales of skis otherwise suffered a particularly harsh battering last winter.

As for snowboard production, taking place across the border in Fürnitz, Austria, it jumped by 32 percent in 2006 to 341,600 boards, giving Elan an estimated global market share of 24 percent in the production of branded snowboards. However, that figure is expected to decline to about 300,000 boards in 2007, although Elan didn’t lose any customers.

Owing to the higher average selling prices, the Elan brand alone attained a gross margin of 46 percent. The operating margin for the whole winter sports division climbed to 3.4 percent of sales in 2006, up from 2.5 percent, in spite of a 35 percent rise in marketing investments for the Elan brand in Germanic countries.

Still, one-off costs for Elan’s U.S. operations reduced the group’s net profit to about €1.4 million in 2006, down from €3.9 million. These extraordinary charges related to the closure of Elan’s own office in the USA, after it terminated a distribution agreement with Dolomite and opted instead for a joint venture with Dalbello. The move cost about €800,000 but it immediately led to an increase of about 60 percent in U.S. orders of Elan skis in 2007.

Net profit is again expected to be squeezed in 2007 by substantial investments in Elan’s ski production facility. To cope with the growth of the last years, the capacity of the plant in Begunje was raised from 600,000 to 900,000 pairs. Although the investments were initiated in November 2006, charges of about €6 million will be spread over the next years, paired with another investment of €4.2 million for the expansion of the marine production plant.

There has been some speculation about the future ownership of the company since several large shareholders publicized their intention to sell. For the time being, five state-related financial institutions hold nearly 83 percent of Elan’s shares, while the remaining 16.8 percent are in the hands of a listed private equity firm. However, shareholders representing 41 percent of the capital have announced that they wanted to divest by the end of 2008. Any takeover by a competitor would be complicated by on-going uncertainty about the ownership of the land on which the company’s Slovenian office and plant are located.

In the meantime, Elan has been hit by the departure of Martin Lehner, a member of its board and vice president of sales and marketing, who unexpectedly left the company in July. In his 10 years at Elan, Lehner has paid a strong contribution to its structural improvements. The management team is now headed by Matjaz Sarabon, Elan’s chief executive, and by Matjaz Grm, executive sales director. The company is considering different options to cover Lehner’s former position.