2010-10-21 08:00:00 CEST
2010-10-21 08:00:32 CEST
REGULATED INFORMATION
Rapala VMC - Interim report (Q1 and Q3)
INTERIM REPORT FOR JANUARY TO SEPTEMBER 2010: RECORD SALES AND MARGIN IMPROVEMENT CONTINUED
Rapala VMC Corporation
Stock Exchange Release
October 21, 2010 at 9.00 p.m.
* Net sales for the third quarter increased 21% compared to last year, again
to a quarterly record level, now at 60.6 MEUR (III/09: 50.2 MEUR). The nine-
month net sales were 209.0 MEUR (I-III/09: 183.1 MEUR), 14% increase from
last year.
* Comparable operating profit improved from last year and reached 3.1 MEUR
(2.1 MEUR) in third quarter and 27.5 MEUR (22.4 MEUR) in January to
September. Comparable operating margin continued to improve from last year
and was 5.1% (4.1%) for the third quarter and 13.2% (12.2%) for the nine
months. Reported operating profit was up to 2.9 MEUR (1.9 MEUR) for the
quarter and 27.1 MEUR (21.4 MEUR) for the nine months.
* Net profit was down to 1.4 MEUR (1.5 MEUR) for July to September, due to
negative foreign exchange impacts, and 18.9 MEUR (15.1 MEUR) for the nine-
month period. Earnings per share was down to 0.01 EUR (0.02 EUR) for the
third quarter and was 0.42 EUR (0.33 EUR) for the nine-month period, due to
increased equity attribution to non-controlling interests.
* Cash flow from operating activities in the third quarter dropped from
last year's record highs to 7.0 MEUR (20.6 MEUR) and was 15.2 MEUR (18.6
MEUR) for the nine-month period, while focus on working capital management
has gradually also turned into securing the service levels to the customers
and exploiting the sales opportunities.
* Group's strategy implementation was supported by acquisition of Dynamite
Baits Ltd, a UK-based premium carp bait manufacturer and distributor.
Implementation continues by emphasizing sales, delivery and supply chain
performance, innovations and development of new products, while
simultaneously rigorously managing the working capital, cash flow and
profitability.
* It is expected that for the full year 2010 the net sales will increase
10-15% and comparable operating margin will be in double digits.
The attachment presents the interim review by the Board of Directors as well as
the accounts.
A conference call on third quarter result will be arranged today at 4 p.m.
Finnish time (3 p.m. CET). Please dial +44 (0)20 3147 4971 or +1 212 444 0889 or
+358 (0)9 2310 1667 (pin code: 967176#) five minutes before the beginning of the
event and request to be connected to Rapala teleconference. A replay facility
will be available for 14 days following the teleconference. The number to dial
is +44 (0)20 7111 1244 (pin code: 967176#). Financial information and
teleconference replay facility are available at www.rapala.com.
For further information, please contact:
Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540
Jouni Grönroos, Chief Financial Officer (until October
30, 2010), +358 9 7562 540
Jussi Ristimäki, Chief Financial Officer (from November
1, 2010), +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
Distribution: NASDAQ OMX Helsinki and Main Media
Market Situation and Sales
The healthy growth of Group's sales continued in the third quarter, despite
continuing uncertainties in the development trend of the economies globally and
some unfavorable fishing weathers in some regions. This growth was supported by
the increased sales in East Europe, where the growth rates remain strong. In
Nordic countries, sales growth was good in Finland and Denmark. Situation was
stable in West Europe as well as in North America, where strengthening of US
Dollar (USD) further supported the sales growth. In some of the Far East Asian
countries the market conditions were more difficult, but the sales were
supported by the strengthening of local currencies. The newly acquired and
established subsidiaries contributed to the sales growth to some extent.
Net sales for the third quarter increased 21% compared to last year and for the
third time this year reached a quarterly record level, now at 60.6 MEUR (50.2
MEUR). The nine-month net sales were 209.0 MEUR (183.1 MEUR), 14% increase from
last year.
In the end of September, USD was 7% stronger against euro than one year before,
while also the average for the first nine months was 4% stronger, giving
positive impact on the US sales. Also most of the other currencies strengthened
against euro compared to the year before, giving a positive impact especially on
sales in Russia, Canada, Scandinavia, Australia and South Africa. The net effect
of the currency movements increased the third quarter net sales by 4.7 MEUR and
nine-month sales by 12.9 MEUR. With comparable exchange rates, net sales
increased 11% for the quarter and 7% for the nine months.
Following the increase in sales of Lures, Fishing Lines and Fishing Accessories,
net sales of Group Fishing Products were up 19% for the quarter and 10% for the
nine-month period. Net sales of Other Group Products increased 81% for July to
September and 29% for January to September as a result of strong sales
performance in winter sports equipment and gift products during the third
quarter. Net sales of Third Party Products were up 14% for the quarter and 18%
for the nine-month period as sales of all product lines increased from last
year.
In North America, despite some slowness in general retail sales caused by
increased unemployment and financial insecurity, the net sales increased in
local currency and were further supported by strengthening of the USD,
increasing net sales by 25% for July to September and 8% for January to
September. In the Nordic countries, as a result of strong sales of winter sports
equipment in Finland, increased internal sales to other geographical areas,
especially to East Europe, and strengthening of Swedish and Norwegian crowns,
the net sales increased 30% for the quarter and 8% for the first nine months of
the year. Net sales in Rest of Europe were up 16% for the quarter and 18% for
the first nine months due to continuing strong customer demand and strengthening
of currencies in East Europe, the stabilized conditions in most West European
markets as well as the acquisition and establishment of new subsidiaries. Net
sales in Rest of the world increased 55% for the quarter and 32% for the first
nine months as a result of increased sales of gift products, increased internal
sales from Chinese manufacturing and sourcing units to Group's distribution
companies and strengthening of currencies.
Financial Results and Profitability
Comparable operating profit, excluding non-recurring items, improved clearly
from last year and reached 3.1 MEUR (2.1 MEUR) in July to September and 27.5
MEUR (22.4 MEUR) in January to September. Comparable operating margin continued
to improve from last year and amounted to 5.1% (4.1%) for the third quarter and
13.2% (12.2%) for the nine months. This improvement came mainly from increased
sales, improvement in gross margin, release of cost provisions and strengthening
of several currencies, although in third quarter the net currency impact on
profitability was almost neutral.
Reported operating profit was up to 2.9 MEUR (1.9 MEUR) for the quarter and
27.1 MEUR (21.4 MEUR) for the nine months. Reported operating profit included
non-recurring business acquisition and restructuring costs of 0.2 MEUR for July
to September and 0.4 MEUR for January to September (1.0 MEUR non-recurring costs
in 2009 related mainly to impairment of tangible assets in China). Reported
operating margin improved to 4.8% (3.8%) for the quarter and 13.0% (11.7%) for
the nine months. Return on capital employed improved to 5.7% (4.0%) for July to
September and 17.9% (14.7%) for January to September.
+--------------------------+----+----+-----+-----+-----+
|Key figures | III| III|I-III|I-III| I-IV|
+--------------------------+----+----+-----+-----+-----+
|MEUR |2010|2009| 2010| 2009| 2009|
+--------------------------+----+----+-----+-----+-----+
|Net sales |60.6|50.2|209.0|183.1|234.6|
+--------------------------+----+----+-----+-----+-----+
|EBITDA as reported | 4.5| 3.3| 31.7| 26.4| 28.9|
+--------------------------+----+----+-----+-----+-----+
|EBITDA excl. one-off items| 4.6| 3.5| 32.1| 26.7| 29.2|
+--------------------------+----+----+-----+-----+-----+
|Operating profit (EBIT) | 2.9| 1.9| 27.1| 21.4| 22.1|
+--------------------------+----+----+-----+-----+-----+
|EBIT excl. one-off items | 3.1| 2.1| 27.5| 22.4| 23.5|
+--------------------------+----+----+-----+-----+-----+
As a result of improved profitability in Lures and Fishing Lines, operating
profit of Group Fishing Products over doubled in the third quarter and was 23%
higher for the nine-month period. Operating profit of Other Group Products was
significantly higher for July to September and for the nine-month period,
especially due to increased profits from winter sports equipment and gift
products. Due to reduced profits from third party hunting, outdoor and winter
sports products, operating profit of Third Party Products decreased 21% for July
to September, but is still up 14% for January to September.
Financial (net) expenses were 1.2 MEUR (gain 0.1 MEUR) for the third quarter,
including net interest expenses of 0.7 MEUR (0.8 MEUR) and (net) currency
exchange losses of 0.4 MEUR (gain 0.9 MEUR), which were mostly unrealized. For
the first nine months, financial (net) expenses were 1.1 MEUR (1.0 MEUR),
including net interest expenses of 2.4 MEUR (2.7 MEUR) and (net) currency
exchange gains of 1.4 (1.7 MEUR).
Due to increased financial (net) expenses, net profit for July to September
decreased 7% and was 1.4 MEUR (1.5 MEUR). Net profit for January to September
was 25% higher than last year at 18.9 MEUR (15.1 MEUR). Earnings per share were
0.01 EUR (0.02 EUR) for the third quarter and 0.42 EUR (0.33 EUR) for the nine-
month period.
Cash Flow and Financial Position
Following the strong working capital management actions executed in past two
years, the focus on working capital management has gradually also turned into
securing the service levels to customers and exploiting the sales opportunities.
This together with acquisition and establishment of new subsidiaries, the
ongoing change of production planning system in China and the strengthening of
most currencies against euro resulted in inventories to increase 10.4 MEUR from
last September.
Due to smaller than last year quarterly reduction in inventories and non-
interest bearing current assets, the cash flow from operating activities in the
third quarter dropped from last year's record highs to 7.0 MEUR (20.6 MEUR) and
was 15.2 MEUR (18.6 MEUR) for the nine-month period. Net change in working
capital was 5.0 MEUR (19.7 MEUR) for July to September and -7.8 MEUR (-2.6 MEUR)
for January to September.
Net cash used in investing activities for the third quarter amounted to 7.2 MEUR
(1.3 MEUR). In addition to the normal capital expenditure of 1.1 MEUR (1.7
MEUR), the main item was the acquisition of Dynamite Baits Ltd ("Dynamite") with
an effect of 6.0 MEUR, of which 1.3 MEUR relates to an escrow account deposit.
Cash used in investing activities for the nine-month period amounted to 11.6
MEUR (3.7 MEUR).
Net interest-bearing debt was 87.9 MEUR, 4.6 MEUR higher than September 2009 and
8.5 MEUR higher than December 2009. The liquidity of the Group remained good.
Equity-to-assets ratio improved slightly from September 2009 to 41.9% but
weakened from December (September 2009: 41.4% and Dec 2009: 42.8%). Gearing
improved from both September and December 2009 and reached 70.4% (September
2009: 75.2% and Dec 2009: 71.1%).
Strategy Implementation
During the third quarter the Group continued the implementation of its strategy
of profitable growth by acquiring 100% of the share capital of Dynamite, a
manufacturer of premium carp baits, having its manufacturing facilities and
offices in Nottingham, United Kingdom. In 2009, the net sales of Dynamite were
some 7.9 MEUR of which some 20% was outside the UK. It is a market leader in UK
and has a good market share in a few other European countries. Group aims to
significantly expand its sales to carp fishermen in the next few years by more
than doubling Dynamite's 2009 sales.
Acquisition of Dynamite makes Rapala a strong player in the European carp
fishing market, the fastest growing market in fishing throughout the Europe.
Acquisition also contributes to the Group's brand strategy and portfolio and
leverages Rapala's unique sourcing and distribution platforms. Following the
acquisition the UK distribution of Rapala's other products can be combined into
the Dynamite's efficient UK distribution system.
Implementation of the Group's strategy also continued by further developing the
new distribution units as well as investigating new distribution possibilities
especially in the Rest of the world. Also implementation of performance
improvement initiatives continued.
Working capital and cash flow management were still one of the top priorities
for the Group, but following the positive results in this field in the past 18
months, the focus on inventory management has also turned into securing the
service levels to the customers and exploiting the sales opportunities. Work to
develop the Group's supply chain, including among others changes in production
planning and development of systems for purchasing and inventory management,
progressed and will continue throughout 2010 and further to 2011 with target to
ensure good services levels to customers without excess inventory levels.
Also development of organic growth in terms of extensions of current product
categories continued. New products for the season 2011 were introduced to the
market in summer and for example the Group's new innovative Sufix 832 fishing
line, featuring Gore fibers, has been received exceptionally well in all world
markets.
Several discussions and negotiations regarding acquisitions and business
combinations continued during the quarter.
Short-term Outlook
Despite the continuing uncertainties on the development trend and pace of the
global economies, Group's business has developed well this year and the view on
the general market situation continues to be optimistic, while still cautious.
In East Europe, the market has continued to grow strongly. In most West European
markets, the situation has stabilized, whereas in Asia there is more
uncertainty. In Nordic markets, the beginning of coming winter season is
supported with good preorders of winter sports equipment, while the success will
partly depend on the weathers. In North America, the retail business is
generally slow due to the economic uncertainties, but Group's business is
growing modestly. Customers continue to be cautious of the market development
and their inventories and, accordingly, there is some uncertainties concerning
the timing of the year-end shipments. Group is prepared to provide improved
service level to the customers and this has influenced the prioritization in the
working capital management initiatives.
At the end of September 2010, the Group's order backlog was up 50% from last
September at 40.9 MEUR (27.3 MEUR). This increase comes from all geographical
areas, with main contribution from Nordic countries and the USA.
It is expected that for the full year 2010 the net sales will increase 10-15%
and comparable operating margin will be in double digits.
Group continues to implement its strategy for profitable growth, emphasizing
sales, delivery and supply chain performance, innovations and development of new
products, while simultaneously firmly driving down the working capital and
rigorously managing the cash flow and profitability.
Fourth quarter interim report and annual accounts 2010 will be published on
February 10, 2011.
Helsinki, October 21, 2010
Board of Directors of Rapala VMC Corporation
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
+-----------------------------------------------+----+----+-----+-----+-----+
|STATEMENT OF INCOME | III| III|I-III|I-III| I-IV|
+-----------------------------------------------+----+----+-----+-----+-----+
|MEUR |2010|2009| 2010| 2009| 2009|
+-----------------------------------------------+----+----+-----+-----+-----+
|Net sales |60.6|50.2|209.0|183.1|234.6|
+-----------------------------------------------+----+----+-----+-----+-----+
|Other operating income | 0.2| 0.2| 0.4| 0.6| 1.2|
+-----------------------------------------------+----+----+-----+-----+-----+
|Materials and services |28.7|24.7| 96.4| 84.4|108.4|
+-----------------------------------------------+----+----+-----+-----+-----+
|Personnel expenses |14.1|12.5| 43.2| 39.6| 53.8|
+-----------------------------------------------+----+----+-----+-----+-----+
|Other costs and expenses |13.5| 9.9| 38.0| 33.3| 44.7|
+-----------------------------------------------+----+----+-----+-----+-----+
|EBITDA | 4.5| 3.3| 31.7| 26.4| 28.9|
+-----------------------------------------------+----+----+-----+-----+-----+
|Depreciation and amortization | 1.6| 1.4| 4.6| 5.0| 6.9|
+-----------------------------------------------+----+----+-----+-----+-----+
|Operating profit (EBIT) | 2.9| 1.9| 27.1| 21.4| 22.1|
+-----------------------------------------------+----+----+-----+-----+-----+
|Financial income and expenses | 1.2|-0.1| 1.1| 1.0| 2.1|
+-----------------------------------------------+----+----+-----+-----+-----+
|Share of results in associated companies | 0.0| 0.0| 0.0| 0.0| 0.0|
+-----------------------------------------------+----+----+-----+-----+-----+
|Profit before taxes | 1.7| 2.1| 26.0| 20.3| 19.9|
+-----------------------------------------------+----+----+-----+-----+-----+
|Income taxes | 0.3| 0.6| 7.0| 5.3| 5.7|
+-----------------------------------------------+----+----+-----+-----+-----+
|Net profit for the period | 1.4| 1.5| 18.9| 15.1| 14.3|
+-----------------------------------------------+----+----+-----+-----+-----+
| | | | | | |
+-----------------------------------------------+----+----+-----+-----+-----+
|Attributable to: | | | | | |
+-----------------------------------------------+----+----+-----+-----+-----+
|Equity holders of the Company | 0.5| 0.8| 16.3| 13.0| 12.1|
+-----------------------------------------------+----+----+-----+-----+-----+
|Non-controlling interests | 0.9| 0.6| 2.6| 2.1| 2.2|
+-----------------------------------------------+----+----+-----+-----+-----+
| | | | | | |
+-----------------------------------------------+----+----+-----+-----+-----+
|Earnings per share for profit attributable | | | | | |
+-----------------------------------------------+----+----+-----+-----+-----+
|to the equity holders of the Company: | | | | | |
+-----------------------------------------------+----+----+-----+-----+-----+
|Earnings per share, EUR (diluted = non-diluted)|0.01|0.02| 0.42| 0.33| 0.31|
+-----------------------------------------------+----+----+-----+-----+-----+
+---------------------------------------------+----+----+-----+-----+----+
|STATEMENT OF COMPREHENSIVE INCOME | III| III|I-III|I-III|I-IV|
+---------------------------------------------+----+----+-----+-----+----+
|MEUR |2010|2009| 2010| 2009|2009|
+---------------------------------------------+----+----+-----+-----+----+
|Net profit for the period | 1.4| 1.5| 18.9| 15.1|14.3|
+---------------------------------------------+----+----+-----+-----+----+
|Other comprehensive income, net of tax | | | | | |
+---------------------------------------------+----+----+-----+-----+----+
|Change in translation differences |-6.5|-0.3| 5.1| 0.0| 1.5|
+---------------------------------------------+----+----+-----+-----+----+
|Gains and losses on cash flow hedges | 0.0|-0.6| -1.5| -0.2|-0.1|
+---------------------------------------------+----+----+-----+-----+----+
|Gains and losses on hedges of net investments| 1.3| 0.0| -0.9| 0.1| 0.2|
+---------------------------------------------+----+----+-----+-----+----+
|Total other comprehensive income, net of tax |-5.1|-0.9| 2.7| -0.1| 1.6|
+---------------------------------------------+----+----+-----+-----+----+
|Total comprehensive income for the period |-3.7| 0.6| 21.6| 14.9|15.9|
+---------------------------------------------+----+----+-----+-----+----+
| | | | | | |
+---------------------------------------------+----+----+-----+-----+----+
|Total comprehensive income attributable to: | | | | | |
+---------------------------------------------+----+----+-----+-----+----+
|Equity holders of the Company |-4.5| 0.0| 18.8| 12.8|13.6|
+---------------------------------------------+----+----+-----+-----+----+
|Non-controlling interests | 0.8| 0.6| 2.9| 2.2| 2.3|
+---------------------------------------------+----+----+-----+-----+----+
+-------------------------------------------------------+-------+-------+------+
|STATEMENT OF FINANCIAL POSITION |Sept 30|Sept 30|Dec 31|
+-------------------------------------------------------+-------+-------+------+
|MEUR | 2010| 2009| 2009|
+-------------------------------------------------------+-------+-------+------+
|ASSETS | | | |
+-------------------------------------------------------+-------+-------+------+
|Non-current assets | | | |
+-------------------------------------------------------+-------+-------+------+
|Intangible assets | 66.9| 56.8| 58.3|
+-------------------------------------------------------+-------+-------+------+
|Property, plant and equipment | 28.1| 27.0| 27.5|
+-------------------------------------------------------+-------+-------+------+
|Non-current financial assets | | | |
+-------------------------------------------------------+-------+-------+------+
|Interest-bearing | 1.8| 0.4| 0.5|
+-------------------------------------------------------+-------+-------+------+
|Non-interest-bearing | 9.1| 7.2| 8.0|
+-------------------------------------------------------+-------+-------+------+
| | 105.9| 91.3| 94.2|
+-------------------------------------------------------+-------+-------+------+
|Current assets | | | |
+-------------------------------------------------------+-------+-------+------+
|Inventories | 106.7| 96.3| 94.4|
+-------------------------------------------------------+-------+-------+------+
|Current financial assets | | | |
+-------------------------------------------------------+-------+-------+------+
|Interest-bearing | 0.1| 0.0| 0.2|
+-------------------------------------------------------+-------+-------+------+
|Non-interest-bearing | 53.9| 43.7| 43.5|
+-------------------------------------------------------+-------+-------+------+
|Cash and cash equivalents | 31.6| 36.3| 29.0|
+-------------------------------------------------------+-------+-------+------+
| | 192.3| 176.3| 167.0|
+-------------------------------------------------------+-------+-------+------+
| | | | |
+-------------------------------------------------------+-------+-------+------+
|Assets classified as held-for-sale | -| 0.3| -|
+-------------------------------------------------------+-------+-------+------+
| | | | |
+-------------------------------------------------------+-------+-------+------+
|Total assets | 298.2| 267.9| 261.2|
+-------------------------------------------------------+-------+-------+------+
| | | | |
+-------------------------------------------------------+-------+-------+------+
|EQUITY AND LIABILITIES | | | |
+-------------------------------------------------------+-------+-------+------+
|Equity | | | |
+-------------------------------------------------------+-------+-------+------+
|Equity attributable to the equity holders of the | 117.8| 106.6| 107.4|
|Company | | | |
+-------------------------------------------------------+-------+-------+------+
|Non-controlling interests | 7.1| 4.1| 4.2|
+-------------------------------------------------------+-------+-------+------+
| | 124.9| 110.7| 111.7|
+-------------------------------------------------------+-------+-------+------+
|Non-current liabilities | | | |
+-------------------------------------------------------+-------+-------+------+
|Interest-bearing | 37.5| 43.9| 36.0|
+-------------------------------------------------------+-------+-------+------+
|Non-interest-bearing | 13.5| 9.8| 10.1|
+-------------------------------------------------------+-------+-------+------+
| | 51.0| 53.7| 46.0|
+-------------------------------------------------------+-------+-------+------+
|Current liabilities | | | |
+-------------------------------------------------------+-------+-------+------+
|Interest-bearing | 83.9| 76.2| 73.1|
+-------------------------------------------------------+-------+-------+------+
|Non-interest-bearing | 38.5| 27.3| 30.5|
+-------------------------------------------------------+-------+-------+------+
| | 122.4| 103.5| 103.5|
+-------------------------------------------------------+-------+-------+------+
| | | | |
+-------------------------------------------------------+-------+-------+------+
|Total equity and liabilities | 298.2| 267.9| 261.2|
+-------------------------------------------------------+-------+-------+------+
+------------------------------------------------+-----+-----+-----+-----+-----+
|KEY FIGURES | III| III|I-III|I-III| I-IV|
+------------------------------------------------+-----+-----+-----+-----+-----+
| | 2010| 2009| 2010| 2009| 2009|
+------------------------------------------------+-----+-----+-----+-----+-----+
|EBITDA margin, % | 7.4%| 6.6%|15.2%|14.4%|12.3%|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Operating profit margin, % | 4.8%| 3.8%|13.0%|11.7%| 9.4%|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Return on capital employed, % | 5.7%| 4.0%|17.9%|14.7%|11.5%|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Capital employed at end of period, MEUR |212.8|194.0|212.8|194.0|191.1|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Net interest-bearing debt at end of period, MEUR| 87.9| 83.3| 87.9| 83.3| 79.4|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Equity-to-assets ratio at end of period, % |41.9%|41.4%|41.9%|41.4%|42.8%|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Debt-to-equity ratio at end of period, % |70.4%|75.2%|70.4%|75.2%|71.1%|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Earnings per share, EUR | 0.01| 0.02| 0.42| 0.33| 0.31|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Fully diluted earnings per share, EUR | 0.01| 0.02| 0.42| 0.33| 0.31|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Equity per share at end of period, EUR | 3.02| 2.73| 3.02| 2.73| 2.75|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Average personnel for the period |2 308|2 356|2 365|2 263|2 259|
+------------------------------------------------+-----+-----+-----+-----+-----+
Definitions of key figures in the interim report are consistent with those in
the Annual Report 2009.
+-------------------------------------------------+----+-----+-----+-----+-----+
|STATEMENT OF CASH FLOWS | III| III|I-III|I-III| I-IV|
+-------------------------------------------------+----+-----+-----+-----+-----+
|MEUR |2010| 2009| 2010| 2009| 2009|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Net profit for the period | 1.4| 1.5| 18.9| 15.1| 14.3|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Adjustments to net profit for the period * | 4.0| 1.7| 13.4| 11.8| 14.7|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Financial items and taxes paid and received |-3.4| -2.3| -9.4| -5.8| -7.4|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Change in working capital | 5.0| 19.7| -7.8| -2.6| 3.0|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Net cash generated from operating activities | 7.0| 20.6| 15.2| 18.6| 24.6|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Investments |-1.1| -1.7| -4.5| -4.3| -6.7|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Proceeds from sales of assets | 0.0| 0.4| 0.1| 1.7| 2.6|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Dynamite Baits acquisition, net of cash |-4.7| -| -4.7| -| -|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Sufix brand acquisition | -| -| -1.2| -1.1| -1.1|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Ultrabite brand acquisition | -| -| -| -| -0.9|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Acquisition of other subsidiaries, net of cash | 0.0| -| 0.0| -0.1| -0.1|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Change in interest-bearing receivables |-1.3| 0.1| -1.3| 0.0| -0.1|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Net cash used in investing activities |-7.2| -1.3|-11.6| -3.7| -6.3|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Dividends paid | -| -| -7.4| -7.5| -7.5|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Net funding |-6.1|-22.8| 6.5| -0.8|-12.8|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Purchase of own shares |-0.4| -0.4| -0.9| -0.5| -0.6|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Net cash generated from financing activities |-6.4|-23.2| -1.8| -8.7|-20.8|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Adjustments | 0.4| -0.5| -0.6| -0.6| 0.8|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Change in cash and cash equivalents |-6.2| -4.4| 1.1| 5.6| -1.7|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Cash & cash equivalents at the beginning of the |39.7| 40.6| 29.0| 30.6| 30.6|
|period | | | | | |
+-------------------------------------------------+----+-----+-----+-----+-----+
|Foreign exchange rate effect |-2.0| 0.1| 1.5| 0.1| 0.1|
+-------------------------------------------------+----+-----+-----+-----+-----+
|Cash and cash equivalents at the end of the |31.6| 36.3| 31.6| 36.3| 29.0|
|period | | | | | |
+-------------------------------------------------+----+-----+-----+-----+-----+
* Includes reversal of non-cash items, income taxes and financial income and
expenses.
+------------------------------------------+-+-------------------+------+------+
| | | | | |
| | | | | |
|STATEMENT OF CHANGES IN EQUITY | | | | |
+----+-------------------------------------+-+-------------------+------+------+
| |Attributable to equity holders of the Company | | |
+----+------------------+-----+-----+------+---------+----+------+------+------+
| | | | |Cumul.| Fund for| | | Non-| |
+----+------------------+-----+-----+------+---------+----+------+------+------+
| | |Share| Fair|trans-| invested| | Re-|contr-| |
+----+------------------+-----+-----+------+---------+----+------+------+------+
| | | pre-|value|lation|non-rest-| Own|tained|olling| |
+----+------------------+-----+-----+------+---------+----+------+------+------+
| | Share| mium| re-|diffe-| ricted|sha-| earn-| inte-| Total|
+----+------------------+-----+-----+------+---------+----+------+------+------+
|MEUR| capital| fund|serve|rences| equity| res| ings| rests|equity|
+----+--------------+---+-----+-----+------+---------+----+------+------+------+
|Equity on Jan |3.6| 16.7| -0.3| -13.8| 4.9|-0.9| 91.5| 1.9| 103.7|
|1, 2009 | | | | | | | | | |
+------------------++---+-----+-----+------+---------+----+------+------+------+
|Comprehensive | -| -| -0.2| 0.0| -| -| 13.0| 2.2| 14.9|
|income* | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Purchase of own | -| -| -| -| -|-0.5| -| -| -0.5|
|shares | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Dividends paid | -| -| -| -| -| -| -7.5| -| -7.5|
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Share based | -| -| -| -| -| -| 0.1| -| 0.1|
|payment | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Equity on Sept | 3.6| 16.7| -0.5| -13.8| 4.9|-1.3| 97.1| 4.1| 110.7|
|30, 2009 | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
| | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Equity on Jan | 3.6| 16.7| -0.3| -12.3| 4.9|-1.4| 96.3| 4.2| 111.7|
|1, 2010 | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Comprehensive | -| -| -1.5| 4.0| -| -| 16.3| 2.9| 21.6|
|income* | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Purchase of own | -| -| -| -| -|-0.9| -| -| -0.9|
|shares | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Dividends paid | -| -| -| -| -| -| -7.4| -| -7.4|
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Share based | -| -| -| -| -| -| -0.1| -| -0.1|
|payment | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
|Equity on Sept | 3.6| 16.7| -1.9| -8.3| 4.9|-2.3| 105.0| 7.1| 124.9|
|30, 2010 | | | | | | | | | |
+------------------+----+-----+-----+------+---------+----+------+------+------+
* For the period (net of tax)
SEGMENT INFORMATION*
+-------------------------------------+----+----+-----+-----+-----+
|MEUR | III| III|I-III|I-III| I-IV|
+-------------------------------------+----+----+-----+-----+-----+
|Net Sales by Operating Segment |2010|2009| 2010| 2009| 2009|
+-------------------------------------+----+----+-----+-----+-----+
|Group Fishing Products |29.7|25.0|110.1|100.1|126.8|
+-------------------------------------+----+----+-----+-----+-----+
|Other Group Products | 5.8| 3.2| 14.8| 11.5| 17.8|
+-------------------------------------+----+----+-----+-----+-----+
|Third Party Products |25.3|22.2| 84.7| 71.9| 90.6|
+-------------------------------------+----+----+-----+-----+-----+
|Intra-Group (Other Group Products) |-0.2|-0.1| -0.6| -0.4| -0.6|
+-------------------------------------+----+----+-----+-----+-----+
|Total |60.6|50.2|209.0|183.1|234.6|
+-------------------------------------+----+----+-----+-----+-----+
| | | | | | |
+-------------------------------------+----+----+-----+-----+-----+
|Operating Profit by Operating Segment| | | | | |
+-------------------------------------+----+----+-----+-----+-----+
|Group Fishing Products | 0.7| 0.3| 17.4| 14.2| 15.7|
+-------------------------------------+----+----+-----+-----+-----+
|Other Group Products | 1.1| 0.3| 1.7| 0.2| 0.5|
+-------------------------------------+----+----+-----+-----+-----+
|Third Party Products | 1.1| 1.4| 8.0| 7.0| 5.8|
+-------------------------------------+----+----+-----+-----+-----+
|Total | 2.9| 1.9| 27.1| 21.4| 22.1|
+-------------------------------------+----+----+-----+-----+-----+
+----------------------------------------+-------+-------+------+
| |Sept 30|Sept 30|Dec 31|
+----------------------------------------+-------+-------+------+
|Assets by Operating Segment | 2010| 2009| 2009|
+----------------------------------------+-------+-------+------+
|Group Fishing Products | 185.3| 153.9| 159.6|
+----------------------------------------+-------+-------+------+
|Other Group Products | 10.2| 9.3| 10.2|
+----------------------------------------+-------+-------+------+
|Third Party Products | 69.3| 68.0| 61.9|
+----------------------------------------+-------+-------+------+
|Intra-Group (Other Group Products) | -0.1| -0.1| 0.0|
+----------------------------------------+-------+-------+------+
|Non-interest bearing assets total | 264.7| 231.2| 231.6|
+----------------------------------------+-------+-------+------+
|Unallocated interest-bearing assets | 33.4| 36.8| 29.6|
+----------------------------------------+-------+-------+------+
|Total assets | 298.2| 267.9| 261.2|
+----------------------------------------+-------+-------+------+
| | | | |
+----------------------------------------+-------+-------+------+
|Liabilities by Operating Segment | | | |
+----------------------------------------+-------+-------+------+
|Group Fishing Products | 35.9| 24.4| 30.8|
+----------------------------------------+-------+-------+------+
|Other Group Products | 2.4| 3.7| 2.5|
+----------------------------------------+-------+-------+------+
|Third Party Products | 13.8| 9.0| 7.2|
+----------------------------------------+-------+-------+------+
|Intra-Group (Group Fishing Products) | -0.1| -0.1| 0.0|
+----------------------------------------+-------+-------+------+
|Non-interest bearing liabilities total | 52.0| 37.1| 40.5|
+----------------------------------------+-------+-------+------+
|Unallocated interest-bearing liabilities| 121.4| 120.0| 109.1|
+----------------------------------------+-------+-------+------+
|Total liabilities | 173.3| 157.2| 149.6|
+----------------------------------------+-------+-------+------+
+-------------------+-----+-----+-----+-----+-----+
| | III| III|I-III|I-III| I-IV|
+-------------------+-----+-----+-----+-----+-----+
|Net Sales by Area**| 2010| 2009| 2010| 2009| 2009|
+-------------------+-----+-----+-----+-----+-----+
|North America | 12.7| 10.2| 51.8| 48.0| 61.1|
+-------------------+-----+-----+-----+-----+-----+
|Nordic | 21.7| 16.7| 85.5| 78.9|102.0|
+-------------------+-----+-----+-----+-----+-----+
|Rest of Europe | 24.3| 20.9| 85.3| 72.3| 89.7|
+-------------------+-----+-----+-----+-----+-----+
|Rest of the world | 19.4| 12.5| 54.8| 41.5| 55.3|
+-------------------+-----+-----+-----+-----+-----+
|Intra-Group |-17.6|-10.0|-68.4|-57.6|-73.5|
+-------------------+-----+-----+-----+-----+-----+
|Total | 60.6| 50.2|209.0|183.1|234.6|
+-------------------+-----+-----+-----+-----+-----+
* The operating segments include the following product lines: Group Fishing
Products include Group Lures, Fishing Hooks, Fishing Lines and Fishing
Accessories, Other Group Products include Group manufactured and/or branded gift
products and products for winter sports and some other businesses and Third
Party Products include non-Group branded fishing products and third party
products for hunting, outdoor and winter sports.
**Geographical sales information has been prepared on source basis i.e. based on
the location of the business unit. Each area shows the sales generated in that
area excluding intra-Group transaction within that area, which have been
eliminated. Intra-Group line includes the eliminations of intra-Group
transactions between geographical areas.
+-------------------------+----+----+----+----+-----+----+----+----+
|KEY FIGURES BY QUARTERS | I| II| III| IV| I-IV| I| II| III|
+-------------------------+----+----+----+----+-----+----+----+----+
|MEUR |2009|2009|2009|2009| 2009|2010|2010|2010|
+-------------------------+----+----+----+----+-----+----+----+----+
|Net sales |65.2|67.7|50.2|51.4|234.6|70.8|77.6|60.6|
+-------------------------+----+----+----+----+-----+----+----+----+
|EBITDA |11.6|11.5| 3.3| 2.5| 28.9|13.1|14.1| 4.5|
+-------------------------+----+----+----+----+-----+----+----+----+
|Operating profit |10.0| 9.4| 1.9| 0.7| 22.1|11.7|12.5| 2.9|
+-------------------------+----+----+----+----+-----+----+----+----+
|Profit before taxes | 8.5| 9.8| 2.1|-0.4| 19.9|12.1|12.1| 1.7|
+-------------------------+----+----+----+----+-----+----+----+----+
|Net profit for the period| 6.2| 7.4| 1.5|-0.8| 14.3| 9.1| 8.4| 1.4|
+-------------------------+----+----+----+----+-----+----+----+----+
NOTES TO THE INCOME STATEMENT AND FINANCIAL POSITION
The financial statement figures included in this release are unaudited.
This report has been prepared in accordance with IAS 34. Accounting principles
adopted in the preparation of this report are consistent with those used in the
preparation of the Annual Report 2009, except for the adoption of the new or
amended standards and interpretations. Adoption of the amended standards IFRS 3
(Business Combinations) and IAS 27 (Consolidated and Separate Financial
Statements) had impact on accounting of non-controlling interest and amount of
goodwill booked. Costs related to acquisitions have been recognized in income
statement and conditional purchase prices have been assessed at a fair market
value, and a later change shall be recognized in income statement. Adoption of
amendments of IFRS 2 and IAS 39 as well as the new interpretations, IFRIC 17 and
IFRIC 18 did not result in any changes in the accounting principles that would
have affected the information presented in this interim report.
Use of estimates and rounding of figures
Complying with IFRS in preparing financial statements requires the management to
make estimates and assumptions. Such estimates affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the amounts of revenues and expenses. Although these estimates are based on the
management's best knowledge of current events and actions, actual results may
differ from these estimates.
All figures in these accounts have been rounded. Consequently, the sum of
individual figures can deviate from the presented sum figure. Key figures have
been calculated using exact figures.
Events after the end of the interim period
The Group has no knowledge of any significant events after the end of the
interim period that would have a material impact on the financial statements for
January-September 2010. Material events after the end of the interim period, if
any, have been discussed in the interim review by the Board of Directors.
Inventories
On September 30, 2010, the book value of inventories included a provision for
net realizable value of 3.3 MEUR (2.4 MEUR at September 30, 2009 and 3.0 MEUR at
December 31, 2009).
Impact of acquisitions on the consolidated financial statements
In February 2010, Rapala purchased a 10% minority stake of the Group's Hungarian
distribution company. This acquisition raised Rapala's ownership to 66.6%.
Acquisition has no significant impact on the Group's consolidated financial
statements.
On August 27, Rapala acquired 100% of the share capital of UK based Dynamite
Baits Ltd ("Dynamite"), a manufacturer of boilies, groundbaits, liquid
attractants, pellets and bagged particle baits for sport fishing. The total
consideration for the deal is some GBP 5.3 million (some EUR 6.5 million). The
total consideration is subject to finalization and audit of closing accounts,
and realization of some contingent liabilities. Fair value of Dynamite's assets
and liabilities at the date of acquisition are provisional. Dynamite has its own
efficient distribution system in the UK securing deliveries directly to some
1 200 sales outlets. Its products enjoy an excellent reputation for catching
fish. The acquisition of Dynamite brings Rapala into an important segment of the
bait market in which it has not been represented before.
Acquisition of Dynamite contributed EUR 0.8 million to the I-III/2010 net sales
and EUR 0.0 million to the net profit for the first nine months. If this
acquisition had taken place at the beginning of the year, it would have
contributed EUR 7.2 million to the I-III/2010 net sales and EUR 0.5 million to
the net profit for the first nine months.
+-----------------------------------------------------+-----+----------+
|Sept 30, 2010 | | Seller's|
+-----------------------------------------------------+-----+----------+
| | Fair| carrying|
+-----------------------------------------------------+-----+----------+
|MEUR |value| amount|
+-----------------------------------------------------+-----+----------+
|Cash and cash equivalents and interest-bearing assets| 0.2| 0.2|
+-----------------------------------------------------+-----+----------+
|Inventories | 1.4| 1.4|
+-----------------------------------------------------+-----+----------+
|Trade and other non-interest bearing receivables | 1.4| 1.4|
+-----------------------------------------------------+-----+----------+
|Intangible assets | 6.6| -|
+-----------------------------------------------------+-----+----------+
|Tangible assets | 0.5| 0.5|
+-----------------------------------------------------+-----+----------+
|Trade and other non-interst bearing payables | -1.7| -1.7|
+-----------------------------------------------------+-----+----------+
|Interest-bearing liabilities | -0.7| -0.7|
+-----------------------------------------------------+-----+----------+
|Deferred tax liability | -1.9| 0.0|
+-----------------------------------------------------+-----+----------+
|Non-controlling interest | 0.0| -|
+-----------------------------------------------------+-----+----------+
|Fair value of acquired net assets | 5.7| 1.0|
+-----------------------------------------------------+-----+----------+
| | | |
| | | |
+-----------------------------------------------------+-----+----------+
|MEUR | |I-III/2010|
+-----------------------------------------------------+-----+----------+
|Cash paid upon closing | | 4.9|
+-----------------------------------------------------+-----+----------+
|Cash to be paid later 1) | | 1.3|
+-----------------------------------------------------+-----+----------+
|Contingent consideration | | 0.2|
+-----------------------------------------------------+-----+----------+
|Total purchase consideration | | 6.5|
+-----------------------------------------------------+-----+----------+
| | | |
+-----------------------------------------------------+-----+----------+
|Goodwill | | 0.7|
+-----------------------------------------------------+-----+----------+
| | | |
+-----------------------------------------------------+-----+----------+
|Cash paid for the acquisitions | | 4.9|
+-----------------------------------------------------+-----+----------+
|Cash and cash equivalents acquired | | -0.2|
+-----------------------------------------------------+-----+----------+
|Net cash flow | | 4.7|
+-----------------------------------------------------+-----+----------+
1) Paid to an escrow account.
EUR 1.3 million of the total consideration has been paid to an escrow account
and will be released to sellers in 3 years.
The contingent consideration requires acquired company Dynamite to receive a tax
benefit of EUR 0.2 million based on preliminary tax calculations. Contingent
consideration will be paid to sellers when the tax benefit is finally confirmed,
approximately in year 2012. The discounted value of the contingent consideration
EUR 0.2 million was estimated by applying the income approach assuming a
discount rate of 1%.
The transaction costs of EUR 0.2 million have been expensed and are included in
the other operating expenses in the income statement and treated as a non-
recurring item.
Acquired companies are accounted for using the purchase method of accounting,
which involves allocating the cost of the business combination to the fair value
of the assets acquired and liabilities and contingent liabilities assumed at the
date of acquisition.
The fair value of acquired intellectual property rights is established with the
estimated discounted royalty payments. Determination of fair value is the market
based estimated royalty rate (normalized net cash flow), that an external party
would be willing to pay for the license contract. The fair value of customer
relations is established based on the estimated duration of customer
relationship (average minimum duration) and discounted net cash flows of present
customer relationships.
The goodwill of 2010 (EUR 0.7 million) resulted from acquiring Dynamite.
Goodwill is justified by expansion of product assortment and market coverage as
well as utilization of economies of scale in production, sourcing and
distribution. The goodwill will be tested for impairment.
None of the goodwill is expected to be deductible for income tax purposes.
+---------------------------------------------------+----+----+-----+-----+----+
|Non-recurring income and expenses included in | III| III|I-III|I-III|I-IV|
|operating profit | | | | | |
+---------------------------------------------------+----+----+-----+-----+----+
|MEUR |2010|2009| 2010| 2009|2009|
+---------------------------------------------------+----+----+-----+-----+----+
|Sale of Hong Kong office premises | -| -| -| -| 0.5|
+---------------------------------------------------+----+----+-----+-----+----+
|Restructuring of Chinese manufacturing operations *| -|-0.1| -| -0.1|-0.4|
+---------------------------------------------------+----+----+-----+-----+----+
|Consolidation of French operations | -| -| -| 0.0| 0.0|
+---------------------------------------------------+----+----+-----+-----+----+
|Closure of Irish lure factory | -| 0.0| -| -0.1|-0.1|
+---------------------------------------------------+----+----+-----+-----+----+
|Costs related to business acquisitions |-0.2| -| -0.2| -| -|
+---------------------------------------------------+----+----+-----+-----+----+
|Other restructuring costs | 0.0|-0.1| -0.2| -0.2|-0.4|
+---------------------------------------------------+----+----+-----+-----+----+
|Other non-recurring items | -| -| -| -|-0.1|
+---------------------------------------------------+----+----+-----+-----+----+
|Total included in EBITDA |-0.2|-0.1| -0.4| -0.3|-0.3|
+---------------------------------------------------+----+----+-----+-----+----+
|Non-recurring impairment of non-current assets in | 0.0| -| 0.0| -0.7|-0.7|
|China | | | | | |
+---------------------------------------------------+----+----+-----+-----+----+
|Non-recurring impairment of non-current assets in | -| -| -| -|-0.3|
|Hungary | | | | | |
+---------------------------------------------------+----+----+-----+-----+----+
|Total included in operating profit |-0.2|-0.1| -0.4| -1.0|-1.4|
+---------------------------------------------------+----+----+-----+-----+----+
* Includes redundancy and other costs as well as gains and losses from the sale
of fixed assets.
+-------------------------------------------------+-------+-------+------+
|Commitments |Sept 30|Sept 30|Dec 31|
+-------------------------------------------------+-------+-------+------+
|MEUR | 2010| 2009| 2009|
+-------------------------------------------------+-------+-------+------+
|On own behalf | | | |
+-------------------------------------------------+-------+-------+------+
|Business mortgage | 16.1| 16.1| 16.1|
+-------------------------------------------------+-------+-------+------+
|Guarantees | 0.2| 0.7| 0.2|
+-------------------------------------------------+-------+-------+------+
| | | | |
+-------------------------------------------------+-------+-------+------+
|Minimum future lease payments on operating leases| 9.6| 10.4| 10.3|
+-------------------------------------------------+-------+-------+------+
+--------------------------------+---------+-----+--------+-----------+--------+
|Related party transactions | |Rents| Other| | |
+--------------------------------+---------+-----+--------+-----------+--------+
|MEUR |Purchases| paid|expenses|Receivables|Payables|
+--------------------------------+---------+-----+--------+-----------+--------+
|I-III 2010 | | | | | |
+--------------------------------+---------+-----+--------+-----------+--------+
|Associated company Lanimo Oü | 0.1| -| -| 0.0| -|
+--------------------------------+---------+-----+--------+-----------+--------+
|Entity with significant | -| 0.1| 0.1| 0.0| -|
|influence over the Group* | | | | | |
+--------------------------------+---------+-----+--------+-----------+--------+
|Management | -| 0.2| -| 0.0| 0.1|
+--------------------------------+---------+-----+--------+-----------+--------+
| | | | | | |
+--------------------------------+---------+-----+--------+-----------+--------+
|I-III 2009 | | | | | |
+--------------------------------+---------+-----+--------+-----------+--------+
|Associated company Lanimo Oü | 0.1| -| -| 0.0| -|
+--------------------------------+---------+-----+--------+-----------+--------+
|Entity with significant | -| 0.1| 0.0| 0.0| -|
|influence over the Group* | | | | | |
+--------------------------------+---------+-----+--------+-----------+--------+
|Management | -| 0.2| 0.0| -| 0.0|
+--------------------------------+---------+-----+--------+-----------+--------+
| | | | | | |
+--------------------------------+---------+-----+--------+-----------+--------+
|I-IV 2009 | | | | | |
+--------------------------------+---------+-----+--------+-----------+--------+
|Associated company Lanimo Oü | 0.1| -| -| 0.0| -|
+--------------------------------+---------+-----+--------+-----------+--------+
|Entity with significant | -| 0.2| 0.1| 0.0| -|
|influence over the Group* | | | | | |
+--------------------------------+---------+-----+--------+-----------+--------+
|Management | -| 0.3| 0.0| 0.0| 0.0|
+--------------------------------+---------+-----+--------+-----------+--------+
* Lease agreement for the real estate for the consolidated operations in France
and a service fee.
+-+------------------------------+---------------+---------------+-------------+
| | | | | |
+-+--------------+---------------+---------------+---------------+-------------+
|Open derivatives| Nominal amount| Positive fair| Negative fair| Net fair|
|MEUR | | values| values| values|
+----------------+--------+------+---------------+---------------+-------------+
|September 30, 2010 | | | | |
+-------------------------+------+---------------+---------------+-------------+
|Foreign currency options | 10.7| 0.1| 0.5| -0.4|
|and forwards | | | | |
+-------------------------+------+---------------+---------------+-------------+
|Interest rate swaps | 85.8| -| 2.5| -2.5|
+-------------------------+------+---------------+---------------+-------------+
|Total | 96.5| 0.1| 3.0| -2.9|
+-------------------------+------+---------------+---------------+-------------+
| | | | | |
+-------------------------+------+---------------+---------------+-------------+
|September 30, 2009 | | | | |
+-------------------------+------+---------------+---------------+-------------+
|Foreign currency options | 1.9| 0.0| 0.0| 0.0|
|and forwards | | | | |
+-------------------------+------+---------------+---------------+-------------+
|Interest rate swaps | 138.5| 0.0| 0.7| -0.7|
+-------------------------+------+---------------+---------------+-------------+
|Total | 140.4| 0.0| 0.7| -0.7|
+-------------------------+------+---------------+---------------+-------------+
| | | | | |
+-------------------------+------+---------------+---------------+-------------+
|Dec 31, 2009 | | | | |
+-------------------------+------+---------------+---------------+-------------+
|Foreign currency options | 7.1| 0.1| -| 0.1|
+-------------------------+------+---------------+---------------+-------------+
|Interest rate swaps | 98.0| 0.0| 0.5| -0.5|
+-------------------------+------+---------------+---------------+-------------+
|Total | 105.0| 0.2| 0.5| -0.3|
+-------------------------+------+---------------+---------------+-------------+
Group's financial risks and hedging principles are described in detail in the
Annual Report 2009.
Share-based payments
The Group had two separate share-based payment programs in place on September
30, 2010: one synthetic option program settled in cash and one share reward
program settled in shares. On March 31, 2010, the exercise period for the 2004B
stock option program expired.
The IFRS accounting effect on operating profit was +0.3 MEUR (-0.1 MEUR) for the
third quarter and +0.2 MEUR (-0.2 MEUR) for the first nine months of the year
2010 due to change in fair value of programs and change in non-market criteria,
and -0.3 MEUR for the financial year 2009. Terms and conditions of the share-
based payment programs are described in detail in the Annual Report 2009.
Shares and share capital
Based on authorization given by the Annual General Meeting (AGM) in April 2007,
the Board can decide to issue shares through issuance of shares, options or
special rights entitling to shares in one or more issues. The number of new
shares to be issued including the shares to be obtained under options or special
rights shall be no more than 10 000 000 shares. This authorization includes the
right for the Board to resolve on all terms and conditions of the issuance of
new shares, options and special rights entitling to shares, including issuance
in deviation from the shareholders' preemptive rights. This authorization is in
force for a period of 5 years from the resolution by the AGM. The Board is also
authorized to resolve to repurchase a maximum of 2 000 000 shares by using funds
in the unrestricted equity. This amount of shares corresponds to less than 10%
of all shares of the company. The shares will be repurchased through public
trading arranged by NASDAQ OMX Helsinki at the market price of the acquisition
date. The shares will be acquired and paid in pursuance of the rules of NASDAQ
OMX Helsinki and applicable rules regarding the payment period and other terms
of the payment. This authorization is effective until the end of the next AGM.
On September 30, 2010, the share capital fully paid and reported in the Trade
Register was 3.6 MEUR and the total number of shares was 39 468 449. The average
number of shares in January-September 2010 was 39 468 449. On February 4, 2010,
the Board decided to continue buying back own shares in accordance with the
authorization granted by the AGM on April 7, 2009. The repurchasing of shares
ended on March 31, 2010 when Rapala held 368 144 own shares. On April 27 and on
July 22, the Board decided again to continue buying back own shares in
accordance with the authorization granted by the AGM on April 14, 2010. The
repurchasing ended on September 30, 2010, when Rapala held 503 000 of its own
shares, representing 1.3% of the total number of Rapala shares and the total
voting rights. The average price for the repurchased own shares in January-
September 2010 was EUR 5.59.
During the first nine months of 2010, 2 542 189 shares (1 556 882) were traded
at a high of EUR 6.04 EUR and a low of 4.80 EUR. The closing share price at the
end of the period was 6.00 EUR.
Short term risks and uncertainties
The objective of Rapala's risk management is to support the implementation of
the Group's strategy and execution of business targets. The importance of risk
management has increased when Rapala has continued to expand its operations.
Accordingly, Group management also continued to develop risk management
practices and internal controls during 2010. Detailed description of Group's
strategic, operative and financial risks and risk management principles are
included in the Annual Report 2009.
Due to the nature of the fishing tackle business and the geographical scope of
Group's operations, Group's business has traditionally been seasonally stronger
in the first half of the financial year compared to the second half. The biggest
deliveries for both summer and winter seasons are concentrated into relatively
short time-periods, which require proper functioning of Group's supply chain.
Group's sales are also to some extent affected by weather. In northern
hemisphere summer fishing season is approaching its end and the success of the
coming season for winter sports equipment is partly dependent on the timing and
length of the winter weathers together with functioning of the supply chain.
A major supply chain and logistics initiative started in 2009 to shorten the
lead-times and further improve the service levels to customers continues in
2010. Before fully implemented, this initiative may temporarily have negative
impact on Group's inventory levels. In 2009 and 2010 Group has paid close
attention on improving cash flow and reducing inventory levels. Increasing focus
has now also been given to securing the service levels to customers, which may
also require additional inventories.
The Group renegotiated its bank covenants during the second quarter of 2009 and
as one of the results has now more flexibility to the most critical cash flow
covenant also for 2010 and onwards. Covenants are monitored closely on a monthly
basis.
Even if the fishing tackle business has traditionally not been strongly
influenced by the increased uncertainties and downturns in the general economic
climate, this may influence, at least for a short while, the sales of fishing
tackle when retailers reduce their inventory levels and face financial
challenges. Also quick and strong increases in living expenses and uncertainties
concerning employment may temporarily affect consumer spending also in fishing
tackle, even though historically the underlying consumer demand has proven to be
fairly solid.
The truly global nature of Group's sales and operations is spreading the market
risks caused by the current uncertainties concerning the recovery of the global
economy. Group is still cautiously monitoring the development in the various
markets, as the W-effect of the economies can't be fully ruled out yet. Such
effect in conjunction with some drastic changes in currency rates could suddenly
change the business sentiment. Due to these uncertainties in future demand and
the length of Group's internal supply chain, the supply chain management is
balancing between risk of shortages and risk of excess production and purchasing
and consequent excess inventories in the Group. Also the importance of cash
collection and credit risk management has increased and this may affect sales to
some customers.
Group's sales and profitability are impacted by the changes in foreign exchange
rates, especially US dollar and other currencies connected to it. Group is
actively monitoring the currency position and risks and using e.g. foreign
currency nominated loans to manage the natural hedging. In order to fix the
exchange rate of some of the future USD-nominated purchases, the Group has
entered into currency hedging agreements. As the Group is not applying hedge
accounting in accordance with IAS 39, also the change in fair value of these
unrealized currency hedging agreements has an impact on the Group's operating
profit. The strengthening of Chinese renmimbi, which started in June, together
with possible future strengthening of US dollar is putting pressure on Group's
costs. The Group is closely monitoring the situation and considering possibility
and feasibility of price increases and hedging actions.
The market prices of some commodity raw materials have started to increase again
and this may also put pressure on pricing of some products in the future.
No significant changes are identified in the Group's strategic risks or business
environment.
[HUG#1453630]
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