2012-10-23 08:30:00 CEST
2012-10-23 08:30:54 CEST
REGULATED INFORMATION
Rapala VMC - Financial Calendar
RAPALA'S INTERIM REPORT FOR JANUARY TO SEPTEMBER 2012: SALES, OPERATING PROFIT AND GEARING REACH QUARTERLY RECORDS
Rapala VMC Corporation
Stock Exchange Release
October 23, 2012 at 9:30 a.m.
* Net sales for the third quarter increased by 4% to 65.6 (63.0 MEUR) and was
up by 2% at 222.8 MEUR (218.7 MEUR) for January to September, reaching all
time record sales for the third quarter and nine months. Sales were
supported by foreign exchange rates and growth in sales especially in North
America and some European countries.
* Comparable operating profit, excluding non-recurring items, increased from
last year and reached third quarter record of 3.9 MEUR (2.8 MEUR), supported
by increased sales and gross margin, and was 25.9 MEUR (28.1 MEUR) for the
nine months. Comparable operating margin for the quarter was higher than
last year amounting to 5.9% (4.5%) and was 11.6 % (12.9%) for the nine
months. Reported operating profit for the third quarter amounted to record
of 3.7 MEUR (2.3 MEUR) and 25.7 MEUR (27.2 MEUR) for the nine months.
* Net profit for the quarter improved to 1.3 MEUR (0.2 MEUR) and was 16.0 MEUR
(16.1 MEUR) for the nine months. Quarterly earnings per share were 0.00 EUR
(-0.01 EUR) and 0.31 EUR (0.34 EUR) for the nine months impacted by
increased share of non-controlling interest in net result.
* Cash flow from operating activities for the third quarter was 7.1 MEUR (15.3
MEUR) impacted by capital tied up into the new ice fishing business and
receivables. For the nine months cash flow for operating activities was at
historically high levels of 19.2 MEUR (16.8 MEUR), following the intense
focus on cash flow and working capital management.
* Implementation of Rapala's strategy of profitable growth continued during
the third quarter of the year by taking several actions relating to
manufacturing and distribution activities. New ice fishing sales started in
the latter part of third quarter while bulk of sales will take place during
the last quarter.
* Outlook for the full year remains positive, while still cautious. The
guidance is unchanged. It is expected that in 2012 the net sales will
increase from 2011and comparable operating profit is expected to remain
close to last year's level.
The attachment presents the interim review by the Board of Directors as well as
the accounts.
A conference call on the third quarter result will be arranged today at 2.00
p.m. Finnish time (1.00 p.m. CET). Please dial +44 (0)20 3147 4971 or
+1 212 444 0889 or +358 (0)9 2310 1667 (pin code: 152778#) five minutes before
the beginning of the event. A replay facility will be available for 14 days
following the teleconference. The number to dial is +44 (0)20 7111 1244 (pin
code: 152778#). 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
Jussi Ristimäki, Chief Financial Officer, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
Market Situation and Sales
During the third quarter of the year Rapala's business continued to develop
positively, again breaking the third quarter and year-to-date sales record
despite the divestment of the gift business. Sales were especially good in North
America, East Europe, France and Nordic countries. In general the US consumer
and retail sentiment is showing positive signs. Third quarter weather conditions
were unfavorable in parts of Europe and Nordic having some impact on customer
demand in fishing tackle. Hunting sales were strong in Nordic countries.
Sales were also supported by good start of the new ice fishing business in
Nordic countries, Russia and North America. Supply chain of the new ice fishing
business is operating smoothly. Some negative impacts on the continuing
financial uncertainties are seen in some European markets. A late and short
winter 2011/2012 is still impacting the financial position of some retailers and
tighter credit control and limited availability of financing have impacted
customer behavior in some cases. Inventory cleaning campaigns accelerated as
summer season approached its end.
Net sales for the third quarter increased by 4% from last year reaching all-time
third quarter high at 65.6 (63.0 MEUR). Changes in currency exchange rates
increased sales by 2.9 MEUR, while establishment of new units and new ice
fishing business offset by divestment of the gift business, reduced the sales in
net of 1.0 MEUR. The nine-month net sales were 222.8 MEUR (218.7 MEUR), 2%
increase from last year, also reaching all time sales record for the nine
months. With comparable exchange rates and organization structure, net sales
increased by 1% in the third quarter and 1% during the nine months. New units
and new ice business included, net sales increased by 4% in the quarter and 2%
in nine-month period.
Compared to last year, net sales of Group Products decreased by 1% in the third
quarter and 2% for the first nine months, negatively impacted by the divestment
of the gift business and structural changes in the UK distribution. Excluding
the impact of gift divestment, Group Product sales increased by 7% for the
quarter and 5% for the nine months of the year supported by new ice fishing
sales. Sales of Third Party Products grew by 12% during the quarter and 7% year-
to-date, following good third quarter sales in hunting and fishing products,
which also includes new third party ice fishing products.
In North America external sales were up by 24% for the third quarter and by 15%
for the nine months. This was significantly impacted by the US dollar, which was
9% stronger year-to-date against euro compared to last year. In local currency,
sales for the third quarter were 9% up and for the nine months 5% above last
year's level, impacted by beginning of sales of the new ice fishing business and
evidencing a clear improvement in the North American business environment.
In Nordic countries, sales were up by 7% for the quarter and down by 2% for the
nine months. Quarterly sales were supported by new ice fishing business and good
hunting season. Year-to-date sales were impacted by challenging 2011/2012 winter
business conditions especially in Finland and by structural changes in Norway.
In Rest of Europe sales increased by 4% for the quarter and by 4% for the nine
months, supported by good sales in Eastern Europe and France, while still
negatively impacted by economical uncertainties especially in Spain, Hungary and
Switzerland. Rest of Europe sales have also been impacted by the structural
changes in UK distribution.
In Rest of the World sales decreased by 19% for the third quarter and by 18% for
the nine months primarily as a result of the gift business divestment. Excluding
the gift business divestment, net sales of Rest of the World were up by 5% in
the third quarter and 11% during the nine months. Nine-month sales increased in
all markets.
Financial Results and Profitability
Comparable operating profit, excluding non-recurring items, increased from last
year and reached third quarter record of 3.9 MEUR (2.8 MEUR). For the nine
months comparable operating profit was 25.9 MEUR (28.1 MEUR). Comparable
operating margin for the quarter was higher than last year amounting to 5.9%
(4.5%), but was down to 11.6 % (12.9%) for the nine months. During the third
quarter, operating profit was positively impacted by the increased sales and
gross margin, while it was negatively impacted by the divestment of the gift
business, establishment of new units and net impact of currency exchange rate
changes. The profitability of third and fourth quarter sales is traditionally
lower than first half of the year due to different sales mix and season-end
stock clearance campaigns, which were increasingly initiated this year. The
incremental margins generated by the new ice fishing business had already some
positive impact on third quarter profitability through better fixed costs
coverage.
Reported operating profit for the third quarter amounted to a record of 3.7 MEUR
(2.3 MEUR) and 25.7 MEUR (27.2 MEUR) for the nine months. Reported operating
margin was 5.6% (3.6%) and 11.5% (12.4%) respectively. Reported operating profit
for the quarter included 0.2 MEUR non-recurring costs (0.5 MEUR) consisting of
costs related to gift divestment and acquisitions. For nine months non-recurring
costs amounted to 0.2 MEUR (0.9 MEUR). Return on capital employed increased to
6.3% (4.1%) for third quarter and was 14.8% (16.3%) for the nine months.
Key figures III III I-III I-III I-IV
MEUR 2012 2011 2012 2011 2011
-------------------------------------------------------------
Net sales 65.6 63.0 222.8 218.7 279.5
EBITDA as reported 5.4 4.1 30.7 32.3 37.7
EBITDA excl. one-off items 5.6 4.5 31.0 33.0 37.1
Operating profit (EBIT) 3.7 2.3 25.7 27.2 30.7
EBIT excl. one-off items 3.9 2.8 25.9 28.1 30.5
-------------------------------------------------------------
Operating profit for Group Products increased from last year in the third
quarter amounting to 2.1 MEUR (1.4 MEUR), but was down to 16.8 MEUR (18.7 MEUR)
for the nine-month period. Nine-month profitability was impacted by the
divestment of the gift business and establishment of new manufacturing units.
Quarterly profit margin reduced in fishing lines, while margin on lures, fishing
accessories and hunting improved. Driven by better profitability of third party
fishing and hunting products, operating profit for Third Party Products was
higher than last year at 1.5 MEUR (0.9 MEUR) for the third quarter and 8.8 MEUR
(8.5 MEUR).
Total financial (net) expenses were 1.7 MEUR (1.9 MEUR) for the quarter and 2.9
MEUR (4.5 MEUR) for the nine months. Net interest and other financing expenses
were 1.1 MEUR (0.9 MEUR) for the quarter and 2.2 MEUR (2.9 MEUR) for the nine
months. Financial items were positively impacted by the change in (net) currency
exchange expenses of 0.6 MEUR (1.0 MEUR) for the quarter and 0.7 MEUR (1.6 MEUR)
for the nine months.
Net profit for the quarter was increased to 1.3 MEUR (0.2 MEUR) and was 16.0
MEUR (16.1 MEUR) for the nine months. Earnings per share for the third quarter
were 0.00 EUR (-0.01 EUR) and were 0.31 EUR (0.34 EUR) for the nine-month period
impacted by increased share of non-controlling interest in net result.
Cash Flow and Financial Position
Cash flow from operating activities was 7.1 (15.3 MEUR) for the third quarter
and 19.2 MEUR (16.8 MEUR) for the nine months. Third quarter cash flow was
impacted by the record high second quarter, while the cumulative cash flow was
still at high levels historically. Third quarter cash flow was affected by
increase in receivables and cash tied into building up the new ice fishing
business, where the sales is mostly concentrated on the fourth quarter. Positive
cash flow impact for the nine months came from the net change in working
capital, mainly inventories and payables, being -1.5 MEUR (-5.7 MEUR).
Group's inventories increased 5.4 MEUR from last September to 120.6 MEUR (115.2
MEUR), of which 4.3 MEUR increase came from net impact of currency movements,
having no cash flow impact, and 3.7 MEUR from net increase from divested gift
business offset by the new ice fishing business. Excluding the currency impact
and the structural changes, comparable inventories decreased 2.6 MEUR from last
September and on comparable basis inventory-to-sales ratio dropped two
percentage points for the nine-month period.
Net cash used in investing activities was 1.6 MEUR (4.2 MEUR, including
acquisition of UK joint venture) for the quarter and 12.3 MEUR (8.2 MEUR) for
the nine-month period. Operative capital expenditure was 1.3 MEUR (2.2 MEUR) for
the quarter and 5.5 MEUR (5.7 MEUR) for the nine months. Nine-month investing
activities also include the acquisition of the assets of Strike Master
Corporation and Mora ICE brand with total of 6.7 MEUR, including consideration
paid at the closing of the accounts in third quarter, and proceeds from the sale
of a real estate in Finland of 0.3 MEUR.
Net interest bearing debt increased to 94.9 MEUR (93.9 MEUR) in the end of
September. Following the increase in equity, gearing decreased to 66.7% (71.8%)
reaching an all time record low level. Equity-to-assets ratio increased to
43.0% (42.2%) compared to last year.
Strategy Implementation
Implementation of Rapala's strategy of profitable growth continued during the
third quarter of the year by taking several actions relating to manufacturing
and distribution activities.
In February Rapala entered seriously into ice drill business and closed the
deals to acquire assets of Strike Master Corporation as well as the brand and
intellectual property rights relating to Mora ICE products. These deals together
with the US distribution agreements concluded for MarCum underwater cameras and
sonars and Otter Outdoors sleds and shelters will give Rapala the global
leadership position in the ice fishing category. Strong expansion into ice
fishing business will increase the sales in the seasonally slower second half of
the year in all main northern markets. Deliveries of the new ice fishing
products have started as planned during the third quarter. Rapala's existing and
new ice fishing products, as well as the various related third party products,
have been gathered under a special ICEFORCE -marketing concept, which has been
launched for this winter season. Product development for the 2013/2014 winter
season is also at full speed and new products will be introduced to customers in
early 2013.
Group's new lure and hook manufacturing units on Batam Island in Indonesia
started their operations during the first quarter. Production volumes of lure
production have been ramped up during the second and third quarter as production
has been gradually transferred from China to Batam. Operational efficiencies are
in line with expectations. The first phase of lure production transfer is
targeted to be finalized by the end of the year. Also the hook production is
expected to be fully ramped up by the end of the year. Construction and
installation work for tripling the size of the lure manufacturing operations are
proceeding and first output of this second phase is expected during first
quarter next year.
Group's new distribution company in Chile has been established during third
quarter and sales have started in October. In September Group acquired the 20%
share in the Indonesian distribution company from its minority shareholder,
increasing Group's ownership to 100%.
A special initiative to improve the performance of the distribution company in
Switzerland continued during the third quarter.
Working capital and cash flow management was still one of the top priorities of
the Group, and the Group continues to work to reduce the inventory levels and
develop the Group's internal supply chain as well as its purchasing processes.
Production and shipments of the new products for season 2013, including the
EFTTEX award winning Rapala BX Minnow lures, have started during third quarter.
Discussions and negotiations regarding acquisitions and business combinations
continued during the third quarter.
Short-term Outlook
Outlook for the full year remains positive, while still cautious. During the
first three quarters Group's sales have developed generally well, with no major
negative surprises. Fourth quarter will be characterized by the new ice fishing
business, which will generate bulk of its annual sales by the end of the year.
In the USA alone, the category is expected to generate some 10 to 15 MUSD
additional sales for the last quarter, of which a significant proportion is
based on fixed customer orders. The supply chain of the new ice fishing business
is operating smoothly.
Presales of winter sports equipment have been relatively good, considering the
challenging weather conditions last winter. Last winter may still have some
knock-on effect on coming winter season's ice fishing and winter sports
equipment sales as retailers have some existing inventories causing them cash
flow challenges and cautiousness. Sales and deliveries of the fourth quarter
winter business are always subject to uncertainties relating to weathers and
timing.
Group has put more emphasis on cash flow and working capital management, which
together with foreign exchange rate changes, establishment of new manufacturing
units and performance improvement initiatives will pressure the profitability
this year.
The guidance is unchanged. It is expected that in 2012 the net sales will
increase from 2011 and the comparable operating profit is expected to remain
close to last year's level.
Fourth quarter interim report and annual accounts 2012 will be published on
February 6, 2013.
Helsinki, October 23, 2012
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 2012 2011 2012 2011 2011
--------------------------------------------------------------------------------
Net sales 65.6 63.0 222.8 218.7 279.5
Other operating income 0.2 0.3 0.7 0.6 2.9
Materials and services 32.3 32.1 104.9 100.4 129.0
Personnel expenses 15.1 14.5 46.8 46.1 62.4
Other costs and expenses 13.0 12.6 41.0 40.5 53.3
Share of results in associates and joint 0.0 0.0 -0.1 0.0 -0.1
ventures
-----------------------------------
EBITDA 5.4 4.1 30.7 32.3 37.7
Depreciation, amortization and impairments 1.7 1.8 5.1 5.0 7.0
-----------------------------------
Operating profit (EBIT) 3.7 2.3 25.7 27.2 30.7
Financial income and expenses 1.7 1.9 2.9 4.5 5.5
-----------------------------------
Profit before taxes 1.9 0.3 22.8 22.7 25.2
Income taxes 0.6 0.1 6.7 6.6 8.0
-----------------------------------
Net profit for the period 1.3 0.2 16.0 16.1 17.2
-----------------------------------
Attributable to:
Equity holders of the Company 0.0 -0.5 12.2 13.1 14.0
Non-controlling interests 1.3 0.7 3.8 3.0 3.2
Earnings per share for profit attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted = non- 0.00 -0.01 0.31 0.34 0.36
diluted)
STATEMENT OF COMPREHENSIVE INCOME III III I-III I-III I-IV
MEUR 2012 2011 2012 2011 2011
--------------------------------------------------------------------------
Net profit for the period 1.3 0.2 16.0 16.1 17.2
-----------------------------
Other comprehensive income, net of tax
Change in translation differences -0.5 2.4 1.6 -2.9 2.0
Gains and losses on cash flow hedges -0.1 -0.5 -0.7 -0.1 -0.1
Gains and losses on hedges of net investments 0.2 -0.8 0.1 0.0 -0.4
-----------------------------
Total other comprehensive income, net of tax -0.4 1.1 1.0 -3.0 1.5
-----------------------------
Total comprehensive income for the period 0.9 1.4 17.0 13.1 18.7
-----------------------------
Total comprehensive income attributable to:
Equity holders of the Company -0.5 1.0 13.2 10.6 15.8
Non-controlling interests 1.4 0.4 3.8 2.5 2.9
STATEMENT OF FINANCIAL POSITION Sept 30 Sept 30 Dec 31
MEUR 2012 2011 2011
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 73.2 67.2 68.0
Property, plant and equipment 28.9 28.9 28.5
Non-current financial assets
Interest-bearing 7.7 3.2 7.6
Non-interest-bearing 9.9 9.3 9.1
---------------------------------------------
119.7 108.5 113.2
Current assets
Inventories 120.6 115.2 115.5
Current financial assets
Interest-bearing 1.7 0.1 1.6
Non-interest-bearing 56.8 54.7 55.0
Cash and cash equivalents 32.0 31.5 28.9
---------------------------------------------
211.1 201.4 201.0
Assets classified as held-for-sale 0.3 - 0.3
Total assets 331.1 310.0 314.5
---------------------------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity 132.8 123.4 128.6
holders of the Company
Non-controlling interests 9.4 7.2 7.2
---------------------------------------------
142.3 130.7 135.8
Non-current liabilities
Interest-bearing* 62.6 24.0 12.7
Non-interest-bearing 14.3 13.4 13.5
---------------------------------------------
76.8 37.4 26.2
Current liabilities
Interest-bearing* 73.7 104.6 116.6
Non-interest-bearing 38.3 37.3 35.9
---------------------------------------------
112.1 141.9 152.5
Total equity and liabilities 331.1 310.0 314.5
---------------------------------------------
* As of April 2012 the revolving credit facilities of the new bank loan
agreements were classified as non-current liabilities to the extent banks'
commitment is valid for longer than 12 months.
III III I-III I-III I-IV
KEY FIGURES 2012 2011 2012 2011 2011
--------------------------------------------------------------------------------
EBITDA margin, % 8.2% 6.5% 13.8% 14.7% 13.5%
Operating profit margin, % 5.6% 3.6% 11.5% 12.4% 11.0%
Return on capital employed, 6.3% 4.1% 14.8% 16.3% 13.7%
%
Capital employed at end of 237.1 224.5 237.1 224.5 227.0
period, MEUR
Net interest-bearing debt 94.9 93.9 94.9 93.9 91.2
at end of period, MEUR
Equity-to-assets ratio at 43.0% 42.2% 43.0% 42.2% 43.2%
end of period, %
Debt-to-equity ratio at end 66.7% 71.8% 66.7% 71.8% 67.2%
of period, %
Earnings per share, EUR 0.00 -0.01 0.31 0.34 0.36
(diluted = non-diluted)
Equity per share at end of 3.42 3.17 3.42 3.17 3.30
period, EUR
Average personnel for the 2 025 2 271 1 991 2 238 2 208
period
--------------------------------------------------------------------------------
Definitions of key figures in the interim report are consistent with those
in the Annual Report 2011.
STATEMENT OF CASH FLOWS III III I-III I-III I-IV
MEUR 2012 2011 2012 2011 2011
--------------------------------------------------------------------------------
Net profit for the period 1.3 0.2 16.0 16.1 17.2
Adjustments to net profit for the period * 4.6 3.6 15.4 15.4 17.6
Financial items and taxes paid and received -4.2 -2.9 -10.6 -9.0 -12.3
Change in working capital 5.3 14.4 -1.5 -5.7 -7.3
--------------------------------------------------------------------------------
Net cash generated from operating activities 7.1 15.3 19.2 16.8 15.2
Investments -1.3 -2.2 -5.5 -5.7 -8.4
Proceeds from sales of assets 0.1 0.1 0.7 0.3 0.7
Acquisition of joint venture Shimano Normark - -2.1 - -2.1 -1.5
UK
Dynamite Baits acquisition, net of cash - - - - -0.1
Sufix brand acquisition - - -0.8 -0.7 -0.7
Strikemaster and Mora ICE acquisitions -0.3 - -6.7 - -
Acquisition of other subsidiaries, net of 0.0 0.0 0.0 0.0 0.0
cash
Proceeds from disposal of subsidiaries, net - - - - 0.6
of cash
Change in interest-bearing receivables 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------
Net cash used in investing activities -1.6 -4.2 -12.3 -8.2 -9.6
Dividends paid to parent company's - - -8.9 -9.0 -9.0
shareholders
Dividends paid to non-controlling interest - - -1.5 -2.7 -2.9
Net funding -17.8 -12.2 7.1 7.5 6.7
Purchase of own shares -0.2 - -0.3 0.0 -0.1
--------------------------------------------------------------------------------
Net cash generated from financing activities -18.0 -12.2 -3.6 -4.2 -5.2
Adjustments -0.2 -0.8 0.0 -0.8 0.4
Change in cash and cash equivalents -12.7 -1.8 3.4 3.7 0.8
Cash & cash equivalents at the beginning of 45.0 32.3 28.9 27.9 27.9
the period
Foreign exchange rate effect -0.3 1.0 -0.3 -0.1 0.2
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of the 32.0 31.5 32.0 31.5 28.9
period
* Includes reversal of non-cash items, income taxes and financial income and
expenses.
CONSOLIDATED 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 -1.5 -6.0 4.9 -2.5 106.7 7.4 129.2
1, 2011
--------------------------------------------------------------------------------
Comprehensive - - -0.1 -2.4 - - 13.1 2.5 13.1
income *
Purchase of own - - - - - 0.0 - - 0.0
shares
Dividends paid - - - - - - -9.0 -2.7 -11.7
Other changes - - - - - - - 0.0 0.0
--------------------------------------------------------------------------------
Equity on Sept 3.6 16.7 -1.6 -8.4 4.9 -2.5 110.9 7.2 130.7
30, 2011
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity on Jan 3.6 16.7 -1.6 -4.1 4.9 -2.6 111.8 7.2 135.8
1, 2012
--------------------------------------------------------------------------------
Comprehensive - - -0.7 1.7 - - 12.2 3.8 17.0
income *
Purchase of own - - - - - -0.3 - - -0.3
shares
Dividends paid - - - - - - -8.9 -1.5 -10.4
Share based - - - - - - 0.1 - 0.1
payments
Other changes - - - - - - - 0.0 0.0
--------------------------------------------------------------------------------
Equity on Sept 3.6 16.7 -2.3 -2.3 4.9 -2.9 115.2 9.4 142.3
30, 2012
--------------------------------------------------------------------------------
* For the period,
(net of tax)
SEGMENT INFORMATION*
MEUR III III I-III I-III I-IV
Net Sales by Operating Segment 2012 2011 2012 2011 2011
------------------------------------------------------------------------
Group Products 37.5 37.9 132.2 134.3 174.5
Third Party Products 28.1 25.1 90.6 84.4 105.0
------------------------------------------------------------------------
Total 65.6 63.0 222.8 218.7 279.5
Operating Profit by Operating Segment
------------------------------------------------------------------------
Group Products 2.1 1.4 16.8 18.7 22.4
Third Party Products 1.5 0.9 8.8 8.5 8.4
------------------------------------------------------------------------
Total 3.7 2.3 25.7 27.2 30.7
Sept 30 Sept 30 Dec 31
Assets by Operating Segment 2012 2011 2011
-------------------------------------------------------------------------
Group Products 218.2 208.2 207.7
Third Party Products 71.5 67.1 68.8
-------------------------------------------------------------------------
Non-interest bearing assets total 289.7 275.2 276.5
Unallocated interest-bearing assets 41.4 34.7 38.1
-------------------------------------------------------------------------
Total assets 331.1 310.0 314.5
Liabilities by Operating Segment
-------------------------------------------------------------------------
Group Products 39.5 37.6 35.0
Third Party Products 13.1 13.0 14.5
-------------------------------------------------------------------------
Non-interest bearing liabilities total 52.6 50.7 49.5
Unallocated interest-bearing liabilities 136.3 128.6 129.3
-------------------------------------------------------------------------
Total liabilities 188.9 179.3 178.8
Net Sales by Area** III III I-III I-III I-IV
MEUR 2012 2011 2012 2011 2011
------------------------------------------------------
North America 16.1 13.0 58.0 50.3 69.1
Nordic 13.4 12.5 49.3 50.2 65.3
Rest of Europe 26.0 25.0 89.1 86.0 102.7
Rest of the world 10.1 12.5 26.5 32.1 42.4
------------------------------------------------------
Total 65.6 63.0 222.8 218.7 279.5
* As of January 1, 2012 the reportable operating segments include the following
product lines: Group Products include Group Fishing Products, such as Lures,
Fishing Hooks, Fishing Lines and Fishing Accessories, as well as Other Group
Products, mainly Winter Sports and some other non-fishing related business
manufactured and/or sourced by the Group and sold under the Group's brands.
Third Party Products include non-Group branded fishing products and third party
products for hunting, outdoor and winter sports distributed by the Group.
** Geographical information has been prepared on source basis i.e. based on the
location of the business unit. As of January 1, 2012 the net sales is presented
excluding intra-Group transactions, i.e. including only Group's external sales
KEY FIGURES BY QUARTERS I II III IV I-IV I II III
MEUR 2011 2011 2011 2011 2011 2012 2012 2012
-------------------------------------------------------------------------
Net sales 74.7 80.9 63.0 60.8 279.5 73.5 83.7 65.6
EBITDA 13.7 14.4 4.1 5.5 37.7 12.0 13.3 5.4
Operating profit 12.1 12.8 2.3 3.5 30.7 10.4 11.6 3.7
Profit before taxes 11.1 11.3 0.3 2.5 25.2 10.4 10.5 1.9
Net profit for the period 7.9 8.0 0.2 1.1 17.2 7.5 7.2 1.3
-------------------------------------------------------------------------
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 2011, except for the adoption of the new or
amended standards and interpretations. Adoption of amendment of IFRS 7 did not
result in any changes in the accounting principles that would have affected the
information presented in this interim report.
Rapala changed its reportable operating segments from January 1, 2012. Rapala's
reportable operating segments are Group Products consisting of Group Fishing
Products and Other Group Products, and Third Party Products.
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 2012. 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, 2012, the book value of inventories included a provision for
net realizable value of 3.6 MEUR (2.9 MEUR at September 30, 2011 and 3.2 MEUR at
December 31, 2011).
Assets held for sale
As part of the relocation of Finnish distribution operations, an office and
warehouse building in Korpilahti, Finland, was classified as held for sale
during the fourth quarter in 2011.
Impact of business acquisitions on the consolidated financial statements
In September 2012, Rapala purchased a 20% share of the Group's Indonesian
distribution company. This acquisition raised Rapala's ownership to 100%.
Acquisition has no significant impact on the Group's consolidated financial
statements.
During the first quarter Rapala acquired the assets, including Mora trademark in
North America, of Minnesota based Strike Master Corporation ("Strike Master"),
the leading supplier of ice augers in the US. Rapala also acquired 100% of the
share capital of Swedish Mora Ice Ab including the Mora ICE brand, together with
all intellectual property rights relating to the Mora ICE products. Mora ICE is
Europe's leading and premium brand of ice augers and auger cutting blades. Both
of the acquisitions were completed in February. The closing accounts were
finalized during the third quarter and the final payment of 0.4 MEUR was made to
the sellers in August. Total considerations for the acquisitions during 2012
amounted to 6.8 MEUR.
These strategic initiatives will give Rapala the global leadership position in
the ice fishing category. Rapala is well equipped to exploit this position as it
is having strong distribution companies in all main arctic markets: US, Canada,
Russia, East European and Nordic countries, Japan and China.
Net sales after the acquisitions, 1.5 MEUR, are included in the consolidated
income statement. The acquisitions did not have material impact on the profit of
the Group. Due to the structure of the acquisitions it is not possible to
reliably determine pre-transaction sales and profit prior in 2012.
The transaction costs of 0.0 MEUR have been expensed and are included in the
other operating expenses in the income statement and treated as a non-recurring
item.
The goodwill of 0.7 MEUR is justified by expansion of product assortment and
market coverage as well as utilization of economies of scale in sourcing and
distribution. None of the goodwill is expected to be deductible for income tax
purposes. The goodwill will be tested for impairment.
The business combinations are accounted for by applying the acquisition method.
The fair value of intellectual property rights is established using the relief
from royalty method. The fair value of customer relationships is established
with the income approach based on the future economic returns from the customers
over their useful lives.
MEUR 2012
-------------------------------------------------------
Inventories 1.8
Trade and other non-interest-bearing receivables 0.3
Intangible assets 4.4
Tangible assets 0.1
Trade and other non-interest-bearing payables 0.0
Deferred tax liability (net) -0.6
Non-controlling interests 0.0
-------------------------------------------------------
Fair value of acquired net assets 6.0
-------------------------------------------------------
MEUR 2012
-------------------------------------------------------
Cash paid upon closing 6.4
Cash paid later 0.4
-------------------------------------------------------
Total purchase consideration 6.8
-------------------------------------------------------
Goodwill 0.7
-------------------------------------------------------
Cash paid for the acquisitions 6.8
Cash and cash equivalents acquired -
-------------------------------------------------------
Net cash flow 6.8
-------------------------------------------------------
Non-recurring income and expenses included in III III I-III I-III I-IV
operating profit
MEUR 2012 2011 2012 2011 2011
--------------------------------------------------------------------------------
Costs related to business acquisitions 0.0 0.0 0.0 -0.1 -0.3
Restructuring of Hungarian operations - - - - 0.1
Relocation of Finnish operations - -0.2 - -0.3 -0.3
Net gain from sale of gift manufacturing unit in -0.2 -0.1 -0.3 -0.2 1.5
China*
Other restructuring costs - -0.1 - -0.2 -0.4
Gain on disposal of real estate in Finland - - 0.1 - -
Other non-recurring items 0.0 - 0.0 - -
--------------------------------------------------------------------------------
Total included in EBITDA -0.2 -0.4 -0.2 -0.7 0.6
--------------------------------------------------------------------------------
Impairment of non-current assets relating to - - - - -0.4
relocation of Finnish operations
Other non-recurring impairments - -0.2 - -0.2 0.0
--------------------------------------------------------------------------------
Total included in operating profit -0.2 -0.5 -0.2 -0.9 0.2
--------------------------------------------------------------------------------
* I-IV 2011: Including a gain of 1.9 MEUR and costs related to divestment.
Commitments Sept 30 Sept 30 Dec 31
MEUR 2012 2011 2011
--------------------------------------------------------------------------------
On own behalf
Business mortgage* - 16.1 16.1
Guarantees 0.1 0.1 0.1
Minimum future lease payments on 15.8 16.8 15.2
operating leases
--------------------------------------------------------------------------------
* The Group refinanced its loan facilities in April 2012, and the business
mortgage related to the previous facility was released. The new loan facilities
are unsecured and include normal financial covenants.
Sales Other
Related party transactions and other Pur- Rents expen- Recei- Paya-
MEUR income chases paid ses vables bles
--------------------------------------------------------------------------------
I-III 2012
Joint venture Shimano Normark 3.4 - - - 0.5 0.0
UK Ltd
Associated company Lanimo Oü - 0.0 - - 0.0 -
Entity with significant - - 0.1 0.1 0.0 -
influence over the Group*
Management - - 0.3 - 0.0 0.0
I-III 2011
Joint venture Shimano Normark 0.8 - - - 1.0 -
UK Ltd
Associated company Lanimo Oü - 0.1 - - 0.0 -
Entity with significant - - 0.1 0.1 0.0 0.0
influence over the Group*
Management - - 0.3 - 0.1 0.0
I-IV 2011
Joint venture Shimano Normark 1.6 - - - 0.1 -
UK Ltd
Associated company Lanimo Oü - 0.1 - - 0.0 -
Entity with significant - - 0.2 0.1 0.0 0.0
influence over the Group*
Management - - 0.3 - 0.0 0.0
--------------------------------------------------------------------------------
* Lease agreement for the real estate for the consolidated operations in France
and a service fee.
Open derivatives Nominal Positive fair Negative Net fair
MEUR amount values fair values values
-------------------------------------------------------------------------------
Sept 30, 2012
Foreign currency 52.0 0.4 0.3 0.0
options and forwards
Interest rate swaps 90.2 - 2.0 -2.0
-------------------------------------------------------------------------------
Total 142.2 0.4 2.3 -2.0
Sept 30, 2011
Foreign currency 3.9 0.1 0.0 0.1
options
Interest rate swaps 86.1 - 2.2 -2.2
-------------------------------------------------------------------------------
Total 90.0 0.1 2.2 -2.1
Dec 31, 2011
Foreign currency 3.4 0.2 - 0.2
options
Interest rate swaps 67.9 - 2.1 -2.1
-------------------------------------------------------------------------------
Total 71.3 0.2 2.1 -1.9
-------------------------------------------------------------------------------
The Group's financial risks and hedging principles are described in detail in
the Annual Report 2011.
Share based incentive plan
In June 2012, the Board approved a new share based incentive plan for the
Group's key personnel. The plan includes one earning period which commenced on
April 1, 2012 and will end on June 30, 2013. The potential reward from the plan
will be based on development of Rapala Group's inventory levels and EBITDA. The
potential reward will be paid primarily as Rapala's shares in August 2013. The
target group of the plan consists of 20 key employees. The gross rewards to be
paid on the basis of the plan will correspond to the value maximum total of
235 000 Rapala shares.Shares and share capital
On April 11, 2012 The Annual General Meeting updated Board's authorization on
issuance and repurchase of shares.
On September 30, 2012, 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 2012 was 39 468 449. During the first nine
months, Rapala bought back total 49 343 of own shares. On September 30, 2012
Rapala held 601 400 own shares, representing 1.5% of the total number of Rapala
shares and the total voting rights. The average share price of all repurchased
own shares held by Rapala was EUR 4.77.
During the first nine months, 2 823 789 shares (5 667 519) were traded at a high
of 6.50 EUR and a low of 4.75 EUR. The closing share price at the end of the
period was 5.00 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 as Rapala has continued to expand its operations.
Accordingly, Group management continues to develop risk management practices and
internal controls during 2012. Detailed descriptions of the Group's strategic,
operative and financial risks as well as risk management principles are included
in the Annual Report 2011.
Due to the nature of the fishing tackle business and the geographical scope of
the Group's operations, the business has traditionally been seasonally stronger
in the first half of the year compared to the second half. The summer fishing
season is approaching its end in the northern hemisphere and the success of the
coming season for winter sports and ice fishing equipment is partly dependent on
the timing and length of winter weathers. The new ice fishing business will to
some extent offset this seasonality during the rest of 2012, while introduction
of such new business will be subject to increased uncertainties and risks
related to ice conditions in North America, northern Europe and Russia.
The biggest deliveries for both summer and winter seasons are concentrated into
relatively short time periods, and hence a well functioning supply chain is
required. The Group's sales are to some extent affected by weather as it impacts
consumer demand and the timing and length of the seasons. The 2011/2012 winter
season was challenging in some markets and consequently retailers were left with
excess inventories. This together with general cautiousness may affect winter
business in the next winter season. Difficult winter season may also increase
some retailers' credit risk and thereby decrease the Group's sales.
A major supply chain and logistics initiative to improve the Group's inventory
turnovers and shorten the factory lead-times continues in 2012, including
planning of new initiatives. Before fully implemented, these initiatives may
temporarily have negative impact on the Group's inventory levels. The possible
product life-cycle initiatives as well as inventory clearance sales supporting
the inventory reduction targets may have some short-term negative impacts on
sales and profitability of some product groups. The ramp-up phase of the new
production facilities in Batam, Indonesia, may increase certain production and
supply chain risks temporarily.
The Group successfully refinanced its credit facilities in April, 2012. This has
decreased the Group's liquidity and refinancing risks. The new credit facilities
include some financial covenants, which are actively monitored.
The fishing tackle business has not traditionally been strongly influenced by
the increased uncertainties and downturns in the general economic climate. They
may, however, 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, such as gasoline
price, uncertainties concerning employment and governmental austerity measures
may temporarily affect consumer spending also in the fishing tackle business.
However, the underlying consumer demand has historically proven to be fairly
solid.
The truly global nature of the Group's sales and operations spreads the market
risks caused by the current uncertainties in the global economy. The Group is
cautiously monitoring the development both in the global macro economy as well
as in the various local markets it operates in. The uncertainties in future
demand as well as the length of the Group's supply chain increases the
importance of supply chain management. Strong and rapid increases in consumer
demand may put challenges on Group's supply chain to meet the demand. Management
balances between risk of shortages and risk of excess production and purchasing,
which would lead to excess inventories in the Group. Cash collection and credit
risk management is high on the agenda of local management and this may affect
sales to some customers. Quality of the accounts receivables is monitored
closely and write-downs are initiated if needed.
The Group's sales and profitability are impacted by the changes in foreign
exchange rates. The disturbances in global economy may cause heavy and
unexpected fluctuations in foreign exchange rates. The Group monitors actively
its currency position and risks and hedges risks in several currencies by
following the risk policy set by the Board of Directors. To fix the exchange
rates of future foreign exchange denominated sales and purchases, the Group has
entered into several currency hedging agreements. As the Group is not applying
hedge accounting in accordance to IAS 39, the unrealized mark-to-market
valuations of currency hedging agreements has an impact on the Group's operating
profit. Following implementation of updated risk policy in the third quarter of
2012 the nominal value of hedging instruments will increase thereby potentially
increasing the quarterly volatility of unrealized items in operating profit, The
continuing strengthening of the Chinese yuan coupled with the possible
strengthening of the US dollar increases cost pressures. Additionally, certain
inflationary trends increase this pressure. The Group is closely monitoring
market development and cost structure and considering possibility and
feasibility of price increases, hedging actions and cost rationalization.
No significant changes are identified in the Group's strategic risks or business
environment.
[HUG#1651106]
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