2009-10-23 08:30:00 CEST
2009-10-23 08:32:13 CEST
REGULATED INFORMATION
Rapala VMC - Interim report (Q1 and Q3)
INTERIM REPORT FOR JANUARY TO SEPTEMBER 2009
Rapala VMC Corporation
Stock Exchange Release
October 23, 2009 at 9.30 a.m.
Major cash flow improvement as a result of strong execution of
working capital management
- Net sales for the third quarter were 50.2 MEUR (III/08: 52.7 MEUR).
Net sales for the first nine months decreased to 183.1 MEUR
(I-III/08:192.1 MEUR).
- Operating profit for July to September, excluding non-recurring
items, was affected by the decrease in sales and especially negative
currency movements in Scandinavia and East Europe and totaled 2.0
MEUR (3.6 MEUR). Comparable operating profit for the nine-month
period was 22.4 MEUR (27.4 MEUR). Reported operating profit was 1.9
MEUR (3.6 MEUR) for the quarter and 21.4 MEUR (28.1 MEUR) for the
first nine months of the year.
- Net profit for the third quarter was 1.5 MEUR (2.0 MEUR) and 15.1
MEUR (18.2 MEUR) for the first nine months of the year. Earnings per
share were 0.02 EUR (0.03 EUR) for July to September and 0.33 EUR
(0.40 EUR) for January to September.
- The major working capital initiative started last November
progressed and the positive results continued to increase during the
third quarter. Accordingly, the cash flow from operating activities
for the third quarter improved clearly to 20.6 MEUR (14.0 MEUR) and
was 18.6 MEUR (3.8 MEUR) for the first nine months. Additional
improvements are expected to materialize during the fourth quarter
and in 2010.
- Implementation of the Group's strategy for profitable growth
continued with set-up of new distribution companies in Romania,
Belarus and China as well as performance improvement initiatives in
China and Hungary.
- Orders for Group branded lures have increased strongly and the
Group lure manufacturing facilities in Europe and China are currently
running at full capacity.
- It is expected that the net sales for 2009 will be somewhat below
the level of 2008.
- Due to the prioritization of cash flow and reduction of inventory
over profitability as well as weakening of several currencies, the
comparable operating margin for 2009 is expected to be in the range
of 10-12%. Improvement of cash flow remains the top priority in the
Group while strong emphasis on innovation and development of new
products continues.
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 3 p.m. Finnish time (2 p.m. CET). Please dial +44 (0)20 7784 1038
or +1 347 366 9564 (pin code: 247330#) 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 (pin code: 247330#) to dial
is +44 (0)20 7111 1244. 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, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
Distribution: NASDAQ OMX Helsinki and Main Media
Market Situation and Sales
While the general market situation has not changed a lot, new
positive signs have been witnessed in several countries. In North
America and Europe, there are signs of increasing business activity.
In North America, orders for especially lures have increased to a
record level. There are positive indications also in the East Europe
but their effect on Group net sales is strongly diluted by the
weakening of local currencies. Sales in Baltic countries continued
poor as a result of the credit crisis and bad economic situation. The
general market conditions in Asia continued tight during the third
quarter but increased business activity was recorded especially in
South East Asia and Australia.
Net sales for July to September, which is seasonally a slow quarter,
were below last year levels at 50.2 MEUR (2008: 52.7 MEUR). Net sales
for the first nine months were 183.1 MEUR (192.1 MEUR). For the
quarter, US dollar (USD) was close to last year levels but
strengthened for the nine-month period. The net effect of the
strengthening of USD and weakening of many East European currencies
as well as Swedish and Norwegian crowns decreased the net sales for
the third quarter by 2.4 MEUR and 3.6 MEUR for the first nine months.
Net sales of Group Fishing Products were up 8% for the third quarter
and 7% for the first nine months of the year. Net sales of Other
Group Products decreased more than half for the quarter and more than
one third for the nine-month period as a result of reduced sales of
gift products and subcontracting services. Net sales of Third Party
Products decreased 6% for July to September and 12% for January to
September mainly because of the weakening of many East European and
Scandinavian currencies and reduced sales of higher price category
products like fishing electronics and expensive reels while the sales
of winter sports equipment was up both for the quarter and the
nine-month period.
Net sales in North America increased 3% for the third quarter and 12%
for the first nine months of the year as a result of increased
business activity and strengthening of the USD. In the Nordic
countries, third quarter net sales decreased 23% as a result of
reduced distribution volumes of especially hunting products and
decrease in factory sales of fishing products to support the working
capital initiative as well as weakening of Swedish and Norwegian
crowns. Accordingly, the nine-month net sales in Nordics were down
10%. Net sales in Rest of Europe were down by 4% for the quarter and
13% for the nine-month period mainly due to weakened currencies in
East Europe. Measured in local currencies, the net sales of Rest of
Europe increased in the third quarter. Net sales in Rest of the World
decreased 6% in July to September but were still up 5% for January to
September mainly as a result of the new sales of Sufix products.
Financial Results and Profitability
Operating profit for the third quarter, excluding non-recurring
items, was affected by the decrease in sales and especially negative
currency movements in Scandinavia and East Europe and reached 2.0
MEUR (3.6 MEUR). Profitability was also affected by sales campaigns
in several countries to reduce inventories as part of the ongoing
working capital project. Comparable operating margin for the third
quarter was 4.0% (6.8%).
Reported operating profit for the third quarter was 1.9 MEUR (3.6
MEUR) including non-recurring costs of 0.1 MEUR. Reported three-month
operating margin was 3.8% (6.8%) and return on capital employed 4.0%
(7.7%).
Key figures III III I-III I-III I-IV
MEUR 2009 2008 2009 2008 2008
Net sales 50.2 52.7 183.1 192.1 243.0
EBITDA as reported 3.3 5.2 26.4 32.7 37.5
EBITDA excl. one-off items 3.4 5.2 26.7 32.0 36.7
Operating profit as reported 1.9 3.6 21.4 28.1 31.3
Operating profit excl. one-offs 2.0 3.6 22.4 27.4 30.5
Comparable operating profit for the first nine months was down as a
result of decrease in sales, stock-clearance sales and negative
currency movements and reached 22.4 MEUR (27.4 MEUR). On the other
hand, fixed costs for the 9-month period were down 5% as a result of
several performance improvement initiatives carried out during the
last two years. Operating margin, excluding non-recurring items,
decreased to 12.2% (14.3%).
Reported operating profit for the first nine months amounted to 21.4
MEUR (28.1 MEUR) including 1.0 MEUR of non-recurring costs and
write-downs. Operating profit for January to September in 2008
included 0.7 MEUR (net) non-recurring gains. Reported nine-month
operating margin was 11.7% (14.6%) and return on capital employed
14.7% (20.1%).
Operating profit of Group Fishing Products decreased strongly for the
third quarter as a result of weakening of many currencies and
stock-clearance sales and was 8% below last year level for the first
nine months. Operating profit of Other Group Products fell close to
break-even for both for the quarter and for the nine-month period as
a result of the major drop in sales of gift products and
subcontracting services. Operating profit of Third Party Products
decreased 6% for July to September and 37% for January to September
due to negative currency movements and reduced sales.
Financial (net) expenses were positive 0.1 MEUR (expense of 1.0 MEUR)
for the third quarter. Net interest expenses were down to 0.8 MEUR
(1.3 MEUR) and the (net) currency exchange gains booked in financial
items were 0.9 MEUR (0.3 MEUR). For the first nine months financial
(net) expenses were 1.0 MEUR (3.4 MEUR), net interest expenses 2.7
MEUR (4.1 MEUR) and (net) currency exchange gains 1.7 MEUR (0.8
MEUR).
Net profit decreased for the third quarter to 1.5 MEUR (2.0 MEUR) and
for the first nine months of the year to 15.1 MEUR (18.2 MEUR).
Earnings per share were 0.02 EUR (0.03 EUR) for July to September and
0.33 EUR (0.40 EUR) for January to September.
Cash Flow and Financial Position
The major working capital initiative started last November progressed
and the positive results continued to increase during the third
quarter. Accordingly, the cash flow from operating activities for the
third quarter increased clearly to 20.6 MEUR (14.0 MEUR) and was 18.6
MEUR (3.8 MEUR) for the first nine months. Additional improvements
are expected to materialize during the fourth quarter and in 2010.
As a result of the strong execution of working capital management,
inventories decreased 6.8 MEUR in the third quarter and, non-interest
bearing assets, mainly trade receivables, decreased 15.5 MEUR. The
Group's working capital project includes a wide variety of actions,
i.e. to develop the Group's internal and external supply chains,
change ways of working in production planning and internal order
management and to implement supporting IT systems to facilitate the
current and new processes. After a pilot project, the management
decided in September to implement a global logistics software to
support the working capital and supply chain management.
Cash used in investing activities amounted to 1.3 MEUR (1.6 MEUR) for
the third quarter. In addition to the normal capital expenditure of
1.7 MEUR (1.6 MEUR) and 0.0 MEUR (1.4 MEUR) of acquisitions, it
included 0.4 MEUR (1.6 MEUR) proceeds from sales of assets. Net cash
used in investing activities for the nine-month period was 3.7 MEUR
(4.9 MEUR), including capital expenditure of 4.3 MEUR (4.8 MEUR),
acquisitions of 1.2 MEUR (1.8 MEUR) and 1.7 MEUR (1.6 MEUR) proceeds
from sales of assets.
Net interest-bearing debt was down from last September at 83.3 MEUR
(Dec 2008: 89.5 MEUR) as cash was released from working capital. The
liquidity of the Group remained good and even improved during the
quarter. Equity-to-assets ratio improved from last September and
reached 41.4% (Dec 2008: 38.0%). Also gearing was better than in last
September at 75.2% (Dec 2008: 86.4%).
Strategy Implementation - Growth
During the third quarter, the management continued discussions and
negotiations regarding acquisitions and business combinations to
further implement the Group's strategy for profitable growth.
Development of organic growth also in terms of extensions of current
product categories as well as special marketing, sales and brand
initiatives continued.
The process to establish a distribution company in Romania to support
the sales growth in South East Europe continued and the company was
registered in October. The new distribution company is fully
operational by the end of the year.
The Group also started the process to establish a distribution
company in Belarus to support the sales growth in the country. Until
now, products to Belarus markets have been supplied from various
surrounding countries.
The process to set-up a company in China to distribute Group's gift
products in this very quickly growing market was initiated in the
third quarter. This distribution company will be fully operational in
the beginning of 2010.
Integration of the Sufix business acquired in 2008 progressed on plan
and will be completed by the end of the year.
Strategy Implementation - Profitability
Strong emphasis on performance improvement initiatives continued in
the third quarter while the benefits from the ongoing and finalized
initiatives continued to capitalize.
The performance improvement initiative started in the second quarter
in Hungary progressed on plan. The aim of the project is to ensure
continuous leadership in the fast growing South East European market
as well as improved financial performance and reduced working
capital.
The performance improvement initiatives at the Group's manufacturing
facilities in China continued. As a result of streamlining the
operations, increasing subcontracting and cutting the capacity to
more quickly adjust to and, more accurately meet the market
requirements, the Group has reduced the headcount in China
considerably. Further development and fine-tuning of the new
operating model in the Chinese manufacturing operations will continue
during the coming months.
In Hong Kong, the Group signed the agreement to sell its office
premises as part of the restructuring of operations in China. The
headquarters of Chinese manufacturing operations will move into
smaller leased premises by the end of the fourth quarter when the
sale transaction is expected to be closed. When completed, the Group
will record a 0.5 MEUR non-recurring gain on the deal.
A major supply chain and logistics initiative, started during the
second quarter, to shorten the lead times, lower the inventories and,
further improve the service levels to customers, has been expanded to
cover the Group's manufacturing and distribution units globally.
Total Group headcount at the end of September was 1 976, down 44%
from September 2008. This major reduction results mainly from the
changes in the operating model in the Chinese manufacturing.
Short-term Outlook
While the general market situation has not changed a lot during 2009,
new positive signs have recently been witnessed in several countries.
In addition to increased business activity, American Sportfishing
Association just announced that the sales of US fishing licenses were
up 8% for the first half of 2009. It is though expected that the
general uncertainty in the world economy will still continue during
the coming months. This will most likely continue to affect the
ordering behavior of many customers and maintain the need for quick
deliveries and short lead-times.
Due to this challenging market situation and the weakening of many
currencies in countries where the Group operates, it is expected that
the net sales for 2009 will be somewhat below 2008 level. Due to the
prioritization of cash flow and reduction of inventory over
profitability as well as weakening of several currencies, the
comparable operating margin for 2009 is expected to be in the range
of 10-12%.
While the Group continues to implement its strategy for profitable
growth, reducing working capital and increasing cash flow from
operating activities continue to be the top priority for the next few
months together with the finalization of the ongoing performance
improvement initiatives. Also strong emphasis on innovation and
development of new products continues.
At the end of September 2009, the Group's order backlog was down 1%
from last September to 26.8 MEUR (Dec. 2008: 34.5 MEUR). Orders for
Group branded lures have though increased clearly and the Group lure
manufacturing facilities in Europe and China are currently running at
full capacity.
The fourth quarter interim report and annual accounts 2009 will be
published on February 4.
Helsinki, October 23, 2009
Board of Directors of Rapala VMC Corporation
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
INCOME STATEMENT III III I-III I-III I-IV
MEUR 2009 2008 2009 2008 2008
Net sales 50.2 52.7 183.1 192.1 243.0
Other operating income 0.2 0.5 0.6 2.3 3.1
Cost of sales 30.4 31.0 104.0 105.7 135.3
Other costs and expenses 16.6 17.0 53.3 56.0 73.2
EBITDA 3.3 5.2 26.4 32.7 37.5
Depreciation and amortization 1.4 1.6 5.0 4.7 6.2
Operating profit 1.9 3.6 21.4 28.1 31.3
Finance income and expenses -0.1 1.0 1.0 3.4 4.8
Share of results in associates 0.0 0.0 0.0 0.0 0.0
Profit before taxes 2.1 2.6 20.3 24.6 26.5
Income taxes 0.6 0.6 5.3 6.4 7.3
Net profit for the period 1.5 2.0 15.1 18.2 19.2
Attributable to:
Equity holders of the Company 0.8 1.2 13.0 15.8 17.7
Minority interest 0.6 0.7 2.1 2.4 1.6
Earnings per share for profit
attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted =
non-diluted) 0.02 0.03 0.33 0.40 0.45
STATEMENT OF COMPREHENSIVE INCOME III III I-III I-III I-IV
MEUR 2009 2008 2009 2008 2008
Net profit for the period 1.5 2.0 15.1 18.2 19.2
Other comprehensive income, net of tax:
Change in translation differences -0.3 3.3 0.0 0.3 -1.2
Gains and losses on cash flow hedges -0.6 0.0 -0.2 -0.1 -0.2
Gains and losses on hedges of net
investments 0.0 -1.3 0.1 -1.4 -2.8
Fair value gains on available-for-sale
investments - - - - -0.1
Total other comprehensive income, net of
tax -0.9 2.0 -0.1 -1.2 -4.3
Total comprehensive income for the
period 0.6 4.0 14.9 17.0 14.9
Total comprehensive income attributable
to:
Equity holders of the Company 0.0 3.3 12.8 14.6 13.4
Minority interest 0.6 0.7 2.2 2.4 1.6
STATEMENT OF FINANCIAL POSITION Sept 30 Sept 30 Dec 31
MEUR 2009 2008 2008
ASSETS
Non-current assets
Intangible assets 56.8 57.5 57.6
Property, plant and equipment 27.0 28.8 28.7
Non-current financial assets
Interest-bearing 0.4 0.6 0.5
Non-interest-bearing 7.2 7.7 7.7
91.3 94.6 94.6
Current assets
Inventories 96.3 93.3 98.4
Current financial assets
Interest-bearing 0.0 0.4 0.4
Non-interest-bearing 43.7 55.2 49.5
Cash and cash equivalents 36.3 27.0 30.6
176.3 175.9 178.9
Assets classified as held-for-sale 0.3 - -
Total assets 267.9 270.5 273.4
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of
the Company 106.6 103.3 101.7
Minority interest 4.1 3.1 1.9
110.7 106.3 103.7
Non-current liabilities
Interest-bearing 43.9 48.8 42.8
Non-interest-bearing 9.8 9.8 10.5
53.7 58.7 53.3
Current liabilities
Interest-bearing 76.2 68.1 78.1
Non-interest-bearing 27.3 37.4 38.3
103.5 105.5 116.4
Total equity and liabilities 267.9 270.5 273.4
KEY FIGURES III III I-III I-III I-IV
2009 2008 2009 2008 2008
EBITDA margin, % 6.6% 9.8% 14.4% 17.0% 15.5%
Operating profit margin, % 3.8% 6.8% 11.7% 14.6% 12.9%
Return on capital employed, % 4.0% 7.7% 14.7% 20.1% 16.9%
Capital employed at end of period, MEUR 194.0 195.3 194.0 195.3 193.2
Net interest-bearing debt at end of
period, MEUR 83.3 89.0 83.3 89.0 89.5
Equity-to-assets ratio at end of
period, % 41.4% 39.4% 41.4% 39.4% 38.0%
Debt-to-equity ratio at end of period,
% 75.2% 83.7% 75.2% 83.7% 86.4%
Earnings per share, EUR 0.02 0.03 0.33 0.40 0.45
Fully diluted earnings per share, EUR 0.02 0.03 0.33 0.40 0.45
Equity per share at end of period, EUR 2.73 2.62 2.73 2.62 2.59
Average personnel for the period 2 356 4 477 2 263 4 374 4 143
Definitions of key figures used in the interim report are consistent
with those used in the Annual Report 2008.
STATEMENT OF CASH III I-III
FLOWS III 2008 2009 I-III I-IV
MEUR 2009 2008 2008
Net profit for the
period 1.5 2.0 15.1 18.2 19.2
Adjustments to net
profit for the period * 1.7 1.5 11.8 10.2 13.0
Financial items and
taxes paid and received -2.3 -3.0 -5.8 -9.3 -14.0
Change in working
capital 19.7 13.5 -2.6 -15.2 -12.7
Net cash generated from
operating activities 20.6 14.0 18.6 3.8 5.4
Investments -1.7 -1.6 -4.3 -4.8 -7.1
Proceeds from sales of
assets 0.4 1.6 1.7 1.6 2.2
Sufix brand acquisition - -1.4 -1.1 -1.4 -1.5
Acquisition of
subsidiaries, net of
cash - 0.0 -0.1 -0.4 -0.5
Change in
interest-bearing
receivables 0.1 -0.1 0.0 0.0 0.0
Net cash used in
investing activities -1.3 -1.6 -3.7 -4.9 -6.8
Dividends paid 0.0 - -7.5 -6.9 -6.9
Net funding -22.8 -10.5 -0.8 7.8 11.9
Purchase of own shares -0.4 -0.3 -0.5 -0.5 -0.9
Net cash generated from
financing activities -23.2 -10.7 -8.7 0.3 4.1
Adjustments -0.5 0.9 -0.6 0.3 0.9
Change in cash and cash
equivalents -4.4 2.6 5.6 -0.4 3.6
Cash & cash equivalents
at the beginning of the
period 40.6 23.8 30.6 27.3 27.3
Foreign exchange rate
effect 0.1 0.6 0.1 0.1 -0.4
Cash and cash
equivalents at the end
of the period 36.3 27.0 36.3 27.0 30.6
* 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
Share Fair trans- invested Re- Mino-
pre- value lation non-rest- Own tained rity
Share mium re- diffe- ricted sha- earn- inte- Total
capital fund serve rences equity res ings rest equity
Equity on Jan
1, 2008 3.6 16.7 0.0 -9.8 4.9 - 80.6 0.9 96.9
Comprehensive
income* - - -0.1 -1.1 - - 15.8 2.4 17.0
Purchase of
own shares - - - - - -0.5 - - -0.5
Dividends
paid - - - - - - -6.9 - -6.9
Share based
payment - - - - - - 0.1 - 0.1
Other changes - - - - - - 0.0 -0.2 -0.3
Equity on
Sept 30, 2008 3.6 16.7 -0.1 -10.9 4.9 -0.5 89.6 3.1 106.3
Equity on Jan
1, 2009 3.6 16.7 -0.3 -13.8 4.9 -0.9 91.5 1.9 103.7
Comprehensive
Income* - - -0.2 0.0 - - 13.0 2.2 14.9
Purchase of
own shares - - - - - -0.5 - - -0.5
Dividends
paid - - - - - - -7.5 - -7.5
Share based
payment - - - - - - 0.1 - 0.1
Equity on
Sept 30, 2009 3.6 16.7 -0.5 -13.8 4.9 -1.3 97.1 4.1 110.7
* For the period (net of tax)
SEGMENT INFORMATION* III III I-III I-III I-IV
Net Sales by Operating Segment 2009 2008 2009 2008 2008
Group Fishing Products 25.2 23.4 100.5 93.8 120.4
Other Group Products 2.8 5.8 10.5 16.2 22.7
Third Party Products 22.4 23.8 72.5 82.8 100.7
Intra-Group -0.1 -0.2 -0.4 -0.6 -0.9
Total 50.2 52.7 183.1 192.1 243.0
Operating Profit by Operating Segment
Group Fishing Products 0.4 1.7 14.3 15.6 19.7
Other Group Products 0.1 0.3 0.0 1.2 1.3
Third Party Products 1.5 1.6 7.1 11.2 10.4
Total 1.9 3.6 21.4 28.1 31.3
Sept 30 Sept 30 Dec. 31
Assets by Operating Segment 2009 2008 2008
Group Fishing Products 151.6 165.2 167.5
Other Group Products 10.8 12.4 9.3
Third Party Products 68.9 65.0 65.3
Intra-Group -0.1 -0.1 -0.1
Non-interest bearing assets total 231.2 242.5 242.0
Unallocated interest-bearing assets 36.8 28.0 31.4
Total assets 267.9 270.5 273.4
Liabilities by Operating Segment
Group Fishing Products 24.4 33.7 30.1
Other Group Products 3.6 1.8 2.6
Third Party Products 9.2 11.9 16.1
Intra-Group -0.1 -0.1 -0.1
Non-interest bearing liabilities total 37.1 47.2 48.8
Unallocated interest-bearing liabilities 120.0 116.9 121.0
Total liabilities 157.2 164.1 169.7
Net Sales by Area** III III I-III I-III I-IV
MEUR 2009 2008 2009 2008 2008
North America 10.2 9.9 48.0 42.7 57.5
Nordic 16.7 21.6 78.9 87.4 105.9
Rest of Europe 20.9 21.7 72.3 83.3 101.3
Rest of the world 12.5 13.3 41.5 39.7 54.3
Intra-Group -10.0 -13.8 -57.6 -60.9 -76.0
Total 50.2 52.7 183.1 192.1 243.0
* The new operating segments (IFRS 8) 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 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 2008 2008 2008 2008 2008 2009 2009 2009
Net sales 65.1 74.2 52.7 50.9 243.0 65.2 67.7 50.2
EBITDA 12.2 15.4 5.2 4.8 37.5 11.6 11.5 3.3
Operating profit 10.6 13.8 3.6 3.2 31.3 10.0 9.4 1.9
Profit before taxes 9.3 12.8 2.6 1.9 26.5 8.5 9.8 2.1
Net profit for the period 6.8 9.4 2.0 1.0 19.2 6.2 7.4 1.5
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 2008, except
for the adoption of the new or amended standards and interpretations.
Adoption of the amended standard IAS 1 affected the presentation of
Group's consolidated financial statements, especially the
consolidated income statement and the statement of changes in equity.
Adoption of IFRS 8 changed the presentation of segment information.
Adoption of IAS 23, IAS 32, IFRS 2 and IAS 39/IFRS 7 as well as the
new interpretations, IFRIC 13, IFRIC 15 and IFRIC 16 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 2009. Material events after the end
of the interim period, if any, have been discussed in the interim
review by the Board of Directors.
Inventories
At September 30, 2009, the book value of inventories differed from
its net realizable value by 2.4 MEUR (2.0 MEUR at September 30, 2008
and 2.4 MEUR at December 31, 2008).
Assets held-for-sale and sale of assets
As part of the consolidation of French operations, Rapala sold few
warehouses and office buildings in France in 2008. This resulted in a
capital gain of 1.4 MEUR in 2008. Rapala is in the process of
disposing its old office premises in Hong Kong, which are recognized
as assets held-for-sale in September 2009.
Non-recurring income and expenses included
in operating profit III III I-III I-III I-IV
MEUR 2009 2008 2009 2008 2008
Consolidation of French operations - -0.1 0.0 -0.2 -0.1
Closure of Irish lure factory 0.0 - -0.1 0.0 0.0
Sale of French warehouse and office
building - 0.2 - 1.4 1.4
Other restructuring costs -0.2 0.0 -0.3 -0.2 -0.3
Other non-recurring items - - - -0.2 -0.2
Total included in EBITDA -0.1 0.0 -0.3 0.7 0.8
Non-recurring impairment of tangible
assets in China - - -0.7 - -
Total included in operating profit -0.1 0.0 -1.0 0.7 0.8
Commitments Sept 30 Sept 30 Dec 31
MEUR 2009 2008 2008
On own behalf
Business mortgage 16.1 16.1 16.1
Guarantees 0.7 0.5 0.3
Minimum future lease payments on operating
leases 10.4 9.9 11.3
Related party
transactions Rents Other
MEUR Purchases paid expenses Receivables Payables
I-III 2009
Associated company
Lanimo Oü 0.1 - - 0.0 -
Entity with
significant influence
over the Group* - 0.1 0.0 0.0 -
Management - 0.2 0.0 - 0.0
I-III 2008
Associated company
Lanimo Oü 0.1 - - 0.0 -
Entity with
significant influence
over the Group - 0.1 0.0 0.0 -
Management - 0.1 0.0 - 0.0
I-IV 2008
Associated company
Lanimo Oü 0.1 - - 0.0 -
Entity with
significant influence
over the Group* - 0.2 0.1 0.0 0.0
Management* - 0.2 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 Positive fair Negative fair Net fair
MEUR amount values values values
Sept 30, 2009
Foreign currency
forwards 1.9 0.0 0.0 0.0
Interest rate swaps 138.5 0.0 0.7 -0.7
Total 140.4 0.0 0.7 -0.7
Sept 30, 2008
Foreign currency
forwards 7.9 0.4 - 0.4
Interest rate swaps 13.8 0.0 0.2 -0.2
Total 21.7 0.4 0.2 0.2
Dec 31, 2008
Foreign currency
forwards 7.2 0.3 - 0.3
Interest rate swaps 14.1 0.0 0.4 -0.4
Total 21.3 0.3 0.4 -0.1
Group's financial risks and hedging principles are described in
detail in the Annual Report 2008.
Share-based payments
The Group had three separate share-based payment programs in place on
September 30, 2009: one stock option program, one synthetic option
program settled in cash and one share reward program settled in
shares.
Share-based payment programs are valued at fair value on the grant
date and recognized as an expense in the income statement during the
vesting period with a corresponding adjustment to the equity or
liability. Grant date is the date at which the entity and another
party agree to a share-based payment arrangement, being when the
entity and the counterparty have a shared understanding of the terms
and conditions of the arrangement.
Options are valued at fair value on the grant date by using the
Black-Scholes option-pricing model. Regarding the option programs in
place, 454 750 share options (2004B) were granted on June 8, 2004,
46 250 share options (2004B) on February 14, 2006 and 978 500
synthetic options (2006A and 2006B) on December 14, 2006. On March
31, 2009, the exercise period for the 2004A stock option program
expired. The 2004B stock option program is exercisable between March
31, 2008 and March 31, 2010 at an exercise price of 6.09 EUR, the
2006A synthetic option program is exercisable between March 31, 2009
and March 31, 2011 at an exercise price of 6.14 EUR and the 2006B
synthetic option program is exercisable between March 31, 2010 and
March 31, 2012 at an exercise price of 5.95 EUR. The exercise prices
have been reduced by the amount of dividends distributed after the
subscription period for option rights has ended and before the
commencement of the subscription period. Terms and conditions of the
option programs are described in detail in the Annual Report 2008.
In March 2009, Rapala announced that its Board had approved a new
share-based incentive plan (Plan) for the Group's key personnel. The
aim of the Plan is to combine the objectives of the shareholders and
the key personnel in order to increase the value of the Company, to
commit the key personnel to the Company, and to offer them a
competitive reward plan based on holding the Company shares. The Plan
includes one earning period, which commenced on January 1, 2009 and
will end on December 31, 2010. The potential reward from the Plan
will be based on the Rapala's earnings per share (EPS) in 2010. The
potential reward from the Plan will be paid as the Company's shares
in 2011. The target group of the Plan consists of 50 key employees.
The gross rewards to be paid on the basis of the Plan will correspond
to the value of a maximum total of 200 000 Rapala shares.
The IFRS accounting effect on operating profit was -0.1 MEUR (0.0
MEUR) for the first quarter and -0.2 MEUR (+0.2 MEUR) for the first
nine months. The effect was +0.3 MEUR for the financial year 2008.
Shares and share capital
Based on authorization given by the Annual General Meeting 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 Annual General Meeting. 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 Annual General
Meeting.
On September 30, 2009, 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 2009 was
39 468 449. On February 6, 2009 the Board decided to continue buying
back own shares in accordance with the authorization granted by the
Annual General Meeting on April 3, 2008. The repurchasing of shares
ended on March 30, 2009 when Rapala held 221 936 own shares. Based on
the Board's decision on July 24, 2009 the repurchasing of own shares
continued until September 18, 2009. On September 30, 2009 Rapala held
321 867 of its own shares, representing 0.8% of the total number of
Rapala shares and the total voting rights. The average price for the
repurchased own shares in January-September 2009 was EUR 4.23.
As a result of the share subscriptions with the 2004B stock option
program, and if all stock options are fully exercised, the Group's
share capital may still be increased by a maximum of 38 970 EUR and
the number of shares by a maximum of 433 000 shares. The shares that
can be subscribed with these stock options correspond to 1.1% of the
Company's shares and voting rights.
During the nine months of 2009, 1 556 882 shares (2 860 408) were
traded. The shares traded at a high of 5.16 EUR and a low of 3.50 EUR
during the period. The closing share price at the end of the period
was 4.58 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 fast. Accordingly, Group
management has continued to develop risk management practices and
this work continues also in 2009. Detailed description of Group's
strategic, operative and financial risks and risk management
principles are included in the Annual Report 2008, see
www.rapala.com.
Due to the nature of the fishing tackle business and the geographical
scope of Group's operations, Group's deliveries and sales as well as
operating profit have traditionally been seasonally stronger in the
first half of the financial year compared to the second half. In 2008
even if more than 40% of the net sales were generated during the
second half of the year, almost 80% of the operating profit was still
generated in the first six months. In the first half of 2009,
deliveries to customers realized mostly according to plan. A major
supply chain and logistics initiative was started in the second
quarter to shorten the lead times and further improve the service
levels to customers.
Group's sales are also to some extent affected by the weather. In
several areas, last winter season was longer than previously. This
supported the sales of winter sports equipment but simultaneously
delayed the beginning of the summer season sales, which led to higher
than anticipated inventory levels in the end of March. During the
second and third quarter, inventory levels started to decrease mostly
as a result of the major ongoing working capital initiative. Further
reduction of inventory levels, even at the risk of losing some profit
margin, and improvement of cash flow remains a top priority in the
Group. The Group renegotiated its bank covenants during the second
quarter and as one of the results has now more flexibility to the
most critical cash flow covenant especially for the rest of the year
but partly also going forward.
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. While continuing,
these uncertainties may also affect the amount retailers invest in
advertising and promotions, which may affect consumer spending at
least temporarily. 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 in the global
economy. Despite some positive signals received during the third
quarter, the Group is still cautiously monitoring the development in
the various markets in order to avoid hasty conclusions. Especially,
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. 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 to IAS 39, also the
change in fair value of these unrealized currency hedging agreements
have an impact on the Group's operating profit. In some countries and
especially in Eastern Europe, the local currency weakened
dramatically during the second half of last year. This weakening was
taken into account in price setting, which has together with the
general economic downturn somewhat negatively impacted the number of
units sold in these countries. The market price of some commodity raw
materials have started to increase again and this may put pressure on
pricing of some products in the future.
The integration of the new Sufix fishing line business to the Group's
distribution network in 27 countries has progressed well but will
still require special attention of the management.
No significant changes are identified in the Group's strategic risks
or business environment.
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