2009-02-06 09:00:00 CET
2009-02-06 09:01:59 CET
REGULATED INFORMATION
Rapala VMC - Financial Statement Release
ANNUAL ACCOUNTS 2008 - RECORD PERFORMANCE IN A CHALLENGING YEAR
Rapala VMC Corporation
Stock Exchange Release
February 6, 2009 at 10.00 am
- Net sales for the fourth quarter were 50.9 MEUR (IV/07: 53.7 MEUR).
Net sales for the full year were slightly above last year at 243.0
MEUR (I-IV/07: 242.5 MEUR). With comparable exchange rates, the full
year net sales were up 4%.
- Operating profit for the fourth quarter improved 33% from last year
mainly as a result of performance improvement initiatives and totaled
3.2 MEUR (2.4 MEUR). Operating profit for the full year was up 11% to
an all-time record of 31.3 MEUR (28.3 MEUR). Comparable operating
profit improved to 33.7 MEUR (26.8 MEUR) and comparable operating
margin to 13.3% (11.0%).
- Net profit decreased to 1.0 MEUR (2.0 MEUR) for the fourth quarter
but increased to 19.2 MEUR (17.5 MEUR) for the full year. Earnings
per share was 0.05 EUR (0.05 EUR) for the quarter and 0.45 EUR (0.45
EUR) for the full year.
- Cash flow from operating activities was 1.6 MEUR (-0.3 MEUR) for
the fourth quarter and 5.4 MEUR (18.2 MEUR) for the full year.
Working capital was up as a result of increased inventories. A major
initiative was started to reduce inventory levels markedly in 2009.
- In the fourth quarter, the Group continued to implement its
strategy for profitable growth. Integration of the acquired Sufix
fishing line business proceeded on plan. Development of the
manufacturing operations in China started to materialize with clear
efficiency improvements and a new sales office was established in
Russia.
- It is expected that the net sales for 2009 will be at previous year
levels or somewhat above. Excluding non-recurring items, the target
is to maintain the operating margin close to the good levels reached
in 2008. The uncertainties are though now clearly higher than before.
- Board proposes to the Annual General Meeting that a dividend of EUR
0.19 per share to be paid. This represents 42% of earnings per share.
The attachment presents the summary of the annual review by the Board
of Directors and extracts from the financial statements for 2008.
A conference call on the 2008 result will be arranged today at 11 am
Finnish time (10 am CET). Please dial +44 (0)20 7111 1258 or +1 347
366 9564 (pin code: 793047#) 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: 793047#) to dial is +44 (0)20 7806 1970.
Teleconference replay facility, financial information and annual
summary of the stock exchange releases and announcements published in
2008 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
Year 2008 was a start for a challenging period in the fishing tackle
business, although this industry is typically quite non-cyclical
during recessions. Market situation remained quite good for the first
nine months of the year in Scandinavia, and very good in East Europe,
whereas the last quarter was clearly affected by overall caution and
uncertainty. Some markets in West Europe, and especially North
America, suffered more than others from the downturn in the general
economy. In the USA, the high petrol prices affected the peak season
of fishing tackle but this effect softened with the decreasing fuel
prices toward the end of the year. The general market conditions in
Asia and Australia tightened during the second half of the year.
Strong weakening of several currencies and the fluctuation of US
dollar increased the uncertainty in the business environment.
Reported net sales for 2008 were just slightly above last year levels
and amounted to 243.0 MEUR (2007: 242.5 MEUR). With comparable
exchange rates net sales were up 4 %. Weakening of the US dollar,
South African rand, Russian ruble and some other currencies decreased
the net sales for the full year by 9.1 MEUR.
In the Nordic countries, net sales increased 10%. Boosted by
continuous growth and strong performance in East Europe, net sales in
Rest of Europe were also up 10%. Net sales in Rest of the world were
14% below last year mainly because of the weakening of US dollar and
local currencies as well as the decline in general market conditions.
As a result of the weak general economics, high fuel prices during
the peak season and the weakening of the US dollar, net sales in
North America decreased 14%. With comparable exchange rates, North
American sales were down 8%.
The decrease of sales in North America affected strongly the net
sales of Lures, which was down 11%. Net sales of Fishing Hooks
decreased 9% and Fishing Lines 17%. Net sales of Fishing Accessories
decreased 5%. Net sales of Third Party Fishing Products, boosted by
increased sales of Shimano products in East Europe, were up 18%. Net
sales of Other Products were up 3% mainly as a result of increased
sales of hunting products in the Nordic countries.
Financial Results
IV IV I-IV I-IV
MEUR 2008 2007 2008 2007
Net sales 50.9 53.7 243.0 242.5
EBITDA 4.8 4.3 37.5 33.8
Operating profit (EBIT) 3.2 2.4 31.3 28.3
Profit before taxes 1.9 1.1 26.5 23.3
Net profit for the period 1.0 2.0 19.2 17.5
Operating profit for 2008 increased 11% to 31.3 MEUR (28.3 MEUR).
Also operating margin continued on the positive trend started in 2007
and increased to 12.9% (11.7%). Return on capital employed improved
to 16.9% (15.9%). Operating profit was positively affected mainly by
performance improvement actions and cost cuttings done in several
manufacturing and distribution companies. The result also included a
capital gain of 1.4 MEUR from the sale of the real estates in France
and 0.6 MEUR of non-recurring costs related to the performance
improvement and ongoing restructuring projects. The result also
benefitted from decreased IFRS based option expenses. In 2007,
operating profit included non-recurring gains of +1.6 MEUR (net).
Weakening of several currencies especially in the fourth quarter
reduced the operating profit by 3.1 MEUR. The largest negative
currency effects on operating profit in 2008 came from South African
rand, Russian ruble and Canadian dollar. While the Group's net sales
continue to be most sensitive to US dollar movements, its effect on
operating profit has continuously decreased as a result of increased
purchases in US dollar. The result of currency hedging related to
operating profit (+0.6 MEUR) is booked in financial items.
Comparable full year operating margin, excluding non-recurring items
and foreign exchange effects, improved clearly from 2007 and reached
13.3% (11.0%).
Management analysis I-IV/ I-IV/ I-IV/ I-IV/
MEUR 2008 2007 2008 2007
Operating profit as
Net sales as reported 243.0 242.5 reported 31.3 28.3
Non-recurring items
Foreign exchange effects 9.1 (net) -0.8 -1.6
Foreign exchange
Comparable net sales 252.1 242.5 effects 3.1
Comparable operating
profit 33.7 26.8
Operating margin as Comparable operating
reported 12.9% 11.7% margin 13.3% 11.0%
Operating profit increased in Nordic countries and Rest of Europe.
Comparable profitability of Nordic countries improved in line with
improved sales and as a result of performance improvement actions.
Improvement in operating profit in Rest of Europe was boosted by
increased sales in East Europe and the French capital gains on real
estate sales. Profitability in Rest of the world suffered mainly from
the weakened South African rand and Australian dollar, strengthening
of yuan as well as decreased sales in few Asian countries. Operating
profit in North America suffered from the reduced sales.
Financial income and expenses were 4.8 MEUR (5.0 MEUR). Net interest
expenses were 5.1 MEUR (5.7 MEUR) and currency exchange gains 0.4
MEUR (0.9 MEUR).
Net profit for the year increased to 19.2 MEUR (17.5 MEUR). Minority
interest increased to 1.6 MEUR (0.3 MEUR) as a result of the
distribution joint venture with Shimano in the East Europe.
Accordingly, earnings per share were on last year level at 0.45 EUR
(0.45 EUR).
Cash Flow and Financial Position
Cash flow from operating activities decreased from last year as a
result of increased working capital. Increase in working capital came
mainly from inventories, which increased 16.7 MEUR from previous year
mainly as a result of decline in sales in the USA and few other
countries as well as the new inventories built for the acquired Sufix
fishing line business. A major working capital initiative was started
in November to reduce inventories markedly in 2009.
Cash used in investing activities amounted to 6.8 MEUR (3.7 MEUR). In
addition to normal capital expenditure (7.1 MEUR), it included the
first installment (1.5 MEUR) of the consideration for the acquired
Sufix fishing line brand, increase of ownership in three Group
companies and payments relating to old acquisitions (0.5 MEUR) and
proceeds from sale of assets (2.2 MEUR).
Net interest-bearing debt increased to 89.5 MEUR (Dec 2007: 80.2
MEUR). The Group cash management was improved in 2008 by introducing
international cash pooling. The first repayment (9.7 MEUR) of the
term-loan raised in 2006 was made in October. The liquidity of the
Group remained good throughout the year and was further improved by
raising a 5 MEUR pension loan in December. The commercial paper
market collapsed during the second quarter of the year but started to
recover gradually during the second half of the year. At the end of
2008, the Group had unused revolving credit facilities of 23.5 MEUR.
Equity-to-assets ratio remained at last year levels at 38.0% (Dec
2007: 38.2%) and gearing increased to 86.4% (Dec 2007: 82.8%).
Strategy Implementation - Growth
During the year, 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 new product lines,
extensions of current product categories as well as special
marketing, sales and brand initiatives continued.
In July, Rapala and Yao I Co Ltd ("Yao I"), one of the leading
manufacturers of fishing line in the world having its operations in
Taiwan and China, concluded an exclusive supply agreement for the
supply of fishing lines. In connection to this arrangement, Yao I
sold its Sufix brand, including all intangible assets relating to
Sufix branded and other fishing line business (excluding
manufacturing related) to Rapala.
According to the terms of this exclusive supply agreement, after an
interim period and under certain conditions, Rapala alone will be
selling fishing lines manufactured by Yao I and Yao I will be
manufacturing fishing lines for Rapala only, including subcontracted
fishing lines for third party customers (OEM).
Sufix brand is very well known around the world already for more than
20 years. The largest market for Sufix is currently in the USA but
the brand is well represented also in Europe, Asia and Oceania. As
part of the deal, Rapala acquired the Sufix branded fishing line
inventory from Sufix North America. Transfer and integration of Sufix
business to Group companies around the world is proceeding on plan
and the shipments of 2009 products have started through the Group
distribution network.
Rapala aims to expand its fishing line sales in the next 2-3 years to
above 20 MEUR. The strategic long-term target is increase the fishing
line sales to 30-40 MEUR and gain a significant market share of the
global fishing line business. In 2008, the sales of Group-branded
fishing lines were some 5 MEUR. In addition, Rapala sold some third
party fishing lines.
The consideration for the Sufix brand, including all intangible
assets relating to Sufix branded and other fishing line businesses,
was 10 MUSD. The consideration will be settled over a period of seven
years, starting from 2008.
Strategic distribution alliance with Shimano continued to strengthen
the Group's position in the fastest growing fishing tackle markets in
Eastern Europe. In January 2008, Rapala started to distribute Shimano
fishing tackle through its joint venture distribution company in
Russia and Ukraine and, in September, in Czech Republic as well as
through its sales office in Slovakia. Another new step in this
cooperation took place in September when Shimano started to
distribute Rapala's products in the UK.
During the year, the Group opened two new sales offices in Russia, in
Khabarovsk and Ekaterinburg. These offices are expected to contribute
positively in the development of Russian fishing tackle market and
distribution. After these, the Group has eight regional sales offices
in Russia.
During 2008, the Group increased its shareholding in its distribution
company in Thailand from 80% to 100% and in Lithuania from 82% to
100%. In Finland, the Group's ownership in the cross-country ski
manufacturer Peltonen Ski was increased from 80% to 90%.
Strategy Implementation - Profitability
Strong emphasis on performance improvement initiatives continued
during 2008.
After closing the lure manufacturing unit in Ireland in April and
completing the ramp-up of the lure assembly factory in Russia, the
Group's European lure manufacturing operations started to contribute
to the financial performance of the Group. After the restructuring,
the full year savings are estimated to be 0.7 MEUR. The next step is
to increase production volumes in the lure factories in line with the
market demand.
The consolidation of France operations proceeded on plan and the
moves of distribution unit Waterqueen and fishing line supplier
Tortue to Morvillars were completed during the third quarter. Results
of this initiative started to capitalize gradually during the fourth
quarter. The consolidation will be finalized when the hook
distributor VMC Europe completes its move into joint premises during
next summer. After all relocations have been made and the new
organisation is fully operational, the annual savings in France are
expected to be 1-2 MEUR.
The performance improvement initiatives at the Group's manufacturing
facilities in China proceeded with major operational changes. The
physical separation of fishing tackle and gift businesses into
separate premises and organizations made it possible to strongly and
quickly develop processes separately for these two business lines. 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 by some 1000 persons since June.
Also several smaller performance improvement initiatives were
implemented in 2008 and their positive effects started to improve the
Group's financial performance already during the year.
Personnel and R&D
Number of personnel decreased 27% mainly during the second half of
the year and was 3 197 (4 356) at the year end. This change is mainly
due to the performance improvement initiatives and increased use of
subcontracting in the Group's manufacturing unit in China. At the
same time, the Group has further strengthened its organizations in
the fastest growing markets. The average number of personnel
decreased to 4 143 (4 577).
Research and development expenses increased 13% to 1.8 MEUR (1.6
MEUR) in 2008.
Risk Management and Environmental Affairs
The Group's emphasis and work on risk management and environmental
affairs continued to increase in 2008. The work to further develop
and implement environmental measurements progressed during the year.
The principles for Group's risk management and environmental affairs
as well as the work done and progress made in these areas are
described in more detail in the Annual Report for 2008.
Short-term Outlook
Market outlook for 2009 looks challenging. The slowdown and
uncertainty in the US and European economies as well as in many Asian
countries is expected to continue in the coming months. Fishing
tackle business has typically been quite non-cyclical during
recessions, which together with the Group's strong brands and
distribution power raises cautious optimism even in the current
market situation. In the history, fishermen and fisherwomen have
continued their activity even in uncertain economic times and,
therefore, the healthy demand for the Group products is expected to
continue also in 2009.
In this business environment, it is expected that the net sales for
2009 will be at previous year levels or somewhat above. Excluding
non-recurring items, the target is to maintain the operating margin
close to the good levels reached in 2008. The uncertainties are
though now clearly higher than before.
While the Group continues to implement its strategy for profitable
growth, the Group management will increase its emphasis on working
capital management with a target to reduce the inventory levels
markedly in 2009 by developing the Group supply chains and changing
ways of working in production planning and internal order management.
Increasing cash flow from operating activities will be one of the key
themes in 2009 together with the finalization of the ongoing
performance improvement initiatives and integration of the new
fishing line business.
At the year end, the Group order backlog was at last year levels at
34.5 MEUR (35.2 MEUR).
Proposal for profit distribution
The Board of Directors proposes to the Annual General Meeting that a
dividend of EUR 0.19 for 2008 (2007: EUR 0.18) per share be paid from
the Group's distributable equity and that any remaining distributable
funds be allocated to retained earnings. At December 31, 2008, the
parent company's distributable equity totaled 50.1 MEUR.
No material changes have taken place in the Group's financial
position after the end of the financial year 2008. Group's liquidity
is good and the view of the Board of Directors is that the
distribution of the proposed dividend will not undermine this
liquidity.
Helsinki, February 6, 2009
Board of Directors of Rapala VMC Corporation
INTERIM CONDENCED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
CONSOLIDATED INCOME STATEMENT IV IV I-IV I-IV
MEUR 2008 2007 2008 2007
Net sales 50.9 53.7 243.0 242.5
Other operating income 0.8 5.5 3.1 6.7
Cost of sales 29.7 31.1 135.3 135.8
Other costs and expenses 17.2 23.7 73.2 79.6
EBITDA 4.8 4.3 37.5 33.8
Depreciation 1.6 1.8 6.2 5.4
Operating profit (EBIT) 3.2 2.4 31.3 28.3
Financial income and expenses 1.4 1.3 4.8 5.0
Share of results in associated companies 0.0 0.0 0.0 0.0
Profit before taxes 1.9 1.1 26.5 23.3
Income taxes 0.9 -0.9 7.3 5.8
Net profit for the period 1.0 2.0 19.2 17.5
Attributable to:
Equity holders of the Company 1.9 2.0 17.7 17.3
Minority interest -0.9 0.1 1.6 0.3
Earnings per share for profit attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted = non-diluted) 0.05 0.05 0.45 0.45
CONSOLIDATED CASH FLOW STATEMENT IV IV I-IV I-IV
MEUR 2008 2007 2008 2007
Net profit for the period 1.0 2.0 19.2 17.5
Adjustments to net profit for the period * 2.8 0.7 13.0 14.8
Financial items and taxes paid and received -4.7 -3.1 -14.0 -11.1
Change in working capital 2.5 0.2 -12.7 -3.1
Net cash generated from operating activities 1.6 -0.3 5.4 18.2
Investments -2.3 -2.4 -7.1 -7.2
Proceeds from sales of assets 0.6 0.0 2.2 0.4
Sufix brand acquisition -0.1 - -1.5 -
Acquisition of subsidiaries, net of cash -0.1 0.0 -0.5 -2.7
Proceeds from disposal of subsidiaries, net of
cash - 5.4 - 5.9
Change in interest-bearing receivables 0.1 -0.2 0.0 -0.1
Net cash used in investing activities -1.9 2.8 -6.8 -3.7
Dividends paid - - -6.9 -4.6
Net funding 4.1 -5.3 11.9 -11.5
Purchase of own shares -0.3 - -0.9 -
Proceeds from share subscriptions - 5.0 - 5.0
Net cash generated from financing activities 3.7 -0.4 4.1 -11.1
Adjustments 0.6 0.4 0.9 0.4
Change in cash and cash equivalents 4.1 2.5 3.6 3.8
Cash & cash equivalents at the beginning of the
period 27.0 25.3 27.3 24.4
Foreign exchange rate effect -0.5 -0.5 -0.4 -0.9
Cash and cash equivalents at the end of the
period 30.6 27.3 30.6 27.3
* Includes reversal of non-cash items, income taxes and financial
income and expenses.
CONSOLIDATED BALANCE SHEET Dec 31 Dec 31
MEUR 2008 2007
ASSETS
Non-current assets
Intangible assets 57.6 51.1
Property, plant and equipment 28.7 28.4
Non-current financial assets
Interest-bearing 0.5 0.6
Non-interest-bearing 7.7 8.0
94.6 88.1
Current assets
Inventories 98.4 84.3
Current financial assets
Interest-bearing 0.4 0.1
Non-interest-bearing 49.5 52.8
Cash and cash equivalents 30.6 27.3
178.9 164.6
Assets classified as held-for-sale - 0.9
Total assets 273.4 253.7
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the
Company 101.7 96.0
Minority interest 1.9 0.9
103.7 96.9
Non-current liabilities
Interest-bearing 42.8 49.8
Non-interest-bearing 10.5 6.4
53.3 56.3
Current liabilities
Interest-bearing 78.1 58.4
Non-interest-bearing 38.3 42.0
116.4 100.5
Total equity and liabilities 273.4 253.7
KEY FIGURES IV IV I-IV I-IV
2008 2007 2008 2007
EBITDA margin, % 9.5% 7.9% 15.5% 13.9%
Operating margin, % 6.4% 4.5% 12.9% 11.7%
Return on capital employed, % 7.0% 5.4% 16.9% 15.9%
Capital employed at end of period, MEUR 193.2 177.1 193.2 177.1
Net interest-bearing debt at end of period,
MEUR 89.5 80.2 89.5 80.2
Equity-to-assets ratio at end of period, % 38.0% 38.2% 38.0% 38.2%
Debt-to-equity ratio at end of period, % 86.4% 82.8% 86.4% 82.8%
Earnings per share, EUR 0.05 0.05 0.45 0.45
Fully diluted earnings per share, EUR 0.05 0.05 0.45 0.45
Equity per share at end of period, EUR 2.59 2.43 2.59 2.43
Average personnel for the period 4 259 4 576 4 143 4 577
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the
Company
Cumu- Fund for
lative invested
Share Fair trans- non- Re- Mino-
pre- value lation restric- Own tained rity
Share mium re- diffe- ted sha- earn- inte- Total
MEUR capital fund serve rences equity res ings rest equity
Equity on Jan 1,
2007 3.5 16.7 0.1 -7.1 - - 67.6 0.6 81.3
Change in
translation
differences - - - -3.4 - - - - -3.4
Gains and losses
on cash flow
hedges * - - 0.0 - - - - - 0.0
Gains and losses
on hedges of net
investments * - - - 0.7 - - - - 0.7
Fair value changes
on
available-for-sale
investments * - - 0.0 - - - - - 0.0
Net income
recognized
directly in equity - - -0.1 -2.7 - - - - -2.7
Net profit for the
period - - - - - - 17.3 0.3 17.5
Total recognized
income and
expenses - - -0.1 -2.7 - - 17.3 0.3 14.8
Private offering 0.1 - - - 4.9 - - - 5.0
Dividends paid - - - - - - -4.6 - -4.6
Shares subscribed
with options 0.0 0.0 - - - - - - 0.0
Share option
program - - - - - - 0.4 - 0.4
Other changes - - - - - - 0.0 0.1 0.1
Equity on Dec 31,
2007 3.6 16.7 0.0 -9.8 4.9 - 80.6 0.9 96.9
Equity on Jan 1,
2008 3.6 16.7 0.0 -9.8 4.9 - 80.6 0.9 96.9
Change in
translation
differences - - - -1.2 - - - - -1.2
Gains and losses
on cash flow
hedges * - - -0.2 - - - - - -0.2
Gains and losses
on hedges of net
investments * - - - -2.8 - - - - -2.8
Fair value gains
on
available-for-sale
investments * - - -0.1 - - - - - -0.1
Net income
recognized
directly in equity - - -0.3 -4.0 - - - - -4.3
Net profit for the
period - - - - - - 17.7 1.6 19.2
Total recognized
income and
expenses - - -0.3 -4.0 - - 17.7 1.6 14.9
Purchase of own
shares - - - - - -0.9 - - -0.9
Dividends paid - - - - - - -6.9 - -6.9
Share option
program - - - - - - 0.1 - 0.1
Other changes - - - - - - 0.0 -0.5 -0.5
Equity on Dec 31,
2008 3.6 16.7 -0.3 -13.8 4.9 -0.9 91.5 1.9 103.7
* Net of tax
SEGMENT INFORMATION** IV IV I-IV I-IV
MEUR 2008 2007 2008 2007
Net Sales by Area**
North America 14.8 13.4 57.5 66.7
Nordic 18.5 21.0 105.9 96.0
Rest of Europe 18.0 19.3 101.3 92.1
Rest of the world 14.6 16.3 54.3 62.9
Intra-Group -15.1 -16.2 -76.0 -75.2
Total 50.9 53.7 243.0 242.5
Operating Profit by Area**
North America 1.6 1.0 4.3 7.5
Nordic -0.6 5.2 8.2 12.5
Rest of Europe 0.0 -5.3 14.1 3.4
Rest of the world 1.2 2.7 3.7 5.4
Intra-Group 1.1 -1.1 1.0 -0.3
Total 3.2 2.4 31.3 28.3
Net Sales by Product Line***
Lures 13.7 11.1 65.8 73.9
Fishing Hooks 3.2 3.7 15.4 16.9
Fishing Lines 1.4 1.4 5.0 6.0
Fishing Accessories 8.4 12.3 35.8 37.5
Third Party Fishing Products 13.0 11.4 74.5 63.4
Other Products 11.6 14.2 49.0 47.8
Intra-Group -0.3 -0.5 -2.5 -3.2
Total 50.9 53.7 243.0 242.5
** Note: This primary segment information is by geographical areas
and it has been prepared on source basis i.e. based on the location
of the business unit. Each area shows the sales/profit 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.
*** Note: This secondary segment information is by product lines.
Lures, Fishing Hooks, Fishing Lines and Fishing Accessories include
Group branded fishing tackle products. Third Party Fishing Products
include non-Group branded fishing products, mostly rods and reels.
Other Products include non-Group branded (third party) products for
hunting, outdoor and winter sports and Group branded products for
winter sports and some other businesses. As a result of the
strategically important acquisition of Sufix trademark and the
additional emphasis on fishing lines, Rapala has added Fishing Lines
to the product line based business segments.
KEY FIGURES BY
QUARTERS I II III IV I-IV I II III IV I-IV
MEUR 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008
Net sales 63.4 73.4 52.0 53.7 242.5 65.1 74.2 52.7 50.9 243.0
EBITDA 12.3 12.6 4.6 4.3 33.8 12.2 15.4 5.2 4.8 37.5
Operating profit
(EBIT) 12.0 11.0 2.9 2.4 28.3 10.6 13.8 3.6 3.2 31.3
Profit before
taxes 11.0 9.8 1.4 1.1 23.3 9.3 12.8 2.6 1.9 26.5
Net profit for
the period 7.7 6.7 1.1 2.0 17.5 6.8 9.4 2.0 1.0 19.2
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
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 2007, except
for the adoption of new interpretations: IFRIC 11, IFRIC 12 and IFRIC
14. Adoption of these interpretations did not result in any changes
in the accounting principles that would have affected the information
presented in this interim report.
Definition of key figures
Definitions of key figures used in the interim report are consistent
with those used in the Annual Report 2007.
Use of estimates
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.
Rounding of figures
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-December 2008. 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 December 31, 2008, the book value of inventories differed from its
net realizable value by 2.4 MEUR (2.4 MEUR at December 31, 2007).
Assets held-for-sale and sale of assets
As part of the consolidation of French operations, Rapala sold the
warehouse and office building in Saint Marcel in January 2008. This
resulted in a capital gain of 1.2 MEUR. In September 2008, Rapala
also sold the building in Loudeac. This resulted in a capital gain of
0.2 MEUR.
Acquisition of Sufix brand
In July 2008, Rapala and Yao I Co ltd ("Yao I"), one of the leading
manufacturers of fishing line in the world having its offices in
Changhua, Taiwan, and fishing line factories in Taiwan and China,
concluded an exclusive supply agreement for the supply of fishing
lines. In connection with this arrangement, Yao I sold its Sufix
brand, including all intangible assets relating to Sufix branded and
other fishing line business (excluding manufacturing related), to
Rapala. The consideration for the Sufix brand, including all
intangible assets relating to Sufix branded and other fishing line
business, is 10 MUSD and will be paid over a seven-year period. In
addition, Rapala paid 1.7 MUSD for Sufix fishing line inventories in
the USA.
Impact of acquisitions on the consolidated financial statements
Rapala increased its ownership in the Finnish cross-country ski
manufacturer Peltonen Ski Oy from 80% to 90% in January 2008,
ownership in the Lithuanian distribution company from 82% to 100% in
March 2008 and ownership in the distribution company in Thailand from
80% to 100% in September 2008. These acquisitions do not have a
material impact on the Group's financial statements for
January-December 2008. Rapala also made the final payment of the
Terminator acquisition (0.2 MEUR) closed in 2007, the final payment
of the Freetime acquisition (0.1 MEUR) closed in 2005 and a payment
of the minority acquisition of Normark Innovation Inc. (0.1 MEUR)
closed last year.
Commitments Dec 31 Dec 31
MEUR 2008 2007
On own behalf
Business mortgages 16.1 16.1
Guarantees 0.3 0.3
Minimum future lease
payments on operating
leases 11.3 9.5
Related party
transactions Rents Other
MEUR Purchases paid expenses Receivables Payables
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
I-IV 2007
Associated company
Lanimo Oü 0.1 - - 0.0 -
Entity with
significant influence
over the Group* - 0.1 0.1 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
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
Dec 31, 2007
Foreign currency
forwards 7.9 - 0.1 -0.1
Interest rate swaps 12.9 - 0.0 0.0
Total 20.8 - 0.2 -0.2
Group's financial risks and hedging principles are described in
detail in the Annual Report 2007.
Non-recurring income and expenses in operating
profit IV IV I-IV I-IV
MEUR 2008 2007 2008 2007
Sale of 50% of Rapala Shimano East Europe Oy - 4.9 - 4.9
Consolidation of French operations 0.1 -2.7 -0.1 -2.8
Closure of Irish lure factory - -1.1 0.0 -1.1
Sale of French warehouse and office building - - 1.4 -
Other disposals of assets - 0.0 0.0 0.4
Excess of Group's interest in the net fair values
of acquired net assets over costs (negative
goodwill) - -0.2 0.0 1.0
Other restructuring costs -0.1 -0.1 -0.3 -1.0
Other non-recurring items - - -0.2 0.1
Total 0.0 0.7 0.8 1.6
Share-based payments
The Group had two separate share-based payment programs in place on
December 31, 2008: one stock option program and one synthetic option
program settled in cash. Terms and conditions of the option program
are described in detail in the Annual Report 2007. The options are
valued at fair value on the grant date by using the Black-Scholes
option-pricing model. The total estimated value of the programs in
place is 2.4 MEUR. 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. 1 909 500 share options were granted on June 8,
2004, 92 500 share options on February 14, 2006 and 978 500 synthetic
options on December 14, 2006. On March 31, 2008, the exercise period
for the 2003B stock option program expired. The 2004A stock option
program is exercisable between March 31, 2007 to March 31, 2009 at an
exercise price of 5.96 EUR per share, 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 6.14 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. Applying of IFRS 2 reduced operating profit with
0.8 MEUR in 2007 and increased operating profit with 0.3 MEUR in 2008
mainly due to change in fair value of synthetic option program.
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.
Until October 24, 2008 Rapala's shares were divided to two classes:
38 578 769 old shares (trading code RAP1V) and 889 680 new restricted
shares (RAP1VN0107). The new class of shares was combined to the old
class of shares on October 24, 2008 when the difference regarding the
right to dividend between the classes ended. The new restricted
shares did not give right to dividend paid from the financial year
2007 and they had a lock-up period of 12-months.
On December 31, 2008, 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-December 2008 was 39
468 449. On April 23, 2008 the Board decided to start 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
December 31, 2008. At December 31, 2008 Rapala held 212 665 of its
own shares, representing 0.5% of the total number of Rapala shares
and the total voting rights. The average price for the repurchased
own shares was EUR 4.01.
As a result of the share subscriptions with the 2004 stock option
programs, and if all stock options are fully exercised, the Group's
share capital may still be increased by a maximum of 80 955 EUR and
the number of shares by a maximum of 899 500 shares. The shares that
can be subscribed with these stock options correspond to 2.3% of the
Company's shares and voting rights.
During the year 4 144 626 shares (8 684 433 shares) were traded. The
shares traded at a high of 5.65 EUR and a low of 2.95 EUR during the
period. The closing share price at the end of the period was 3.48
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 continued to develop risk management practices during
2008. Detailed description of Group's strategic, operative and
financial risks and risk management principles are included in the
Annual Report 2007 and will be updated in the Annual Report 2008
(published on week 12), 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. The
seasonality of the fishing tackle business has been reduced during
the last few years by expanding the Group's operations in the
southern hemisphere and closer to equator by acquisitions, start-ups
and expanding existing operations. 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
of 2008. In 2008, deliveries to customers realized mostly according
to plan, without any material operative problems in the supply chain.
Group's sales are also to some extent affected by the weather. Mild
winters in the past two years have had some negative knock-on impacts
on this season's winter sports equipment sales.
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 if retailers reduce their
inventory levels. 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, like interest rates on
mortgages and price of fuels, may temporarily affect consumer
spending also in fishing tackle, as was seen especially in North
America during 2008.
The truly global nature of Group's sales and operations is spreading
the market risks caused by the current uncertainties in the global
economy. Already in 2007, the Group started initiatives to improve
the performance of its own operations and actively monitors the
performance of its customers and other counterparties.
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 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.
Increase of prices of certain raw materials and salaries, especially
in China, have impacted Group's profitability. Group has successfully
introduced price increases targeted to offset at least part of these
effects.
The integration of the new Sufix-fishing line business to the Group's
28 distribution companies will require special attention of the
management also in 2009.
No significant changes are identified in the Group's strategic risks
or business environment.
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