2010-02-04 08:30:00 CET
2010-02-04 08:31:10 CET
REGULATED INFORMATION
Rapala VMC - Financial Statement Release
ANNUAL ACCOUNTS 2009: MAJOR CASH FLOW IMPROVEMENT
Rapala VMC Corporation
Stock Exchange Release
February 4, 2010 at 9.30 a.m.
- Net sales for the fourth quarter increased to 51.4 MEUR (IV/08: 50.9 MEUR).
Net sales for the full year decreased to 234.6 MEUR (I-IV/08: 243.0 MEUR). With
comparable exchange rates, last quarter net sales increased 4% and full year net
sales decreased 1%.
- Operating profit for the fourth quarter benefitted from a small capital gain
but was strongly affected by negative currency movements and stock sales
related to the major working capital project and amounted to 0.7 MEUR (3.2
MEUR). Comparable operating profit for the full year was 23.5 MEUR (30.5 MEUR)
and comparable operating margin 10.0% (12.6%). Reported operating profit was
22.1 MEUR (31.3 MEUR) for the full year.
- Net profit for the fourth quarter was -0.8 MEUR (1.0 MEUR) and 14.3 MEUR (19.2
MEUR) for the full year. Earnings per share were -0.02 EUR (0.05 EUR) for the
quarter and 0.31 EUR (0.45 EUR) for the full year.
- The major working capital initiative started in late 2008 progressed during
2009 and the results started to capitalize. Accordingly, the cash flow from
operating activities for the fourth quarter increased in multiples to 6.0 MEUR
(1.6 MEUR) and to 24.6 MEUR (5.4 MEUR) for the full year. This project continues
and further results are expected in 2010.
- Implementation of the Group's strategy continued in the fourth quarter with
work to establish new distribution companies in Romania, Belarus, Iceland and
China as well as to finalize the performance improvement initiative in Hungary.
The set-up of the new operating model in China and the integration of Sufix
fishing line business were also completed. In December, the fish pheromone brand
Ultrabite was acquired.
- Orders for Group branded lures and winter sports equipment have recently been
on a record level. Accordingly, the Group lure manufacturing facilities and the
Peltonen ski factory are currently running at full capacity.
- It is expected that both the net sales and the operating margin excluding
non-recurring items will increase from 2009.
- Board proposes to the Annual General Meeting that a dividend of EUR 0.19 per
share to be paid. This represents 61% 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 2009.
A conference call on the 2009 result will be arranged today at 3 p.m. Finnish
time (1 p.m. CET). Please dial +44 (0)20 3147 4971 or +1 347 366 9564 or +358
(0)9 2310 1667 (pin code: 667611#.) five minutes before the beginning of the
event and request to be connected to Rapala teleconference. A replay facility
will be available for 14 days following the teleconference. The number to dial
is +44 (0)20 7111 1244 (pin code: 667611#). 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
Year 2009 started quite well although the general downturn in the world economy
started to influence also fishing tackle market in the end of 2008. The strong
weakening of many currencies increased the pressure on consumer confidence in
East Europe and started quickly to reduce the purchase power in the region. At
the same time, market situation especially in West Europe and Nordic countries
continued quite weak but confidence in Asia and Australia continued to pick-up.
During the third quarter, both European and North American markets started to
gradually strengthen. In North America, orders especially for lures increased
during the second half of the year. In the fourth quarter, sales of products for
winter sports increased as a result of good snow situation in Europe. The
improved sales performance in the latter part of the year was though diluted by
the weak currencies in many European countries.
Net sales for 2009 decreased 3% to 234.6 MEUR (243.0 MEUR). US dollar (USD)
strengthened 5% from previous year but many currencies especially in East Europe
and Scandinavia weakened strongly. The net effect of the currency movements
decreased the 2009 net sales by 5.0 MEUR. With comparable exchange rates, net
sales decreased 1%.
Net sales of Group Fishing Products, boosted by the new sales of Sufix fishing
lines, were up 6% in 2009. Net sales of Other Group Products decreased 27% as a
result of reduced sales of gift products and subcontracting services while sales
of Peltonen cross-country skis increased markedly. Net sales of Third Party
Products decreased 9% mainly due to the weakening of many East European and
Scandinavian currencies and reduced sales of higher price category products like
fishing electronics and expensive reels and hunting equipments.
Supported by the strengthening of USD, the net sales in North America increased
6%. In the Nordic Countries, the net sales decreased 4% as a result of reduced
distribution volumes of especially hunting products and weakening of Swedish and
Norwegian crowns. Net sales in Rest of Europe were down by 11% due to difficult
market situation and weakened currencies in East Europe. Net sales in Rest of
the World increased 2% as a result of the new sales of Sufix products and
strengthening of USD while the sales of gift products fell strongly.
Financial Results and Profitability
Operating profit for 2009, excluding non-recurring items, amounted to 23.5 MEUR
(30.5 MEUR). It was strongly affected by reduction of sales and negative
currency movements in Scandinavia and East Europe. Profitability was also
affected by liquidation campaigns arranged in several countries to reduce
inventories as part of the ongoing working capital project. On the other hand,
fixed costs were down 3% as a result of several performance improvement
initiatives carried out during the last two years. Comparable operating margin
for the year was 10.0% (12.6%).
Reported operating profit for 2009 was 22.1 MEUR (31.3 MEUR) including
non-recurring costs and impairment losses of 1.9 MEUR and a non-recurring gain
of 0.5 MEUR from the sale of office premises in Hong Kong (net gain of 0.8 MEUR
in 2008). Most of these non-recurring costs and impairment losses relate to the
restructure of the operating model in the Group's Chinese manufacturing
operations and Hungarian distribution unit. Reported operating margin was 9.4%
(12.9%) and return on capital employed 11.5% (16.9%).
Key figures IV IV I-IV I-IV
MEUR 2009 2008 2009 2008
-------------------------------------------------------
Net sales 51.4 50.9 234.6 243.0
EBITDA as reported 2.5 4.8 28.9 37.5
EBITDA excl. one-off items 2.5 4.8 29.2 36.7
Operating profit as reported 0.7 3.2 22.1 31.3
Operating profit excl. one-offs 1.1 3.2 23.5 30.5
-------------------------------------------------------
Operating profit of Group Fishing Products decreased to 15.7 MEUR (19.5 MEUR) as
a result of currency movements and stock-clearance sales. Operating profit of
Other Group Products fell to 0.5 MEUR (1.6 MEUR) due to the strong fall in
sales. Operating profit of Third Party Products decreased to 5.8 MEUR (10.3
MEUR) due to negative currency movements and reduced sales.
Financial (net) expenses were 2.1 MEUR (4.8 MEUR) including net interest
expenses of 3.5 MEUR (5.1 MEUR) and (net) currency exchange gains of 1.5 MEUR
(0.4 MEUR).
Net profit for the year decreased to 14.3 MEUR (19.2 MEUR) and earnings per
share to 0.31 EUR (0.45 EUR).
Cash Flow and Financial Position
As a result of the strong execution of working capital management, inventories
decreased 5.6 MEUR and non-interest bearing assets, mainly trade receivables,
decreased 6.6 MEUR. Accordingly, the cash flow from operating activities more
than fourfolded to 24.6 MEUR (5.4 MEUR).
Net cash used in investing activities amounted to 6.3 MEUR (6.8 MEUR). In
addition to the normal capital expenditure of 6.7 MEUR (7.1 MEUR) and 2.1 MEUR
(2.0 MEUR) of acquisitions, it included a 0.1 MEUR (0.0) change in
interest-bearing receivables and 2.6 MEUR (2.2 MEUR) proceeds from sales of
assets.
Net interest-bearing debt decreased to 79.4 MEUR (Dec 2008: 89.5 MEUR) as cash
was released from working capital. The liquidity of the Group remained good
through the year. Equity-to-assets ratio improved and reached 42.8% (Dec
2008: 38.0%). Also gearing improved and decreased to 71.1% (Dec 2008: 86.4%).
Strategy Implementation
Implementation of the Group's strategy for profitable growth continued in 2009
with high emphasis on making a positive turnaround in cash flow and finalizing
the new operating model in the Chinese manufacturing operations.
The results of the major working capital initiative kicked off in late 2008 to
reduce Group inventories and improve cash flow started to capitalize during the
second quarter with further progress during the second half of the year. To
support this development, a major supply chain and logistics initiative to
shorten the lead-times, lower the inventories and further improve the service
levels to customers, was started in 2009 including an implementation of a common
logistics software covering the Group's manufacturing and distribution units
globally. This project continues and further results are expected in 2010. The
reduction of inventories started quicker in Group products and therefore, the
further decrease of inventories in 2010 is expected especially in third party
products for which the purchasing volumes were adjusted accordingly already
during 2009.
The performance improvement initiatives started in 2008 at the Group's
manufacturing facilities in China were finalized in 2009. With the new set-up
of four Group-owned factories and a network of dozens of outsourcing partners,
Rapala can adjust capacity quicker and more accurately to meet the market
requirements. The benefits will also include shorter lead-times and improved
service levels. As a result of the new operating model, the Group has reduced
its headcount in China considerably. Accordingly, the headquarters of Chinese
manufacturing operations in Hong Kong moved into smaller leased premises in the
end of the year and the old office was sold. This resulted in a 0.5 MEUR
non-recurring gain.
The integration of Sufix fishing line business acquired in 2008 was completed in
2009. Rapala intends to increase its worldwide fishing line sales to some 20
MEUR in the next few years. The long-term strategic target for Rapala is to
increase its annual fishing line sales to 30-50 MEUR.
Discussions and negotiations regarding acquisitions and business combinations
continued in 2009. In December, Rapala acquired the fish pheromone brand
Ultrabite and signed an exclusive agreement to commercialize this patented
pheromone technology to the sport fishing market worldwide. Rapala's sales of
products including pheromones were less than 2 MEUR in 2009 but it is expected
that the sales will grow substantially in the future as the newly developed
products will be sold through the Group's worldwide distribution network with
further new products being developed and introduced.
To further expand and strengthen its distribution network, Rapala established a
new distribution company in Romania in 2009. The Group also started the process
to establish new distribution companies in Iceland and Belarus as well as a
specialized distribution company for gift products in China. These units have
started or will start their operations in the first quarter of 2010.
In addition, the Group introduced and implemented several other performance
improvement initiatives like further development of lure manufacturing processes
and restructuring of Hungarian distribution operations. Also development of
organic growth in terms of extensions of current product categories as well as
special marketing, sales and brand initiatives continued.
Personnel and R&D
Number of personnel decreased 29% during the year and was 2 271 (3 197) at the
year-end.
This change resulted mainly from the new operating model in the manufacturing
operations in China. At the same time, the Group has further strengthened its
organizations in the fastest growing markets. The average number of personnel
decreased 45% to 2 259 (4 143).
Research and development expenses increased 11% to 2.0 MEUR (1.8 MEUR) in 2009.
Risk Management, Internal Controls and Corporate Responsibility
In 2009, increased attention was paid to risk management, internal controls and
corporate responsibility. Both internal controls and risk management were
developed and reviewed through several projects and actions during the year. In
addition, the Board redefined and approved its updated Corporate Governance
Statement, which will be included in the Annual Report for 2009.
The work to further develop actions and reporting within corporate
responsibility progressed. In addition to the implementation and development of
environmental measurements, actions were taken to widen the reporting of
corporate responsibility to economic and social responsibility. The progress
made in these areas is described in more detail in the Annual Report for 2009.
Short-term Outlook
While the general market situation did not change a lot during 2009, positive
signs were witnessed in several countries during the second half of the year. In
addition, good winter weather conditions have recently boosted the sales of
winter sports equipment in the Nordic countries. The general uncertainty in the
world economy may continue in 2010 through increased unemployment in many
countries, which will most likely continue to affect the ordering behavior of
many customers and maintain the need for quick deliveries and short lead-times.
In general though, the short-term outlook is cautiously optimistic.
In this economic and market situation, it is expected that both the net sales
and the operating margin excluding non-recurring items will increase from 2009
even if the Group continues to reduce its inventories.
While the Group continues to implement its strategy for profitable growth,
reducing working capital and increasing cash flow continue to be the top
priority for 2010 together with strong emphasis on innovation and development of
new products.
At the end of 2009, the Group's order backlog was up 13% at 43.8 MEUR (38.6
MEUR). Orders for Group branded lures and winter sports equipment have recently
been on a record level. Accordingly, the Group lure manufacturing facilities and
the Peltonen cross country ski factory are currently running at full capacity.
Proposal for profit distribution
The Board of Directors proposes to the Annual General Meeting that a dividend of
EUR 0.19 for 2009 (2008: EUR 0.19) per share be paid from the Group's
distributable equity and that any remaining distributable funds be allocated to
retained earnings. At December 31, 2009, the parent company's distributable
equity totaled 42.6 MEUR.
No material changes have taken place in the Group's financial position after the
end of the financial year 2009. 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 4, 2010
Board of Directors of Rapala VMC Corporation
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
INCOME STATEMENT IV IV I-IV I-IV
MEUR 2009 2008 2009 2008
---------------------------------------------------------------------------
Net sales 51.4 50.9 234.6 243.0
Other operating income 0.6 0.8 1.2 3.1
Cost of sales 32.8 29.7 135.8 135.3
Other costs and expenses 16.7 17.2 71.1 73.2
------------------------
EBITDA 2.5 4.8 28.9 37.5
Depreciation and amortization 1.8 1.6 6.9 6.2
------------------------
Operating profit 0.7 3.2 22.1 31.3
Finance income and expenses 1.1 1.4 2.1 4.8
Share of results in associates 0.0 0.0 0.0 0.0
------------------------
Profit before taxes -0.4 1.9 19.9 26.5
Income taxes 0.4 0.9 5.7 7.3
------------------------
Net profit for the period -0.8 1.0 14.3 19.2
Attributable to:
Equity holders of the Company -0.9 1.9 12.1 17.7
Minority interest 0.1 -0.9 2.2 1.6
Earnings per share for profit attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted = non-diluted) -0.02 0.05 0.31 0.45
STATEMENT OF COMPREHENSIVE INCOME IV IV I-IV I-IV
MEUR 2009 2008 2009 2008
---------------------------------------------------------------------------
Net profit for the period -0.8 1.0 14.3 19.2
------------------------
Other comprehensive income, net of tax:
Change in translation differences 1.5 -1.5 1.5 -1.2
Gains and losses on cash flow hedges 0.1 -0.2 -0.1 -0.2
Gains and losses on hedges of net investments 0.1 -1.4 0.2 -2.8
Fair value gains on available-for-sale investments - -0.1 - -0.1
------------------------
Total other comprehensive income, net of tax 1.7 -3.1 1.6 -4.3
------------------------
Total comprehensive income for the period 1.0 -2.1 15.9 14.9
Total comprehensive income attributable to:
Equity holders of the Company 0.8 -1.2 13.6 13.4
Minority interest 0.1 -0.9 2.3 1.6
STATEMENT OF FINANCIAL POSITION Dec 31 Dec 31
MEUR 2009 2008
------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 58.3 57.6
Property, plant and equipment 27.5 28.7
Non-current financial assets
Interest-bearing 0.5 0.5
Non-interest-bearing 8.0 7.7
---------------
94.2 94.6
Current assets
Inventories 94.4 98.4
Current financial assets
Interest-bearing 0.2 0.4
Non-interest-bearing 43.5 49.5
Cash and cash equivalents 29.0 30.6
---------------
167.0 178.9
Total assets 261.2 273.4
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the Company 107.4 101.7
Minority interest 4.2 1.9
---------------
111.7 103.7
Non-current liabilities
Interest-bearing 36.0 42.8
Non-interest-bearing 10.1 10.5
---------------
46.0 53.3
Current liabilities
Interest-bearing 73.1 78.1
Non-interest-bearing 30.5 38.3
---------------
103.5 116.4
Total equity and liabilities 261.2 273.4
KEY FIGURES IV IV I-IV I-IV
2009 2008 2009 2008
--------------------------------------------------------------------------
EBITDA margin, % 4.8% 9.5% 12.3% 15.5%
Operating profit margin, % 1.3% 6.4% 9.4% 12.9%
Return on capital employed, % 1.4% 7.0% 11.5% 16.9%
Capital employed at end of period, MEUR 191.1 193.2 191.1 193.2
Net interest-bearing debt at end of period, MEUR 79.4 89.5 79.4 89.5
Equity-to-assets ratio at end of period, % 42.8% 38.0% 42.8% 38.0%
Debt-to-equity ratio at end of period, % 71.1% 86.4% 71.1% 86.4%
Earnings per share, EUR -0.02 0.05 0.31 0.45
Fully diluted earnings per share, EUR -0.02 0.05 0.31 0.45
Equity per share at end of period, EUR 2.75 2.59 2.75 2.59
Average personnel for the period 2 261 4 259 2 259 4 143
--------------------------------------------------------------------------
Definitions of key figures in the interim report are consistent with those in
the Annual Report 2008.
STATEMENT OF CASH FLOWS IV IV I-IV I-IV
MEUR 2009 2008 2009 2008
-------------------------------------------------------------------------------
Net profit for the period -0.8 1.0 14.3 19.2
Adjustments to net profit for the period * 2.9 2.8 14.7 13.0
Financial items and taxes paid and received -1.6 -4.7 -7.4 -14.0
Change in working capital 5.6 2.5 3.0 -12.7
-------------------------------------------------------------------------------
Net cash generated from operating activities 6.0 1.6 24.6 5.4
Investments -2.4 -2.3 -6.7 -7.1
Proceeds from sales of assets 0.9 0.6 2.6 2.2
Sufix brand acquisition - -0.1 -1.1 -1.5
Ultrabite brand acquisition -0.9 - -0.9 -
Acquisition of subsidiaries, net of cash - -0.1 -0.1 -0.5
Change in interest-bearing receivables -0.1 0.1 -0.1 0.0
-------------------------------------------------------------------------------
Net cash used in investing activities -2.6 -1.9 -6.3 -6.8
Dividends paid - - -7.5 -6.9
Net funding -12.1 4.1 -12.8 11.9
Purchase of own shares -0.1 -0.3 -0.6 -0.9
-------------------------------------------------------------------------------
Net cash generated from financing activities -12.1 3.7 -20.8 4.1
Adjustments 1.3 0.6 0.8 0.9
Change in cash and cash equivalents -7.3 4.1 -1.7 3.6
Cash & cash equivalents at the beginning of the period 36.3 27.0 30.6 27.3
Foreign exchange rate effect 0.0 -0.5 0.1 -0.4
-------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 29.0 30.6 29.0 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
MEUR 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* - - -0.3 -4.0 - - 17.7 1.6 14.9
Purchase of own
shares - - - - - -0.9 - - -0.9
Dividends paid - - - - - - -6.9 - -6.9
Share based payment - - - - - - 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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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* - - -0.1 1.5 - - 12.1 2.3 15.9
Purchase of own
shares - - - - - -0.6 - - -0.6
Dividends paid - - - - - - -7.5 - -7.5
Share based payment - - - - - - 0.1 - 0.1
Other changes - - - - - - 0.0 0.0 0.0
--------------------------------------------------------------------------------
Equity on Dec
31, 2009 3.6 16.7 -0.3 -12.3 4.9 -1.4 96.3 4.2 111.7
--------------------------------------------------------------------------------
* For the period (net of tax)
SEGMENT INFORMATION*
MEUR IV IV I-IV I-IV
Net Sales by Operating Segment 2009 2008 2009 2008
-------------------------------------------------------------
Group Fishing Products 26.7 26.4 126.8 119.6
Other Group Products 6.3 7.0 17.8 24.5
Third Party Products 18.7 17.7 90.6 99.7
Intra-Group -0.2 -0.2 -0.6 -0.9
-------------------------------------------------------------
Total 51.4 50.9 234.6 243.0
Operating Profit by Operating Segment
Group Fishing Products 1.5 3.9 15.7 19.5
Other Group Products 0.3 0.1 0.5 1.6
Third Party Products -1.2 -0.8 5.8 10.3
-------------------------------------------------------------
Total 0.7 3.2 22.1 31.3
Dec. 31 Dec. 31
Assets by Operating Segment 2009 2008
----------------------------------------------------------
Group Fishing Products 159.6 167.5
Other Group Products 10.2 10.2
Third Party Products 61.9 64.3
Intra-Group -0.0 -0.1
----------------------------------------------------------
Non-interest bearing assets total 231.6 242.0
Unallocated interest-bearing assets 29.6 31.4
----------------------------------------------------------
Total assets 261.2 273.4
Liabilities by Operating Segment
Group Fishing Products 30.8 30.1
Other Group Products 2.5 2.7
Third Party Products 7.2 16.0
Intra-Group -0.0 -0.1
----------------------------------------------------------
Non-interest bearing liabilities total 40.5 48.8
Unallocated interest-bearing liabilities 109.1 121.0
----------------------------------------------------------
Total liabilities 149.6 169.7
Net Sales by Area** IV IV I-IV I-IV
MEUR 2009 2008 2009 2008
---------------------------------------------
North America 13.1 14.8 61.1 57.5
Nordic 23.2 18.5 102.0 105.9
Rest of Europe 17.4 18.0 89.7 101.3
Rest of the world 13.7 14.6 55.3 54.3
Intra-Group -15.9 -15.1 -73.5 -76.0
---------------------------------------------
Total 51.4 50.9 234.6 243.0
* 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 IV I-IV
MEUR 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009
-------------------------------------------------------------------------------
Net sales 65.1 74.2 52.7 50.9 243.0 65.2 67.7 50.2 51.4 234.6
EBITDA 12.2 15.4 5.2 4.8 37.5 11.6 11.5 3.3 2.5 28.9
Operating profit 10.6 13.8 3.6 3.2 31.3 10.0 9.4 1.9 0.7 22.1
Profit before taxes 9.3 12.8 2.6 1.9 26.5 8.5 9.8 2.1 -0.4 19.9
Net profit for the period 6.8 9.4 2.0 1.0 19.2 6.2 7.4 1.5 -0.8 14.3
-------------------------------------------------------------------------------
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 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-December 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
On December 31, 2009, the book value of inventories included a provision for net
realizable value of 3.0 MEUR (2.4 MEUR).
Non-recurring income and expenses included in operating
profit IV IV I-IV I-IV
MEUR 2009 2008 2009 2008
--------------------------------------------------------------------------------
Sale of Hong Kong office premises 0.5 - 0.5 -
Restructuring of Chinese manufacturing operations * -0.3 - -0.4 -
Consolidation of French operations - 0.1 0.0 -0.1
Closure of Irish lure factory - - -0.1 0.0
Sale of French warehouse and office building - - - 1.4
Other restructuring costs -0.2 -0.1 -0.4 -0.3
Other non-recurring items -0.1 - -0.1 -0.2
--------------------------------------------------------------------------------
Total included in EBITDA 0.0 0.0 -0.3 0.8
--------------------------------------------------------------------------------
Non-recurring impairment of non-current assets in China 0.0 - -0.7 -
Non-recurring impairment of non-current assets in Hungary -0.3 - -0.3 -
--------------------------------------------------------------------------------
Total included in operating profit -0.4 0.0 -1.4 0.8
*) Includes redundancy and other costs as well as gains and losses from the sale
of fixed assets.
Commitments Dec 31 Dec 31
MEUR 2009 2008
-----------------------------------------------------------------
On own behalf
Business mortgage 16.1 16.1
Guarantees 0.2 0.3
Minimum future lease payments on operating leases 10.3 11.3
-----------------------------------------------------------------
Related party transactions Rents Other
MEUR Purchases paid expenses Receivables Payables
--------------------------------------------------------------------------------
I-IV 2009
Associated company Lanimo Oü 0.1 - - 0.0 -
Entity with significant
influence over the Group* - 0.2 0.1 0.0 -
Management - 0.3 0.0 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 Positive fair Negative fair Net fair
MEUR Nominal amount values values values
--------------------------------------------------------------------------------
Dec 31, 2009
Foreign currency
forwards 7.1 0.1 - 0.1
Interest rate
swaps 98.0 0.0 0.5 -0.5
Total 105.0 0.2 0.5 -0.3
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 December
31, 2009: one share 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.
In March 2009, the Board 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
fourth quarter and -0.3 MEUR (+0.3 MEUR) for the financial year. Terms and
conditions of the share-based payment programs are described in detail in the
Annual Report 2008 and the descriptions will be updated in the Annual Report
2009.
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 December 31, 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 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 and on September 30, 2009 Rapala held 321 867 own shares.
Based on the Board's decision on October 23, 2009, the repurchasing of own
shares continued until December 30, 2009. At the end of December 2009, Rapala
held 340 344 own shares, representing 0.9% of the total number and the total
voting rights of Rapala shares. The average price for the repurchased own shares
in 2009 was EUR 4.31.
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 share options
correspond to 1.1% of the Company's shares and voting rights.
During the year 2009, 3 138 597 shares (4 144 626) 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 4.97 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 also continued to develop risk management
practices and internal controls during 2009. Detailed description of Group's
strategic, operative and financial risks and risk management principles are
included in the Annual Report 2008 and will be updated in the Annual Report
2009.
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 2009, although more than 40 % of the net
sales were generated during the second half of the year, almost 90 % of the
operating profit was still generated in the first six months. In 2009,
deliveries to customers realized mostly according to plan. A major supply chain
and logistics initiative was started in the second quarter of 2009 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. Weather has
supported the sales of winter sports equipment especially in the Nordic
countries during the on-going winter season but may simultaneously delay the
beginning of the coming summer fishing season. Last year such delay partly led
to higher than anticipated inventory levels, which subsequently 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 also in
2010.
The Group renegotiated its bank covenants during the second quarter of 2009 and
as one of the results has now more flexibility to the most critical cash flow
covenant also for 2010.
Even if the fishing tackle business has traditionally not been strongly
influenced by the increased uncertainties and downturns in the general economic
climate, this may influence, at least for a short while, the sales of fishing
tackle when retailers reduce their inventory levels and face financial
challenges. Also quick and strong increases in living expenses and uncertainties
concerning employment may temporarily affect consumer spending also in fishing
tackle, even though historically the underlying consumer demand has proven to be
fairly solid.
The truly global nature of Group's sales and operations is spreading the market
risks caused by the current uncertainties in the global economy. Despite some
positive signals received during the second half of 2009, 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 increased during 2009 and this may affect sales to some customers.
The good sales for winter sports supports financially many retailers especially
in the Nordic countries and reduces the risks related to cash collection and
orders for summer fishing.
Group's sales and profitability are impacted by the changes in foreign exchange
rates, especially US dollar and other currencies connected to it. Group is
actively monitoring the currency position and risks and using e.g. foreign
currency nominated loans to manage the natural hedging. In order to fix the
exchange rate of some of the future USD-nominated purchases, the Group has
entered into currency hedging agreements. As the Group is not applying hedge
accounting in accordance with IAS 39, also the change in fair value of these
unrealized currency hedging agreements have an impact on the Group's operating
profit. As the Group has material amount of Chinese renminbi nominated expenses,
the Group is closely monitoring the on-going discussions on the potential future
appreciation of the renminbi and considering feasibility of hedging
possibilities.
Especially in East Europe, local currencies weakened dramatically during the
second half of 2008 and have not significantly appreciated since. 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 was completed in 2009.
No significant changes are identified in the Group's strategic risks or business
environment.
[HUG#1380445]
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