2011-07-27 11:00:00 CEST
2011-07-27 11:00:42 CEST
REGULATED INFORMATION
Rapala VMC - Quarterly report
INTERIM REPORT FOR JANUARY TO JUNE 2011: SALES AND OPERATING PROFIT GREW FROM LAST YEAR, NEW STEPS TAKEN IN STRATEGY IMPLEMENTATION.
Rapala VMC Corporation
Stock Exchange Release
July 27, 2011 at 12.00 noon
* Net sales for the second quarter increased by 4% from last year to 80.9
(77.6 MEUR), reaching highest quarterly sales in Rapala's history. Net sales
for January to June increased by 5% to 155.6 MEUR (148.4 MEUR).
* Comparable operating profit increased from last year and reached 13.0 MEUR
(12.6 MEUR) for the second quarter and 25.1 MEUR (24.4 MEUR) for the first
six months. Comparable operating margin was slightly lower than last year
amounting to 16.1% (16.2%) for the quarter and 16.2% (16.4%) for the six
months. Reported operating profit for the second quarter amounted to 12.8
MEUR (12.5 MEUR) and 24.9 MEUR (24.2 MEUR) for the first half of the year.
* Net profit for the quarter was reduced to 8.0 MEUR (8.4 MEUR) and was 15.9
MEUR (17.5 MEUR) for the first six months due to currency impacts on
financial items. Earnings per share were 0.17 EUR (0.18 EUR) and 0.35 EUR
(0.40 EUR) respectively.
* Cash flow from operating activities for second quarter was down from last
year's record levels at 17.0 MEUR (20.2 MEUR) and was 1.5 MEUR (8.2 MEUR)
for the first half of the year due to working capital increase.
* Implementation of the Group's strategy continued:
* by signing an agreement with Shimano to create a true 50:50 distribution
joint venture in the UK,
* by proceeding with plans to establish a lure manufacturing unit on Batam
Island in Indonesia and
* by continuing the planning and implementation of new supply chain and
inventory management initiatives.
* Short term outlook remains positive. It is expected that in 2011 the net
sales will increase from 2010. Profitability estimate is specified so that
the comparable operating profit is expected to improve from 2010 and
comparable operating margin to remain close to last year's level.
The attachment presents the interim review by the Board of Directors as well as
the accounts.
A conference call on the first quarter result will be arranged today at 3.00
p.m. Finnish time (2.00 p.m. CET). Please dial +44 (0)20 3147 4972 or
+1 212 444 0891 or +358 (0)9 2310 1672 (pin code: 226519#) five minutes before
the beginning of the event. A replay facility will be available for 14 days
following the teleconference. The number to dial is +44 (0)20 7111 1244 (pin
code: 226519#). Financial information and teleconference replay facility are
available at www.rapala.com.
For further information, please contact:
Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540
Jussi Ristimäki, Chief Financial Officer, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
Distribution: NASDAQ OMX Helsinki and Main Media
Market Situation and Sales
During the first half of the year Rapala's business has developed positively,
mostly in line with expectations and as a result of good sales performance in
several units, second quarter net sales reached record levels. Weathers, which
impact the consumer demand and timing of the summer fishing season, have
supported the sales in Western and Central Europe, whereas in major parts of
North America season did not properly start until June, when sales were however
strong. The continuing economical uncertainties have impacted consumer behavior
in some countries and tighter credit control has impacted sales in some others.
Changes in foreign exchange rates impacted the net sales negatively compared to
last year. Group's supply chain has functioned well and products have been
available in the distribution companies to meet the demand. Special sales
initiatives to bring down Rapala's inventory levels have gradually started,
which also had impact on the production volumes of the manufacturing units.
Net sales for the second quarter increased by 4% from last year reaching all-
time quarterly high at 80.9 MEUR (77.6 MEUR), even though currency movements had
2.9 MEUR negative net impact on the sales. New units contributed 3.1 MEUR net
sales in the second quarter. The six-month net sales were 155.6 MEUR (148.4
MEUR), 5% increase from last year. With comparable exchange rates and
organization structure net sales increased 4% in the second quarter and 2%
during the first six months.
Net sales of Group Fishing Products increased 4% in second quarter and 7% for
the first six months, driven by fishing lines, accessories and Dynamite Baits'
products, whereas lure sales is negatively impacted by the currency movements.
Sales of Other Group Products grew 28% during the quarter and 16% year-to-date,
following good second quarter sales in hunting and gift products. Sales of Third
Party Products increased modestly by 1% during the quarter, while the small
decrease in fishing products was offset with growth in hunting and outdoor
products. Six months sales were at last year level.
In North America sales were down by 8% for April to June and by 4% for the six-
month period. This was significantly impacted by the US dollar, which was 6%
weaker year-to-date against euro compared to last year. In local currency sales
for the first six months were at last year's level. North American sales were
also negatively impacted by the late beginning of the season as well as
economical uncertainties which are impacting the consumer spending at the retail
level.
In Nordic countries sales were up by 7% in second quarter and by 9% for the
first half of the year. Especially in Finland and Sweden the sales of summer
fishing and hunting equipment have proceeded well, whereas the Norwegian retail
structure is currently going through some changes. In Rest of Europe sales
increased by 14% for April to June and by 16% for the six-month period,
supported by new sales generated by Dynamite Baits Ltd as well as good sales in
France, while in Spain and Portugal economical uncertainties are impacting the
sales. In Eastern Europe sales growth continued, although some sales were
permanently lost due to the earlier problems with Russian logistics and some
importation problems.
In Rest of the World net sales fell by 6% in the second quarter, but are still
4% higher for January to June. External sales in several Asian and Southern
Hemisphere countries is growing well, while the production volumes at Group's
Chinese manufacturing unit are temporarily reduced following the Group's ongoing
working capital management projects.
Financial Results and Profitability
Comparable operating profit, excluding non-recurring items, increased from last
year and amounted to 13.0 MEUR (12.6 MEUR) for second quarter and 25.1 MEUR
(24.4 MEUR) for the six-month period. Comparable operating margin was slightly
lower than last year amounting to 16.1% (16.2%) for the quarter and 16.2%
(16.4%) for the six months period. The margin was positively impacted by
improved gross margin, whereas fixed cost inflation and currency items impacted
negatively.
Reported operating profit for the second quarter increased from last year and
amounted to 12.8 MEUR (12.5 MEUR) for the quarter and 24.9 MEUR (24.2 MEUR) for
the first half of the year. Reported operating margin was 15.8% (16.1%) and
16.0% (16.3%) respectively. Reported operating profit for the quarter and for
the first six months included 0.2 MEUR non-recurring restructuring and
acquisition costs (0.2 MEUR non-recurring costs in January-June 2010). Return on
capital employed fell to 22.6% (24.4%) for April to June and 22.0% (23.6%) for
the six-month period, following the increased capital tied into inventories.
Key figures II II I-II I-II I-IV
MEUR 2011 2010 2011 2010 2010
-----------------------------------------------------------------------
Net sales 80.9 77.6 155.6 148.4 269.4
EBITDA as reported 14.4 14.1 28.1 27.2 37.4
EBITDA excl. one-off items 14.6 14.1 28.4 27.4 37.9
Operating profit (EBIT) 12.8 12.5 24.9 24.2 31.3
EBIT excl. one-off items 13.0 12.6 25.1 24.4 31.8
-----------------------------------------------------------------------
Operating profit for Group Fishing Products decreased 0.7 MEUR from last year in
second quarter and 0.2 MEUR for the six-month period. Profitability has been
impacted by currency movements and inventory clearance sales with lower margins.
Benefitting from increased sales, operating profit for Other Group Products has
increased by 0.3 MEUR for second quarter and as well as year-to-date, which also
benefits from improved profitability of the winter sports equipment. Operating
profit for Third Party Products increased by 0.7 MEUR in second quarter as well
as year-to-date. Cheaper US dollar has supported the profitability of these
products.
Net interest and other financing expenses remained close to last year levels at
1.1 MEUR (0.9 MEUR) for the quarter and 1.9 MEUR (1.8 MEUR) for the six months.
Major negative change in financial items is coming from (net) currency exchange
expenses of 0.4 MEUR (gain 0.5 MEUR) for the quarter and 0.6 MEUR (gain 1.8
MEUR) for the six months. Total financial (net) expenses were 1.5 MEUR (0.4
MEUR) for the quarter and 2.6 MEUR (gain 0.1 MEUR) for the six months.
Net profit for the quarter was reduced to 8.0 MEUR (8.4 MEUR) and was 15.9 MEUR
(17.5 MEUR) for the first half of the year, especially due to the currency
impacts on financial items. Earnings per share for the second quarter reached
0.17 EUR (0.18 EUR) and was 0.35 EUR (0.40 EUR) for the six months, impacted
also by increased amount of non-controlling interest in net income.
Cash Flow and Financial Position
Cash flow from operating activities for second quarter was 16% down from last
year's record levels at 17.0 MEUR (20.2 MEUR) and was 1.5 MEUR (8.2 MEUR) for
the first half of the year. Following the increased sales, more sales oriented
focus in working capital management and ongoing changes in Group's supply chain
management, Group's inventories increased 9.6 MEUR from last June to 116.2 MEUR
(106.6 MEUR), while the currency movements reduced the value of inventories by
6.0 MEUR compared to last year. Compared to March inventories have decreased by
4.0 MEUR, releasing 3.7 MEUR more cash from working capital than in second
quarter last year. As a whole, net change in working capital for the quarter was
6.4 MEUR (8.7 MEUR) and -20.2 MEUR (-12.8 MEUR) for the first half of the year,
with main negative change coming from the change in trade and other short term
payables.
Net cash used in investing activities was down to 2.3 MEUR (2.7 MEUR) for the
quarter and 4.0 MEUR (4.4 MEUR) for the first six months.
Due to the increased working capital, net interest bearing debt increased to
103.4 MEUR (90.4 MEUR) in the end of June. Equity-to-assets ratio weakened
accordingly to 40.4% (41.3%). Gearing was 79.9% (70.0%), remaining at same
levels as in the end of March, but increasing from last June's record levels.
Strategy Implementation
Implementation of Rapala's strategy of profitable growth continued during the
second quarter of the year by taking several actions relating to manufacturing
and distribution activities as wells as Group's internal supply chain and
inventory management.
In June Rapala and Shimano Inc. ("Shimano"), the leading manufacturer of rods
and reels worldwide, signed an agreement to strengthen their European
distribution alliance by merging their existing UK distribution activities into
a true 50/50 joint venture distribution company. Rapala's products have since
April been distributed in the UK by Dynamite Baits Ltd ("Dynamite"), a
manufacturer and distributor of premium carp baits, which Rapala acquired in
August 2010. This joint venture company ("JV"), currently still Shimano UK Ltd,
will distribute both Rapala and Shimano products in UK on an exclusive basis.
Dynamite's and Shimano's UK distribution activities will be merged. Dynamite
branded bait manufacturing activities will remain fully in Rapala's control
under Dynamite Baits Ltd. This transaction is expected to be closed by end of
August, 2011. JV will be consolidated into Rapala's accounts by using the equity
method.
In July Rapala also closed a deal to purchase a small UK based company Advanced
Carp Equipment Ltd ("ACE"), engaged in design and sales of equipment and
accessories for carp fishing. ACE will form the platform for Rapala's fast entry
into these product categories in UK and in Europe.
In order to secure access to cost competitive production resources also in the
future, Rapala made a decision to open a lure manufacturing unit on Batam Island
in Indonesia. At first stage the operation will employ some 150-200 people and
run parallel to Group's Chinese manufacturing operations. The main governmental
approvals were received in June and after the necessary renovations and
equipment installations the production of PVC soft plastic lures is expected to
start by fourth quarter. The capital expenditure of this project is expected to
total some 0.5 MEUR.
The planning and implementation of new initiatives and structural changes in
Group's internal supply chain, inventory and product life-cycle management
continued during the second quarter, targeting to permanently bring down Group's
inventories to lower levels, while simultaneously improving the service levels
to customers. The topic is high on the agenda of each Group unit and planned
actions include among others special campaigns and clearance sales of slow-
moving inventory as well as improving the information and product flow between
Group's manufacturing and distribution units.
The establishment of Group's new distribution companies in Indonesia and Mexico
proceeded according to plans and sales will start in July.
Relocation of Rapala's Finnish distribution company Normark Suomi Oy has
gradually started and will be finalized by late autumn. Relocation of ski
manufacturer Peltonen Ski Oy into larger premises will take place in July-
August. Relocation of the warehouse of Group's Chinese distribution company will
take place in June-July.
The special performance improvement initiative in Rapala's Norwegian
distribution company continued.
The range of new products for season 2012 have been introduced to the market in
the major fishing tackle shows in Europe and USA in June and July. Group's
products received awards in both and the feedback from customers has been
positive. These new products will continue to support Rapala's organic growth.
Discussions and negotiations regarding acquisitions and business combinations
continued during the second quarter.
Short-term Outlook
The view on general market situation and sentiment continues to be positive for
the remaining of the year, with no major threats currently on sight. After a
slowish start for the season in the major North American markets, the sales
picked up strong in June and the short-term outlook seems good. Sales growth is
expected to continue during summer season in East Europe. Encouraging signals
have been received also from several other countries, while gloomier outlook is
reported only from a few. Group's manufacturing units are better prepared to
support the replenishment sales during the summer season.
In Finland the presales of winter sports equipment for next winter season has
been better than last year, although there is always uncertainties concerning
the weathers and timing of the shipments. The start of winter sports equipment
distribution in Russia will trigger some additional sales on these to fourth
quarter, whereas in Norway the market situation is more unclear.
It is expected that in 2011 the net sales will increase from 2010. Profitability
estimate is specified so that the comparable operating profit is expected to
improve from 2010 and comparable operating margin to remain close to last year's
level.
Third quarter interim report will be published on October 27.
Helsinki, July 27, 2011
Board of Directors of Rapala VMC Corporation
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME II II I-II I-II I-IV
MEUR 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Net sales 80.9 77.6 155.6 148.4 269.4
Other operating income 0.3 0.1 0.4 0.2 0.7
Materials and services 36.4 36.4 68.3 67.7 123.9
Personnel expenses 16.0 14.8 31.5 29.2 59.1
Other costs and expenses 14.4 12.4 28.0 24.5 49.7
---------------------------------------------
EBITDA 14.4 14.1 28.1 27.2 37.4
Depreciation and amortization 1.6 1.6 3.2 3.0 6.1
---------------------------------------------
Operating profit (EBIT) 12.8 12.5 24.9 24.2 31.3
Financial income and expenses 1.5 0.4 2.6 -0.1 1.8
Share of results in associated
companies 0.0 0.0 0.0 0.0 0.0
---------------------------------------------
Profit before taxes 11.3 12.1 22.4 24.2 29.5
Income taxes 3.3 3.7 6.4 6.7 8.7
---------------------------------------------
Net profit for the period 8.0 8.4 15.9 17.5 20.7
Attributable to:
Equity holders of the Company 6.6 7.2 13.6 15.8 18.0
Non-controlling interests 1.4 1.1 2.3 1.7 2.8
Earnings per share for profit
attributable
to the equity holders of the
Company
Earnings per share, EUR (diluted =
non-diluted) 0.17 0.18 0.35 0.40 0.46
STATEMENT OF COMPREHENSIVE INCOME II II I-II I-II I-IV
MEUR 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Net profit for the period 8.0 8.4 15.9 17.5 20.7
---------------------------------------------
Other comprehensive income, net of
tax
Change in translation differences -1.1 6.1 -5.3 11.6 7.8
Gains and losses on cash flow
hedges -0.2 -0.6 0.3 -1.6 -1.2
Gains and losses on hedges of net
investments 0.2 -1.3 0.8 -2.2 -1.1
---------------------------------------------
Total other comprehensive income,
net of tax -1.1 4.2 -4.2 7.8 5.5
---------------------------------------------
Total comprehensive income for the
period 6.9 12.5 11.8 25.4 26.3
Total comprehensive income
attributable to:
Equity holders of the Company 5.5 11.3 9.6 23.3 23.1
Non-controlling interests 1.4 1.2 2.2 2.0 3.2
STATEMENT OF FINANCIAL POSITION Jun 30 Jun 30 Dec 31
MEUR 2011 2010 2010
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 65.1 63.1 67.8
Property, plant and equipment 28.5 29.3 28.7
Non-current financial assets
Interest-bearing 1.7 0.4 1.7
Non-interest-bearing 8.7 9.4 9.2
------------------------------
104.0 102.3 107.4
Current assets
Inventories 116.2 106.6 112.2
Current financial assets
Interest-bearing 0.0 0.5 0.0
Non-interest-bearing 67.9 63.6 56.5
Cash and cash equivalents 32.3 39.7 27.9
------------------------------
216.5 210.5 196.6
Total assets 320.4 312.8 304.0
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the
Company 122.4 122.9 121.8
Non-controlling interests 6.9 6.3 7.4
------------------------------
129.3 129.2 129.2
Non-current liabilities
Interest-bearing 23.6 39.1 27.1
Non-interest-bearing 13.0 10.9 13.7
------------------------------
36.6 50.0 40.8
Current liabilities
Interest-bearing 113.9 92.0 94.6
Non-interest-bearing 40.7 41.7 39.4
------------------------------
154.6 133.7 134.0
Total equity and liabilities 320.4 312.8 304.0
II II I-II I-II I-IV
KEY FIGURES 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
EBITDA margin, % 17.8% 18.2% 18.1% 18.3% 13.9%
Operating profit margin, % 15.8% 16.1% 16.0% 16.3% 11.6%
Return on capital employed, % 22.6% 24.4% 22.0% 23.6% 15.2%
Capital employed at end of period,
MEUR 232.7 219.6 232.7 219.6 221.3
Net interest-bearing debt at end of
period, MEUR 103.4 90.4 103.4 90.4 92.0
Equity-to-assets ratio at end of
period, % 40.4% 41.3% 40.4% 41.3% 42.6%
Debt-to-equity ratio at end of
period, % 79.9% 70.0% 79.9% 70.0% 71.2%
Earnings per share, EUR 0.17 0.18 0.35 0.40 0.46
Fully diluted earnings per share,
EUR 0.17 0.18 0.35 0.40 0.46
Equity per share at end of period,
EUR 3.15 3.15 3.15 3.15 3.13
Average personnel for the period 2 304 2 214 2 304 2 250 2 317
--------------------------------------------------------------------------------
Definitions of key figures in the interim report are consistent with those in
the Annual Report 2010.
STATEMENT OF CASH FLOWS II II I-II I-II I-IV
MEUR 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Net profit for the period 8.0 8.4 15.9 17.5 20.7
Adjustments to net profit for the period
* 5.8 5.8 11.9 9.4 17.4
Financial items and taxes paid and
received -3.3 -2.7 -6.2 -6.0 -12.1
Change in working capital 6.4 8.7 -20.2 -12.8 -13.0
--------------------------------------------------------------------------------
Net cash generated from operating
activities 17.0 20.2 1.5 8.2 13.0
Investments -1.7 -1.5 -3.5 -3.3 -6.2
Proceeds from sales of assets 0.0 0.0 0.2 0.1 0.3
Dynamite Baits acquisition, net of cash - - - - -4.8
Sufix brand acquisition -0.7 -1.2 -0.7 -1.2 -1.2
Acquisition of other subsidiaries, net
of cash - 0.0 - 0.0 0.0
Change in interest-bearing receivables 0.0 0.0 0.0 0.0 -1.3
--------------------------------------------------------------------------------
Net cash used in investing activities -2.3 -2.7 -4.0 -4.4 -13.2
Dividends paid to parent company's
shareholders -9.0 -7.4 -9.0 -7.4 -7.4
Dividends paid to non-controlling
interest -2.7 - -2.7 - -
Net funding 3.4 2.6 19.7 12.5 6.0
Purchase of own shares - -0.4 0.0 -0.5 -1.1
--------------------------------------------------------------------------------
Net cash generated from financing
activities -8.3 -5.3 8.0 4.6 -2.5
Adjustments 0.0 -0.4 0.0 -1.0 -0.5
Change in cash and cash equivalents 6.4 11.8 5.5 7.3 -3.2
Cash & cash equivalents at the beginning
of the period 26.0 26.0 27.9 29.0 29.0
Foreign exchange rate effect -0.1 1.9 -1.1 3.4 2.2
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of
the period 32.3 39.7 32.3 39.7 27.9
* Includes reversal of non-cash items, income taxes and financial income and
expenses.
STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the
Company
---------------------------------------------------
Cumul. Fund for Non-
Share Fair trans- invested Re- contr-
pre- value lation non-rest- Own tained olling
Share mium re- diffe- ricted sha- earn- inte- Total
MEUR capital fund serve rences equity res ings rests equity
--------------------------------------------------------------------------------
Equity on Jan
1, 2010 3.6 16.7 -0.3 -12.3 4.9 -1.4 96.3 4.2 111.7
--------------------------------------------------------------------------------
Comprehensive
income* - - -1.6 9.1 - - 15.8 2.0 25.4
Purchase of
own shares - - - - - -0.5 - - -0.5
Dividends paid - - - - - - -7.4 - -7.4
Share based
payment - - - - - - 0.1 - 0.1
--------------------------------------------------------------------------------
Equity on Jun
30, 2010 3.6 16.7 -1.9 -3.2 4.9 -1.9 104.8 6.3 129.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity on Jan
1, 2011 3.6 16.7 -1.5 -6.0 4.9 -2.5 106.7 7.4 129.2
--------------------------------------------------------------------------------
Comprehensive
income* - - 0.3 -4.4 - - 13.6 2.2 11.8
Purchase of
own shares - - - - - 0.0 - - 0.0
Dividends paid - - - - - - -9.0 -2.7 -11.7
Other changes - - - - - - - 0.0 0.0
--------------------------------------------------------------------------------
Equity on Jun
30, 2011 3.6 16.7 -1.1 -10.3 4.9 -2.5 111.3 6.9 129.3
--------------------------------------------------------------------------------
* For the period (net of tax)
SEGMENT INFORMATION*
MEUR II II I-II I-II I-IV
Net Sales by Operating Segment 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Group Fishing Products 44.5 42.7 86.4 80.4 139.5
Other Group Products 5.1 4.0 10.4 9.0 25.2
Third Party Products 31.4 31.1 59.3 59.4 105.6
Intra-Group (Other Group Products) -0.2 -0.2 -0.5 -0.4 -0.9
--------------------------------------------------------------------------------
Total 80.9 77.6 155.6 148.4 269.4
Operating Profit by Operating
Segment
--------------------------------------------------------------------------------
Group Fishing Products 7.9 8.6 16.5 16.7 21.4
Other Group Products 0.4 0.1 0.9 0.6 2.0
Third Party Products 4.5 3.8 7.6 6.9 7.8
--------------------------------------------------------------------------------
Total 12.8 12.5 24.9 24.2 31.3
Jun 30 Jun 30 Dec 31
Assets by Operating Segment 2011 2010 2010
-------------------------------------------------------------------------
Group Fishing Products 192.4 186.0 190.5
Other Group Products 16.5 10.5 12.7
Third Party Products 77.4 75.6 71.1
-------------------------------------------------------------------------
Non-interest-bearing assets total 286.3 272.1 274.3
Unallocated interest-bearing assets 34.1 40.7 29.7
-------------------------------------------------------------------------
Total assets 320.4 312.8 304.0
Liabilities by Operating Segment
-------------------------------------------------------------------------
Group Fishing Products 36.2 35.4 35.1
Other Group Products 4.2 2.3 2.9
Third Party Products 13.3 14.8 15.1
-------------------------------------------------------------------------
Non-interest-bearing liabilities total 53.6 52.6 53.1
Unallocated interest-bearing liabilities 137.5 131.1 121.7
-------------------------------------------------------------------------
Total liabilities 191.1 183.7 174.8
II II I-II I-II I-IV
Net Sales by Area** 2011 2010 2011 2010 2010
----------------------------------------------------------------
North America 18.5 20.1 37.4 39.1 68.5
Nordic 33.8 31.6 69.7 63.7 110.4
Rest of Europe 36.3 31.9 70.6 61.0 104.6
Rest of the world 17.3 18.4 36.8 35.4 69.6
Intra-Group -25.0 -24.4 -58.9 -50.9 -83.8
----------------------------------------------------------------
Total 80.9 77.6 155.6 148.4 269.4
* The operating segments include the following product lines: Group Fishing
Products include Group Lures, Fishing Hooks, Fishing Lines and Fishing
Accessories, Other Group Products include Group manufactured and/or branded gift
products and products for winter sports and some other businesses and Third
Party Products include non-Group branded fishing products and third party
products for hunting, outdoor and winter sports.
**Geographical sales information has been prepared on source basis i.e. based on
the location of the business unit. Each area shows the sales generated in that
area excluding intra-Group transaction within that area, which have been
eliminated. Intra-Group line includes the eliminations of intra-Group
transactions between geographical areas.
KEY FIGURES BY QUARTERS I II III IV I-IV I II
MEUR 2010 2010 2010 2010 2010 2011 2011
-------------------------------------------------------------------
Net sales 70.8 77.6 60.6 60.4 269.4 74.7 80.9
EBITDA 13.1 14.1 4.5 5.7 37.4 13.7 14.4
Operating profit 11.7 12.5 2.9 4.2 31.3 12.1 12.8
Profit before taxes 12.1 12.1 1.7 3.5 29.5 11.1 11.3
Net profit for the period 9.1 8.4 1.4 1.8 20.7 7.9 8.0
-------------------------------------------------------------------
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 2010, except for the adoption of the new or
amended standards and interpretations. Adoption of amendments of IAS 24 and IAS
32 as well as the new interpretations, IFRIC 14 and IFRIC 19 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-June 2011. 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 June 30, 2011, the book value of inventories included a provision for net
realizable value of 2.8 MEUR (2.8 MEUR at June 30, 2010 and 3.0 MEUR at December
31, 2010).
Non-recurring income and expenses included in
operating profit II II I-II I-II I-IV
MEUR 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Costs related to business acquisitions -0.1 - -0.1 - -0.2
Restructuring of Hungarian operations - 0.0 - -0.2 -0.2
Relocation of Finnish operations -0.1 - -0.1 - -
Other restructuring costs 0.0 - 0.0 - -0.1
Other non-recurring items - 0.0 - 0.0 -0.1
--------------------------------------------------------------------------------
Total included in EBITDA -0.2 -0.1 -0.2 -0.2 -0.5
--------------------------------------------------------------------------------
Non-recurring impairment of non-current assets in
China - - - - -0.0
--------------------------------------------------------------------------------
Total included in operating profit -0.2 -0.1 -0.2 -0.2 -0.5
--------------------------------------------------------------------------------
Commitments Jun 30 Jun 30 Dec 31
MEUR 2011 2010 2010
--------------------------------------------------------------------------------
On own behalf
Business mortgage 16.1 16.1 16.1
Guarantees 0.1 0.2 0.1
Minimum future lease payments on operating
leases 10.1 9.9 9.3
--------------------------------------------------------------------------------
Related party transactions Rents Other
MEUR Purchases paid expenses Receivables Payables
--------------------------------------------------------------------------------
I-II 2011
Associated company Lanimo Oü 0.1 - - 0.0 -
Entity with significant
influence over the Group* - 0.1 0.0 0.0 0.0
Management - 0.2 - - 0.0
I-II 2010
Associated company Lanimo Oü 0.1 - - 0.0 -
Entity with significant
influence over the Group* - 0.1 0.0 0.0 0.0
Management - 0.1 - 0.0 0.0
I-IV 2010
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 0.1
--------------------------------------------------------------------------------
* Lease agreement for the real estate for the consolidated operations in France
and a service fee.
Open derivatives Nominal Positive fair Negative Net fair
MEUR amount values fair values values
--------------------------------------------------------------------------------
June 30, 2011
Foreign currency options and
forwards 6.0 0.0 0.4 -0.4
Interest rate swaps 84.3 - 1.5 -1.5
--------------------------------------------------------------------------------
Total 90.3 0.0 1.9 -1.9
June 30, 2010
Foreign currency options and
forwards 3.5 0.5 0.0 0.5
Interest rate swaps 89.1 - 2.6 -2.6
--------------------------------------------------------------------------------
Total 92.5 0.5 2.6 -2.1
December 31, 2010
Foreign currency options and
forwards 9.1 0.0 0.3 -0.3
Interest rate swaps 86.3 - 2.0 -2.0
--------------------------------------------------------------------------------
Total 95.4 0.0 2.3 -2.3
--------------------------------------------------------------------------------
The Group's financial risks and hedging principles are described in detail in
the Annual Report 2010.
Share-based payments
On March 31, 2011, the Group's synthetic option plan (2006) expired. The reward
totaling to 0.3 MEUR was disbursed during the second quarter.
The IFRS accounting effect of share based payment programs on operating profit
was 0.0 MEUR (-0.0 MEUR) for the second quarter and 0.1 MEUR (-0.0 MEUR) in
January-June due to change in fair value of programs. Terms and conditions of
the share-based payment programs are described in detail in the Annual Report
2010.
In June the Board has made a principal decision to establish a new share-based
long term retention and incentive program for key management for years
2011-2016. Program will be launched during second half of the year, once all
details have been determined.
Shares and share capital
Based on authorization given by the Annual General Meeting (AGM) in April 2007,
the Board can decide to issue shares through issuance of shares, options or
special rights entitling to shares in one or more issues. The number of new
shares to be issued including the shares to be obtained under options or special
rights shall be no more than 10 000 000 shares. This authorization includes the
right for the Board to resolve on all terms and conditions of the issuance of
new shares, options and special rights entitling to shares, including issuance
in deviation from the shareholders' preemptive rights. This authorization is in
force for a period of 5 years from the resolution by the AGM. The Board is also
authorized to resolve to repurchase a maximum of 2 000 000 shares by using funds
in the unrestricted equity. This amount of shares corresponds to less than 10%
of all shares of the company. The shares will be repurchased through public
trading arranged by NASDAQ OMX Helsinki at the market price of the acquisition
date. The shares will be acquired and paid in pursuance of the rules of NASDAQOMX Helsinki and applicable rules regarding the payment period and other terms
of the payment. This authorization is effective until the end of the next AGM.
On June 30, 2011, 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-June 2011 was 39 468 449. At the end of June 2011,
Rapala held 540 198 own shares, representing 1.4% of the total number and the
total voting rights of Rapala shares. The average share price of all repurchased
own shares held by Rapala was EUR 4.71.
During the first six months, 5 394 111 shares (1 337 294) were traded at a high
of 7.38 EUR and a low of 6.16 EUR. The closing share price at the end of the
period was 6.41 EUR.
Short term risks and uncertainties
The objective of Rapala's risk management is to support the implementation of
the Group's strategy and execution of business targets. The importance of risk
management has increased when Rapala has continued to expand its operations.
Accordingly, Group management also continues to develop risk management
practices and internal controls during 2011. Detailed description of the Group's
strategic, operative and financial risks and risk management principles are
included in the Annual Report 2010.
Due to the nature of the fishing tackle business and the geographical scope of
the Group's operations, business has traditionally been seasonally stronger in
the first half of the financial year compared to the second half. The biggest
deliveries for both summer and winter seasons are concentrated into relatively
short time-periods, which require proper functioning of the supply chain. The
Group's sales are also to some extent affected by weather as it impacts consumer
demand and the timing and length of the seasons. In Nordic countries longer
lasting summer fishing season may generate some additional fishing equipment
sale, but simultaneously delay the beginning of winter sports season impacting
timing of year-end deliveries and cause permanent loss of sales.
A major supply chain and logistics initiative to improve Group's inventory turns
and shorten the factory lead-times continues in 2011, including planning of new
initiatives. Before fully implemented, these initiatives may temporarily have
negative impact on the Group's inventory levels. The possible product life-cycle
initiatives as well as inventory clearance sales supporting the inventory
reduction targets may also have some short-term negative impacts on sales and
profitability of some product groups.
The ramp-up phase of the new production facility in Batam, Indonesia, may
increase certain production and supply chain risks temporarily. The relocation
of Peltonen Ski and the Finnish distribution operations might also temporarily
increase the level of operational risk of these units.
The increased sales and accordingly increased working capital levels have put
pressure on the cash flow covenant of the Group's financing facilities.
Covenants are monitored closely on a monthly basis. In the second quarter of
2011 the Group negotiated with its banks waivers for the cash flow covenant for
the second quarter of 2011.
Even though 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, such as gasoline
price, uncertainties concerning employment and governmental austerity measures
may temporarily affect consumer spending also in fishing tackle. However the
underlying consumer demand has historically proven to be fairly solid.
The truly global nature of the Group's sales and operations is spreading the
market risks caused by the ongoing uncertainties in the global economy. The
Group is cautiously monitoring the economic development in all markets. Due to
these uncertainties in future demand and the length of the Group's internal
supply chain, the supply chain management is balancing between risk of shortages
and risk of excess production and purchasing and consequent excess inventories
in the Group. Also the importance of cash collection and credit risk management
has increased and this may affect sales to some customers. Quality of the
accounts receivable is monitored closely and write-downs are initiated if
needed.
The Group's sales and profitability are impacted by the changes in foreign
exchange rates, especially US dollar and other currencies connected to it. The
Group is actively monitoring the currency position and risks and using e.g.
foreign currency denominated loans to generate natural hedging. In order to fix
the exchange rates of some of the future USD-denominated purchases, the Group
has entered into currency hedging agreements. As the Group is not applying hedge
accounting to currency hedging agreements in accordance with IAS 39, the change
in fair value of these unrealized currency hedging agreements has an impact on
the Group's operating profit. Development of oil price may impact value of
Russian ruble, which has become significant inflowing currency for the Group.
The continuing strengthening of Chinese renminbi together with possible
strengthening of US dollar is putting pressure on costs. The Group is closely
monitoring the situation and considering possibility and feasibility of price
increases and hedging actions.
The market prices of some commodity raw materials have started to increase again
and this together with other inflation trends would put pressure on pricing of
some products in the future.
No significant changes are identified in the Group's strategic risks or business
environment.
[HUG#1533720]
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