2010-04-27 08:00:00 CEST
2010-04-27 08:00:56 CEST
REGULATED INFORMATION
Rapala VMC - Interim report (Q1 and Q3)
INTERIM REPORT FOR JANUARY TO MARCH 2010: RECORD NET SALES WITH STRONG PROFITABILITY AND CASH FLOW
Rapala VMC Corporation
Stock Exchange Release
April 27, 2010 at 9.00 a.m.
* Net sales for the first quarter increased 9% and reached a record level at
70.8 MEUR (I/09: 65.2 MEUR).
* The sales growth was strongest in East Europe, which is back to
pre-recession growth trend. Also sales of winter sport equipment increased
strongly in the Nordic countries.
* Operating profit for the first quarter improved and amounted to 11.7 MEUR
(10.0 MEUR). Comparable operating profit was 11.8 MEUR (10.1 MEUR) and
comparable operating margin 16.7% (15.5%).
* Profit before taxes increased 42% and reached 12.1 MEUR (8.5 MEUR).
* Earnings per share reached a first quarter record level at 0.22 EUR (0.15
EUR).
* The major working capital initiative started 18 months ago progressed during
the quarter. As a result, cash flow from operating activities improved to
-12.0 MEUR (-19.8 MEUR). Group inventories are now almost 10 MEUR less than
one year ago.
* Implementation of the Group's strategy continued with focus on improvement
of cash flow, establishment of new distribution companies and performance
improvement initiatives. Reducing working capital and increasing cash flow
continue to be the top priorities for 2010 together with strong emphasis on
innovation and development of new products.
* Group lure manufacturing facilities and the Peltonen ski factory continue to
run at full capacity.
* It is expected that both the net sales and the comparable operating margin
for the full year 2010, excluding non-recurring items, will increase from
2009.
The attachment presents the interim review by the Board of Directors as well as
the accounts.
A conference call on first quarter result will be arranged today at 10 a.m.
Finnish time (9 a.m. CET). Please dial +44 (0)20 3147 4971 or +1 212 444 0889 or
+358 (0)9 2310 1667 (pin code: 488040#) 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: 488040#). 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 2010 started very well due to strong sales of especially winter sports
equipment. The uncertainty regarding the world economy continued but positive
signs of recovery were witnessed especially in East Europe, which is back to
pre-recession growth trend. Strengthening of many currencies eased up the
pressure on consumer confidence and increased the purchase power especially in
East Europe, Sweden, Australia and South Africa. Market situation in West Europe
continued relatively weak. Nordic countries enjoyed good winter conditions,
which boosted the winter sports business while the general market sentiment was
still quite weak. In North America, the business environment remained on last
year levels. Asian market was somewhat weaker than a year ago.
Net sales for the first quarter increased 9% and reached a record level at 70.8
MEUR (65.2 MEUR). US dollar (USD) weakened 6% from previous year but many other
currencies especially in East Europe and Scandinavia strengthened against euro.
The net effect of the currency movements increased the quarterly net sales by
1.8 MEUR. With comparable exchange rates, net sales increased 6%.
Net sales of Group Fishing Products were up only 1% due to weakening of USD. Net
sales of Other Group Products increased 19% as a result of improved sales of
especially Peltonen cross-country skis but also all other categories than
subcontracting services. Net sales of Third Party Products were up 18% mainly
due to increased sales of sport fishing and winter sport equipment as well as
strengthening of many currencies.
Net sales in North America decreased 3% due to the weakening of USD. In the
Nordic countries, net sales decreased 10% as a net result of reduced
distribution volumes of especially hunting products, increased sales of winter
sport products and strengthening of Swedish and Norwegian crowns. Net sales in
Rest of Europe were up 14% due to improved market sentiment and strengthened
currencies in East Europe. Net sales in Rest of the world increased 4% despite
the weakening of USD.
Financial Results and Profitability
Comparable operating profit for the first quarter, excluding non-recurring
items, improved and amounted to 11.8 MEUR (10.1 MEUR). This improvement came
from increased net sales. Comparable operating margin was 16.7% (15.5%).
Reported operating profit was 11.7 MEUR (10.0 MEUR) including non-recurring
restructuring costs of 0.1 MEUR from the Hungarian distribution unit (0.1 MEUR
non-recurring costs related to the closure of the Irish lure factory). Reported
operating margin was 16.5% (15.4%) and return on capital employed 22.6% (19.3%).
Key figures I I I-IV
MEUR 2010 2009 2009
------------------------------------------
Net sales 70.8 65.2 234.6
EBITDA as reported 13.1 11.6 28.9
EBITDA excl. one-off items 13.2 11.7 29.2
Operating profit (EBIT) 11.7 10.0 22.1
EBIT excl. one-off items 11.8 10.1 23.5
------------------------------------------
Operating profit of Group Fishing Products increased to 8.1 MEUR (7.8 MEUR).
Operating profit of Other Group Products improved to 0.5 MEUR (0.1 MEUR) due to
growth in net sales. Operating profit of Third Party Products increased to 3.1
MEUR (2.1 MEUR) due to stronger sales.
Financial (net) gains were 0.5 MEUR (expenses 1.6 MEUR) including net interest
expenses of 0.8 MEUR (0.9 MEUR) and (net) currency exchange gains of 1.3 MEUR
(losses 0.6 MEUR).
Profit before taxes increased 42% and reached 12.1 MEUR (8.5 MEUR). Net profit
for the quarter increased strongly to 9.1 MEUR (6.2 MEUR) and earnings per share
reached a first quarter record level at 0.22 EUR (0.15 EUR).
Cash Flow and Financial Position
As a result of strong sales and progress in working capital management,
inventories decreased 9.4 MEUR from last March. Despite increased sales,
short-term non-interest bearing assets, mainly trade receivables, decreased 2.2
MEUR.
As a result of the good performance in working capital management, the cash flow
from operating activities improved strongly to -12.0 MEUR (-19.8 MEUR).
Net cash used in investing activities amounted to 1.7 MEUR (0.5 MEUR). In
addition to the normal capital expenditure of 1.8 MEUR (1.5 MEUR) it included
0.1 MEUR (1.0 MEUR) proceeds from sales of assets.
Net interest-bearing debt increased seasonally to 96.6 MEUR (Dec 2009: 79.4
MEUR) as cash was tied mainly in working capital. Comparing to March 2009, net
interest-bearing debt decreased 15.7 MEUR. The liquidity of the Group remained
good. Equity-to-assets and gearing ratios weakened seasonally from December but
improved from March 2009. Equity-to-assets reached 41.7% (Dec 2009: 42.8% and
Mar 2009: 35.3%) and gearing 77.7% (Dec 2009: 71.1% and Mar 2009: 101.7%).
Strategy Implementation
Implementation of the Group's strategy for profitable growth continued during
the first quarter with emphasis on continuing the positive development in cash
flow and opening new distribution companies to support future growth.
The results of the major working capital initiative kicked off in late 2008 to
reduce Group inventories and improve cash flow progressed and contributed to the
positive cash flow. Work to shorten the lead-times, lower the inventories and
further improve the service levels to customers will continue throughout 2010.
The newly established distribution company in Iceland started its operations
during the quarter and the Chinese gift distribution company in April. These
units will further expand and strengthen the Group distribution network.
In addition, the Group continued several other performance improvement
initiatives like further development of lure manufacturing processes and
restructuring of Hungarian distribution operations. Group shareholding in the
Hungarian distribution company was raised by 10% to 66.6% in February.
Also development of organic growth in terms of extensions of current product
categories as well as special marketing, sales and brand initiatives continued.
Discussions and negotiations regarding acquisitions and business combinations
continued during the quarter.
Short-term Outlook
The general market situation continues to be cautiously optimistic. In East
Europe, the market has continued the strong growth that was there before the
recession. US market is quite stable but there are big differences between
countries in Europe and Asia. The general uncertainty may continue in 2010
through increased unemployment in many countries, which will most likely
continue to affect the ordering behavior of some customers and maintain the need
for quick deliveries and short lead-times.
At the end of March 2010, the Group's order backlog was up 14% from last March
at 37.2 MEUR. Group lure manufacturing facilities and the Peltonen ski factory
continue to run at full capacity.
It is expected that both the net sales and the comparable operating margin for
the full year 2010, excluding non-recurring items, will increase from 2009.
While the Group continues to implement its strategy for profitable growth,
reducing working capital and increasing cash flow continue to be the top
priorities for 2010 together with strong emphasis on innovation and development
of new products.
Second quarter interim report will be published on July 22.
Helsinki, April 27, 2010
Board of Directors of Rapala VMC Corporation
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME I I I-IV
MEUR 2010 2009 2009
---------------------------------------------------------------
Net sales 70.8 65.2 234.6
Other operating income 0.1 0.2 1.2
Materials and services 31.3 28.6 108.4
Personnel expenses 14.3 13.8 53.8
Other costs and expenses 12.1 11.4 44.7
----------------
EBITDA 13.1 11.6 28.9
Depreciation and amortization 1.5 1.5 6.9
----------------
Operating profit (EBIT) 11.7 10.0 22.1
Financial income and expenses -0.5 1.6 2.1
Share of results in associated companies 0.0 0.0 0.0
----------------
Profit before taxes 12.1 8.5 19.9
Income taxes 3.0 2.3 5.7
----------------
Net profit for the period 9.1 6.2 14.3
Attributable to:
Equity holders of the Company 8.6 6.0 12.1
Non-controlling interests 0.6 0.2 2.2
Earnings per share for profit attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted = non-diluted) 0.22 0.15 0.31
STATEMENT OF COMPREHENSIVE INCOME I I I-IV
MEUR 2010 2009 2009
------------------------------------------------------------
Net profit for the period 9.1 6.2 14.3
---------------
Other comprehensive income, net of tax
Change in translation differences 5.5 1.6 1.5
Gains and losses on cash flow hedges -0.9 -0.1 -0.1
Gains and losses on hedges of net investments -0.9 -0.9 0.2
---------------
Total other comprehensive income, net of tax 3.7 0.6 1.6
---------------
Total comprehensive income for the period 12.8 6.7 15.9
Total comprehensive income attributable to:
Equity holders of the Company 12.0 6.6 13.6
Non-controlling interests 0.8 0.1 2.3
STATEMENT OF FINANCIAL POSITION Mar 31 Mar 31 Dec 31
MEUR 2010 2009 2009
-----------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 60.4 58.9 58.3
Property, plant and equipment 28.7 28.7 27.5
Non-current financial assets
Interest-bearing 0.4 0.5 0.5
Non-interest-bearing 9.4 8.5 8.0
---------------------
98.9 96.6 94.2
Current assets
Inventories 102.9 112.3 94.4
Current financial assets
Interest-bearing 0.5 0.4 0.2
Non-interest-bearing 70.6 72.8 43.5
Cash and cash equivalents 26.0 30.8 29.0
---------------------
199.9 216.4 167.0
Total assets 298.8 313.0 261.2
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the Company 119.3 108.3 107.4
Non-controlling interests 5.0 2.0 4.2
---------------------
124.4 110.4 111.7
Non-current liabilities
Interest-bearing 38.6 44.0 36.0
Non-interest-bearing 10.8 11.0 10.1
---------------------
49.5 55.0 46.0
Current liabilities
Interest-bearing 84.9 100.1 73.1
Non-interest-bearing 40.0 47.5 30.5
---------------------
124.9 147.5 103.5
Total equity and liabilities 298.8 313.0 261.2
KEY FIGURES I I I-IV
2010 2009 2009
-------------------------------------------------------------------
EBITDA margin, % 18.6% 17.7% 12.3%
Operating profit margin, % 16.5% 15.4% 9.4%
Return on capital employed, % 22.6% 19.3% 11.5%
Capital employed at end of period, MEUR 221.0 222.7 191.1
Net interest-bearing debt at end of period, MEUR 96.6 112.3 79.4
Equity-to-assets ratio at end of period, % 41.7% 35.3% 42.8%
Debt-to-equity ratio at end of period, % 77.7% 101.7% 71.1%
Earnings per share, EUR 0.22 0.15 0.31
Fully diluted earnings per share, EUR 0.22 0.15 0.31
Equity per share at end of period, EUR 3.05 2.76 2.75
Average personnel for the period 2 178 2 446 2 259
-------------------------------------------------------------------
Definitions of key figures in the interim report are consistent with those in
the Annual Report 2009.
STATEMENT OF CASH FLOWS I I I-IV
MEUR 2010 2009 2009
------------------------------------------------------------------------
Net profit for the period 9.1 6.2 14.3
Adjustments to net profit for the period * 3.6 5.2 14.7
Financial items and taxes paid and received -3.3 -2.2 -7.4
Change in working capital -21.4 -29.0 3.0
------------------------------------------------------------------------
Net cash generated from operating activities -12.0 -19.8 24.6
Investments -1.8 -1.5 -6.7
Proceeds from sales of assets 0.1 1.0 2.6
Sufix brand acquisition - - -1.1
Ultrabite brand acquisition - - -0.9
Acquisition of subsidiaries, net of cash - - -0.1
Change in interest-bearing receivables 0.0 0.0 -0.1
------------------------------------------------------------------------
Net cash used in investing activities -1.7 -0.5 -6.3
Dividends paid - - -7.5
Net funding 10.0 20.1 -12.8
Purchase of own shares -0.1 0.0 -0.6
------------------------------------------------------------------------
Net cash generated from financing activities 9.8 20.1 -20.8
Adjustments -0.6 0.2 0.8
Change in cash and cash equivalents -4.5 0.0 -1.7
Cash & cash equivalents at the beginning of the period 29.0 30.6 30.6
Foreign exchange rate effect 1.6 0.3 0.1
------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 26.0 30.8 29.0
* 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, 2009 3.6 16.7 -0.3 -13.8 4.9 -0.9 91.5 1.9 103.7
--------------------------------------------------------------------------------
Comprehensive
income* - - -0.1 0.7 - - 6.0 0.1 6.7
Purchase of own
shares - - - - - 0.0 - - 0.0
--------------------------------------------------------------------------------
Equity on Mar
31, 2009 3.6 16.7 -0.3 -13.0 4.9 -0.9 97.5 2.0 110.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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* - - -0.9 4.4 - - 8.6 0.8 12.8
Purchase of own
shares - - - - - -0.1 - - -0.1
Share based payments - - - - - - 0.1 - 0.1
--------------------------------------------------------------------------------
Equity on Mar
31, 2010 3.6 16.7 -1.3 -7.9 4.9 -1.6 104.9 5.0 124.4
--------------------------------------------------------------------------------
* For the period (net of tax)
SEGMENT INFORMATION*
I I I-IV
Net Sales by Operating Segment
MEUR 2010 2009 2009
--------------------------------------------------
Group Fishing Products 37.7 37.3 126.8
Other Group Products 5.0 4.2 17.8
Third Party Products 28.2 23.8 90.6
Intra-Group -0.2 -0.1 -0.6
--------------------------------------------------
Total 70.8 65.2 234.6
Operating Profit by Operating Segment
Group Fishing Products 8.1 7.8 15.7
Other Group Products 0.5 0.1 0.5
Third Party Products 3.1 2.1 5.8
-------------------------------------------------
Total 11.7 10.0 22.1
Mar 31 Mar 31 Dec 31
Assets by Operating Segment 2010 2009 2009
--------------------------------------------------------
Group Fishing Products 182.4 184.9 159.6
Other Group Products 11.1 11.6 10.2
Third Party Products 78.4 84.8 61.9
Intra-Group (Other Group Products) -0.1 -0.1 0.0
--------------------------------------------------------
Non-interest bearing assets total 271.9 281.2 231.6
Unallocated interest-bearing assets 26.9 31.8 29.6
--------------------------------------------------------
Total assets 298.8 313.0 261.2
Liabilities by Operating Segment
----------------------------------------------------------
Group Fishing Products 32.1 33.3 30.8
Other Group Products 2.2 2.3 2.5
Third Party Products 16.7 23.0 7.2
Intra-Group (Group Fishing Products) -0.1 -0.1 0.0
----------------------------------------------------------
Non-interest bearing liabilities total 50.9 58.5 40.5
Unallocated interest-bearing liabilities 123.5 144.1 109.1
----------------------------------------------------------
Total liabilities 174.4 202.6 149.6
Net Sales by Area** I I I-IV
MEUR 2010 2009 2009
-------------------------------------
North America 19.0 19.5 61.1
Nordic 32.1 35.8 102.0
Rest of Europe 29.1 25.5 89.7
Rest of the world 17.0 16.4 55.3
Intra-Group -26.4 -32.0 -73.5
-------------------------------------
Total 70.8 65.2 234.6
* 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
MEUR 2009 2009 2009 2009 2009 2010
--------------------------------------------------------
Net sales 65.2 67.7 50.2 51.4 234.6 70.8
EBITDA 11.6 11.5 3.3 2.5 28.9 13.1
Operating profit 10.0 9.4 1.9 0.7 22.1 11.7
Profit before taxes 8.5 9.8 2.1 -0.4 19.9 12.1
Net profit for the period 6.2 7.4 1.5 -0.8 14.3 9.1
--------------------------------------------------------
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 2009, except for the adoption of the new or
amended standards and interpretations. Adoption of the amended standards IFRS 3
(Business Combinations) and IAS 27 (Consolidated and Separate Financial
Statements) had impact on accounting of minority interest and will have
significant impact on the future business combinations. Adoption of IFRS 2 and
IAS 39 as well as the new interpretations, IFRIC 17 and IFRIC 18 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-March 2010. 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 March 31, 2010, the book value of inventories included a provision for net
realizable value of 2.8 MEUR (2.4 MEUR at March 31, 2009 and 3.0 MEUR at
December 31, 2009).
Impact of acquisitions on the consolidated financial statements
In February 2010, Rapala purchased a 10% minority stake of the Group's Hungarian
distribution company. This acquisition raised Rapala's ownership to 66.6%.
Acquisition has no significant impact on the Group's consolidated financial
statements.
Non-recurring income and expenses included in operating profit I I I-IV
MEUR 2010 2009 2009
-----------------------------------------------------------------------------
Sale of Hong Kong office premises - - 0.5
Restructuring of Chinese manufacturing operations * - - -0.4
Consolidation of French operations - - 0.0
Closure of Irish lure factory - -0.1 -0.1
Other restructuring costs -0.1 - -0.4
Other non-recurring items - - -0.1
-----------------------------------------------------------------------------
Total included in EBITDA -0.1 -0.1 -0.3
-----------------------------------------------------------------------------
Non-recurring impairment of non-current assets in China - - -0.7
Non-recurring impairment of non-current assets in Hungary - - -0.3
-----------------------------------------------------------------------------
Total included in operating profit -0.1 -0.1 -1.4
* Includes redundancy and other costs as well as gains and losses from the sale
of fixed assets.
Commitments Mar 31 Mar 31 Dec 31
MEUR 2010 2009 2009
----------------------------------------------------------------------
On own behalf
Business mortgage 16.1 16.1 16.1
Guarantees 0.2 0.3 0.2
Minimum future lease payments on operating leases 10.0 9.9 10.3
----------------------------------------------------------------------
Related party transactions Rents Other
MEUR Purchases paid expenses Receivables Payables
--------------------------------------------------------------------------------
I 2010
Associated company Lanimo Oü 0.1 - - 0.0 -
Entity with significant influence
over the Group* - 0.0 0.0 0.0 -
Management - 0.1 - - 0.0
I 2009
Associated company Lanimo Oü 0.1 - - 0.0 -
Entity with significant influence
over the Group* - 0.0 0.0 0.0 -
Management - 0.0 0.0 - -
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
--------------------------------------------------------------------------------
* 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
--------------------------------------------------------------------------------
March 31, 2010
Foreign currency
forwards 5.8 0.4 0.0 0.4
Interest rate swaps 86.5 - 1.7 -1.7
Total 92.3 0.4 1.7 -1.3
March 31, 2009
Foreign currency
forwards 4.9 0.4 - 0.4
Interest rate swaps 124.5 0.1 0.5 -0.5
Total 129.4 0.5 0.5 0.0
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
--------------------------------------------------------------------------------
Group's financial risks and hedging principles are described in detail in the
Annual Report 2009.
Share-based payments
The Group had two separate share-based payment programs in place on March
31, 2010: one synthetic option program settled in cash and one share reward
program settled in shares. On March 31, 2010, the exercise period for the 2004B
stock option program expired.
The IFRS accounting effect on operating profit was -0.0 MEUR (-0.1 MEUR) for the
first quarter and -0.3 MEUR for the financial year 2009. Terms and conditions of
the share-based payment programs are described in detail 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 March 31, 2010, 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-March 2010 was 39 468 449. On February 4, 2010, the
Board decided to continue buying back own shares in accordance with the
authorization granted by the Annual General Meeting on April 7, 2009. The
repurchasing of shares ended on March 31, 2010 when Rapala held 368 144 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 January-March
2010 was 5.26 EUR.
During the first quarter, 2 482 268 shares (1 133 539) were traded. The shares
traded at a high of EUR 5.50 EUR and a low of 4.80 EUR during the period. The
closing share price at the end of the period was 5.40 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 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 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. The biggest deliveries are concentrated into
relatively short time period which requires proper functioning of Group's supply
chain. In 2010, deliveries to customers have started mostly according to plan
and without any material problems in the supply chain. A major supply chain and
logistics initiative started in 2009 to shorten the lead-times and further
improve the service levels to customers continues in 2010.
Group's sales are also to some extent affected by weather. Weather conditions
supported the sales of winter sports equipment especially in the Nordic
countries during the winter season 2009-2010. Strong winter could simultaneously
delay the beginning of the coming summer fishing season, which could negatively
affect the sales and inventory levels. In 2010, the spring started in most
markets close to normal time and sales of fishing tackle to distributors started
well, but the level of final consumer demand is still somewhat unclear, as the
summer fishing season has not yet fully started.
Year 2009 was characterized by initiatives to improve cash flow and reduce
inventory levels, even at the risk of losing some profit margin, and these
initiatives continue in 2010. Cautious purchasing could result in shortage of
some products if the demand exceeds the estimates.
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 and onwards.
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
positive signals received since 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 has increased 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.
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.
No significant changes are identified in the Group's strategic risks or business
environment.
[HUG#1408287]
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