2011-10-27 08:30:00 CEST
2011-10-27 08:30:34 CEST
REGULATED INFORMATION
Rapala VMC - Interim report (Q1 and Q3)
INTERIM REPORT FOR JANUARY TO SEPTEMBER 2011: SALES GROWTH CONTINUED AND CASH FLOW IMPROVED SIGNIFICANTLY
Rapala VMC Corporation
Stock Exchange Release
October 27, 2011 at 9.30 a.m.
* Net sales for the quarter increased by 4% from last year to new third
quarter record of 63.0 MEUR (60.6 MEUR). Net sales for January to September
reached 218.7 MEUR (209.0 MEUR), increasing 5% from last year.
* Comparable operating profit decreased from last year to 2.8 MEUR (3.1 MEUR)
for third quarter, but was up for the nine-month period at 28.1 MEUR (27.5
MEUR). Comparable operating margin was impacted by the inventory clearance
sales and was lower than last year amounting to 4.5% (5.1%) for the quarter
and 12.9% (13.2%) for the nine months. Reported operating profit for the
third quarter was 2.3 MEUR (2.9 MEUR) and 27.2 MEUR (27.1 MEUR) for January
to September.
* Net profit for third quarter was down to 0.2 MEUR (1.4 MEUR) and was 16.1
MEUR (18.9 MEUR) for the nine-month period, heavily impacted by currency
exchange rate movements. Earnings per share were -0.01 EUR (0.01 EUR) and
0.34 EUR (0.42 EUR) respectively.
* Cash flow from operating activities for third quarter improved significantly
to 15.3 MEUR (7.0 MEUR) and was 16.8 MEUR (15.2 MEUR) for the nine-month
period following the positive development in the amount of working capital.
* Implementation of the Group's strategy continued:
* by closing the transaction to create a distribution joint venture with
Shimano in the UK,
* by proceeding with establishment of a lure manufacturing unit as well
as a VMC hook manufacturing unit on Batam Island in Indonesia and
* by continuing the planning and implementation of new supply chain and
inventory management initiatives.
* It is expected that in 2011 the net sales will increase from 2010. Following
the increased uncertainties in business environment, Group's focus on cash
flow and consequent impacts of the inventory cleaning initiatives,
profitability estimate is specified. The comparable operating profit is
expected to remain close to last year's level although comparable operating
profit margin is expected to be slightly lower.
The attachment presents the interim review by the Board of Directors as well as
the accounts.
A conference call on the third quarter result will be arranged today at 3.00
p.m. Finnish time (2.00 p.m. CET). Please dial +44 (0)20 7784 1038 or
+1 212 444 0889 or +358 (0)9 2310 1667 (pin code: 881159#) 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: 881159#). 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
Rapala's sales growth continued in third quarter of the year, again breaking the
previous third quarter sales record. The re-emerging uncertainties concerning
the future development of economies globally and particularly in Europe did not
significantly affect the demand for fishing tackle in any of the major markets.
Weathers supported the sales, especially in Central and Western Europe. New
products have been selling well. Rapala's supply chain operated smoothly
enabling better and timely availability of products, thus securing fill rates
and importantly promoting customer satisfaction among major customers. Changes
in foreign exchange rates reduced the net sales compared to last year. Some
negative impacts of the ongoing financial turmoil have been seen in some single
markets and impacting certain more expensive product categories. Tight credit
control as well as relocation of operations impacted sales negatively in some
markets. Special sales initiatives to bring down Group's inventory levels
accelerated.
Net sales for the third quarter increased by 4% from last year to 63.0 MEUR
(60.6 MEUR), whereas changes in currency exchange rates reduced the sales by
1.9 MEUR. New units contributed 2.1 MEUR net sales in the third quarter. The
nine-month net sales reached 218.7 MEUR (209.0 MEUR), increasing 5% from last
year. With comparable exchange rates and organization structure Rapala's net
sales increased by 4% in third quarter and by 3% during the nine-month period.
Net sales of Group Fishing Products increased by 11% in third quarter and by 8%
for the nine months, following increased third quarter sales of fishing lines
and Dynamite Baits' products. Net sales of Other Group Products was down 12% for
the third quarter, following decline in sales of gift products, while for the
nine-month period the sales were up 5%. Net sales of Third Party Products were
down 1% for the third quarter, as the decline in hunting products was not
entirely covered by the increase in outdoor products. For the nine-month period
sales were at last year level.
In North-America, after slow beginning of the season, sales developed positively
during third quarter by increasing 3% from last year, even though US dollar was
7% weaker year-to-date against euro than last year. Consequently the nine-month
sales were 3% down from last year. US consumer confidence and general retail
business is still hurt by the ongoing economical uncertainties. Rapala's North-
American sales increase in third quarter was supported by good delivery
performance as well as introduction of new winter fishing products and special
sales programs.
In Nordic countries sales were down by 6% in third quarter, but up 5% in the
nine-month period. Third quarter drop is largely caused by timing issues
relating to relocation of Rapala's Finnish distribution company. Decline in
sales of more expensive hunting equipment also impacted the Nordic sales. In
Rest of Europe sales were up 15% in third quarter and equally for the nine
months. Growth was based on good sales performance especially in France and East
Europe as well as impact of Dynamite Baits, which was acquired during third
quarter last year.
In Rest of the World third quarter sales fell 4% from last year, but were 1% up
for the nine-month period. In third quarter external sales grew in all markets,
especially strong in Japan and Australia, while production volumes at Rapala's
Asian manufacturing operations are slightly down from last year's record levels
following Group's ongoing working capital management projects.
Financial Results and Profitability
Comparable operating profit, excluding non-recurring items, decreased from last
year to 2.8 MEUR (3.1 MEUR) for third quarter, but was up for the nine-month
period at 28.1 MEUR (27.5 MEUR). Comparable operating margin was lower than last
year amounting to 4.5% (5.1%) for the quarter and 12.9% (13.2%) for the nine
months. Following increased focus on cash flow, the third quarter operating
profit was negatively impacted by the ongoing inventory reduction initiatives,
including controlled clearance sales of slow moving items as well as timing
issues relating to the relocation of the Finnish distribution operations and
increase in fixed costs. Compared to last year change in currency exchange rates
gave positive impact for the third quarter profitability, but for the nine
months the impact of currencies is negative. Third quarter operating profit was
also burdened by higher allowances for doubtful receivables, whereas last year
it benefitted from positive change in fair value of share based-payment
programs.
Reported operating profit for the third quarter decreased from last year and
amounted to 2.3 MEUR (2.9 MEUR), but was up for the nine-month period at 27.2
MEUR (27.1 MEUR). Reported operating margin was 3.6% (4.8%) and 12.4% (13.0%)
respectively. Reported operating profit for the quarter included -0.5 MEUR (-
0.2 MEUR) non-recurring items consisting of restructuring and acquisition costs.
For nine months non-recurring items amounted to -0.9 MEUR (-0.4 MEUR). Return on
capital employed fell to 4.1% (5.7%) for the quarter and to 16.3% (17.9%) for
the nine months.
Key figures III III I-III I-III I-IV
MEUR 2011 2010 2011 2010 2010
-----------------------------------------------------------------------
Net sales 63.0 60.6 218.7 209.0 269.4
EBITDA as reported 4.1 4.5 32.3 31.7 37.4
EBITDA excl. one-off items 4.5 4.6 33.0 32.1 37.9
Operating profit (EBIT) 2.3 2.9 27.2 27.1 31.3
EBIT excl. one-off items 2.8 3.1 28.1 27.5 31.8
-----------------------------------------------------------------------
As a result of improved profitability of fishing lines and accessories,
operating profit for Group Fishing Products increased to 1.6 MEUR (0.7 MEUR) for
the third quarter and to 18.0 MEUR (17.4 MEUR) for the nine-month period.
Operating profit margin increased to 4.8% (2.4%) for the quarter, but was down
to 15.1% (15.8%) for the nine-month period. Operating profit of Other Group
Products turned negative in third quarter following the decline in sales of gift
products as well as non-recurring costs and timing issues relating to
relocations of the Finnish operations. Operating profit of Third Party Products
was slightly lower than last year in the third quarter, but still ahead of last
year in the nine-month period. In third quarter, profitability of third party
fishing was at last year level, whereas outdoor products were above and hunting
and winter sports equipments below last year levels.
Total financial (net) expenses increased significantly amounting to 1.9 MEUR
(1.2 MEUR) for the third quarter and 4.5 MEUR (1.1 MEUR) for the nine-month
period. Major negative change in financial items is resulting from (net)
currency exchange expenses which amounted to 1.0 MEUR (0.4 MEUR) for the quarter
and 1.6 MEUR (net gain 1.4 MEUR) for the nine-month period. Net interest and
other financing expenses remained closer to last year levels at 0.9 MEUR (0.8
MEUR) for the quarter and 2.9 MEUR (2.6 MEUR) for the nine months.
As a result of lower operating profit and increased financial (net) expenses,
net profit for third quarter was down to 0.2 MEUR (1.4 MEUR) and amounted to
16.1 MEUR (18.9 MEUR) for the nine-month period. After deduction of non-
controlling interest, earnings per share turned negative for the quarter
amounting to -0.01 EUR (0.01 EUR) and was 0.34 EUR (0.42 EUR) for the nine-month
period.
Cash Flow and Financial Position
Following the positive development in working capital, especially change in
accounts receivables and inventories, cash flow from operations improved clearly
from last year to 15.3 MEUR (7.0 MEUR) for the quarter and was 16.8 MEUR (15.2
MEUR) for the nine-month period. Net change in working capital was 14.4 MEUR
(5.0 MEUR) for the quarter and -5.7 MEUR (-7.8 MEUR) for the nine-month period.
Group's inventories increased 8.5 MEUR from last September to 115.2 MEUR (106.7
MEUR), while currency movements reduced the value of inventories 0.7 MEUR.
However from June to September, inventories decreased with comparable currency
rates 1.6 MEUR, while last year same period with comparable currency rates they
increased 4.3 MEUR.
Net cash used in investing activities was down to 4.2 MEUR (7.2 MEUR) for the
quarter and 8.2 MEUR (11.6 MEUR) for the nine-month period, due to smaller
business acquisitions.
Due to higher inventory levels compared to last year, net interest bearing debt
was up at 93.9 MEUR (87.9 MEUR) at end of September, but was 9.5 MEUR lower than
in the end of June. Equity-to-asset ratio improved from last year to 42.2%
(41.9%). Gearing was slightly higher than last year at 71.8% (70.4%), still at
low levels historically.
Strategy Implementation
Implementation of Rapala's strategy of profitable growth continued during the
third quarter of the year by taking actions relating to manufacturing and
distribution activities as wells as Group's internal supply chain and inventory
management.
The transaction to create a joint venture distribution company ("JV") with
Shimano in the UK was closed in the beginning of September. The transaction was
based on an agreement signed in June between Rapala and Shimano Inc., the
leading manufacturer of rods and reels worldwide, to strengthen European
distribution alliance by merging existing UK distribution activities into a true
50/50 distribution JV. This JV, Shimano Normark UK Ltd, distributes both Rapala
and Shimano products in the UK on an exclusive basis. Dynamite Baits' UK
distribution activities are merged into the JV. Dynamite Baits branded bait
manufacturing activities will remain fully in Rapala's control under Dynamite
Baits Ltd. 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 the UK and in Europe.
Project to establish a lure manufacturing unit on Batam Island in Indonesia
proceeded according to plans. The manufacturing facility will provide access to
cost competitive production resources also in the future and enable
manufacturing efficiencies. After the necessary renovations and equipment
installations the production of PVC soft plastic lures is expected to start
during the fourth quarter. At first stage the operation will employ some
150-200 people and run parallel to Group's Chinese manufacturing operations.
Possibilities to expand lure manufacturing operations in Batam further will be
studied once the first stage is successfully implemented.
VMC, Rapala's hook manufacturing branch, also made a decision to establish hook
manufacturing operations on Batam Island, nearby the lure manufacturing
facility. This unit will mainly produce single hooks and serve Rapala's Asian
lure manufacturing operations as well as other Asian hook customers. Operations
are expected to start during the fourth quarter and within a year employ some
50 persons. Capital expenditure of this project is expected to be in the range
of 0.3 MEUR.
The planning and implementation of actions and changes in Group's internal
supply chain, inventory and product life-cycle management continued during the
third quarter, targeting to permanently bring down Group's inventories to lower
levels, while simultaneously improving 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 implementation of these actions and planning of new
initiatives will continue also next year.
Group's new distribution company in Mexico started its operations during the
third quarter. Indonesian distribution company will commence its business in
October. Rapala is actively investigating possibilities to further expand its
global distribution network, already largest within the industry.
Relocation of Rapala's ski manufacturing unit Peltonen Ski Oy was finalized
during the third quarter in accordance to plans. New location and investments
increase the capacity significantly and enable clear improvements in
manufacturing efficiencies.
Relocation of Rapala's Finnish distribution company Normark Suomi Oy started
during the second quarter and will be finalized during October. As expected,
relocation has caused some delays in shipments. New location will enable more
efficient warehouse and logistics operations.
The special performance improvement initiative in Rapala's Norwegian
distribution company continued.
Discussions and negotiations regarding acquisitions and business combinations
continued during the third quarter.
Short-term Outlook
The re-emerging uncertainties concerning the future development of world
economies and the impacts these may have on consumer and retailer behavior limit
the visibility to the future. So far the recent economic turbulences have only
had limited impact on demand for Rapala's products and even historically the
fishing tackle business has not been too strongly influenced by the downturns in
the general economic climate. The uncertainties in business environment will
anyhow increase the emphasis on prudent credit, inventory and liquidity
management.
The presales of winter sports equipment for coming winter season have been
better than last year and the supply chain has functioned well. In the USA order
book for the fourth quarter is strong and should materialize in good sales still
this year. Fourth quarter deliveries are always subject to uncertainties
relating to weathers and timing, which together with year-end accounting
accruals may cause fluctuation to the fourth quarter sales and operating profit.
It is expected that in 2011 the net sales will increase from 2010. Following the
increased uncertainties in business environment, Group's focus on cash flow and
consequent impacts of the inventory cleaning initiatives, profitability estimate
is specified. The comparable operating profit is expected to remain close to
last year's level although comparable operating profit margin is expected to be
slightly lower.
Fourth quarter interim report and annual accounts 2011 will be published on
February 8, 2012.
Helsinki, October 27, 2011
Board of Directors of Rapala VMC Corporation
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME III III I-III I-III I-IV
MEUR 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Net sales 63.0 60.6 218.7 209.0 269.4
Other operating income 0.3 0.2 0.6 0.4 0.7
Materials and services 32.1 28.7 100.4 96.4 123.9
Personnel expenses 14.5 14.1 46.1 43.2 59.1
Other costs and expenses 12.6 13.5 40.5 38.0 49.7
Share of results in associates and
joint ventures 0.0 0.0 0.0 0.0 0.0
---------------------------------------------
EBITDA 4.1 4.5 32.3 31.7 37.4
Depreciation and amortization 1.8 1.6 5.0 4.6 6.1
---------------------------------------------
Operating profit (EBIT) 2.3 2.9 27.2 27.1 31.3
Financial income and expenses 1.9 1.2 4.5 1.1 1.8
---------------------------------------------
Profit before taxes 0.3 1.7 22.7 26.0 29.5
Income taxes 0.1 0.3 6.6 7.0 8.7
---------------------------------------------
Net profit for the period 0.2 1.4 16.1 18.9 20.7
---------------------------------------------
Attributable to:
Equity holders of the Company -0.5 0.5 13.1 16.3 18.0
Non-controlling interests 0.7 0.9 3.0 2.6 2.8
Earnings per share for profit
attributable
to the equity holders of the
Company
Earnings per share, EUR (diluted =
non-diluted) -0.01 0.01 0.34 0.42 0.46
STATEMENT OF COMPREHENSIVE INCOME III III I-III I-III I-IV
MEUR 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Net profit for the period 0.2 1.4 16.1 18.9 20.7
---------------------------------------------
Other comprehensive income, net of
tax
Change in translation differences 2.4 -6.5 -2.9 5.1 7.8
Gains and losses on cash flow
hedges -0.5 0.0 -0.1 -1.5 -1.2
Gains and losses on hedges of net
investments -0.8 1.3 0.0 -0.9 -1.1
---------------------------------------------
Total other comprehensive income,
net of tax 1.1 -5.1 -3.0 2.7 5.5
---------------------------------------------
Total comprehensive income for the
period 1.4 -3.7 13.1 21.6 26.3
---------------------------------------------
Total comprehensive income
attributable to:
Equity holders of the Company 1.0 -4.5 10.6 18.8 23.1
Non-controlling interests 0.4 0.8 2.5 2.9 3.2
STATEMENT OF FINANCIAL POSITION Sep 30 Sep 30 Dec 31
MEUR 2011 2010 2010
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 67.2 66.9 67.8
Property, plant and equipment 28.9 28.1 28.7
Non-current financial assets
Interest-bearing 3.2 1.8 1.7
Non-interest-bearing 9.3 9.1 9.2
------------------------------
108.5 105.9 107.4
Current assets
Inventories 115.2 106.7 112.2
Current financial assets
Interest-bearing 0.1 0.1 0.0
Non-interest-bearing 54.7 53.9 56.5
Cash and cash equivalents 31.5 31.6 27.9
------------------------------
201.4 192.3 196.6
Total assets 310.0 298.2 304.0
------------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the
Company 123.4 117.8 121.8
Non-controlling interests 7.2 7.1 7.4
------------------------------
130.7 124.9 129.2
Non-current liabilities
Interest-bearing 24.0 37.5 27.1
Non-interest-bearing 13.4 13.5 13.7
------------------------------
37.4 51.0 40.8
Current liabilities
Interest-bearing 104.6 83.9 94.6
Non-interest-bearing 37.3 38.5 39.4 ------------------------------
141.9 122.4 134.0
Total equity and liabilities 310.0 298.2 304.0
------------------------------
III III I-III I-III I-IV
KEY FIGURES 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
EBITDA margin, % 6.5% 7.4% 14.7% 15.2% 13.9%
Operating profit margin, % 3.6% 4.8% 12.4% 13.0% 11.6%
Return on capital employed, % 4.1% 5.7% 16.3% 17.9% 15.2%
Capital employed at end of period,
MEUR 224.5 212.8 224.5 212.8 221.3
Net interest-bearing debt at end of
period, MEUR 93.9 87.9 93.9 87.9 92.0
Equity-to-assets ratio at end of
period, % 42.2% 41.9% 42.2% 41.9% 42.6%
Debt-to-equity ratio at end of
period, % 71.8% 70.4% 71.8% 70.4% 71.2%
Earnings per share, EUR -0.01 0.01 0.34 0.42 0.46
Fully diluted earnings per share,
EUR -0.01 0.01 0.34 0.42 0.46
Equity per share at end of period,
EUR 3.17 3.02 3.17 3.02 3.13
Average personnel for the period 2 271 2 308 2 238 2 365 2 317
--------------------------------------------------------------------------------
Definitions of key figures in the interim report are consistent with those in
the Annual Report 2010.
STATEMENT OF CASH FLOWS III III I-III I-III I-IV
MEUR 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Net profit for the period 0.2 1.4 16.1 18.9 20.7
Adjustments to net profit for the period
* 3.6 4.0 15.4 13.4 17.4
Financial items and taxes paid and
received -2.9 -3.4 -9.0 -9.4 -12.1
Change in working capital 14.4 5.0 -5.7 -7.8 -13.0
--------------------------------------------------------------------------------
Net cash generated from operating
activities 15.3 7.0 16.8 15.2 13.0
Investments -2.2 -1.1 -5.7 -4.5 -6.2
Proceeds from sales of assets 0.1 0.0 0.3 0.1 0.3
Acquisition of joint venture Shimano
Normark UK -2.1 - -2.1 - -
Dynamite Baits acquisition, net of cash - -4.7 - -4.7 -4.8
Sufix brand acquisition - - -0.7 -1.2 -1.2
Acquisition of other subsidiaries, net
of cash 0.0 0.0 0.0 0.0 0.0
Change in interest-bearing receivables 0.0 -1.3 0.0 -1.3 -1.3
--------------------------------------------------------------------------------
Net cash used in investing activities -4.2 -7.2 -8.2 -11.6 -13.2
Dividends paid to parent company's
shareholders - 0.0 -9.0 -7.4 -7.4
Dividends paid to non-controlling
interest - - -2.7 - -
Net funding -12.2 -6.1 7.5 6.5 6.0
Purchase of own shares - -0.4 0.0 -0.9 -1.1
--------------------------------------------------------------------------------
Net cash generated from financing
activities -12.2 -6.4 -4.2 -1.8 -2.5
Adjustments -0.8 0.4 -0.8 -0.6 -0.5
Change in cash and cash equivalents -1.8 -6.2 3.7 1.1 -3.2
Cash & cash equivalents at the beginning
of the period 32.3 39.7 27.9 29.0 29.0
Foreign exchange rate effect 1.0 -2.0 -0.1 1.5 2.2
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of
the period 31.5 31.6 31.5 31.6 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* - - -1.5 4.0 - - 16.3 2.9 21.6
Purchase of
own shares - - - - - -0.9 - - -0.9
Dividends paid - - - - - - -7.4 - -7.4
Share based
payment - - - - - - -0.1 - -0.1
--------------------------------------------------------------------------------
Equity on Sep
30, 2010 3.6 16.7 -1.9 -8.3 4.9 -2.3 105.0 7.1 124.9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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* - - -0.1 -2.4 - - 13.1 2.5 13.1
Purchase of
own shares - - - - - 0.0 - - 0.0
Dividends paid - - - - - - -9.0 -2.7 -11.7
Other changes - - - - - - - 0.0 0.0
--------------------------------------------------------------------------------
Equity on Sep
30, 2011 3.6 16.7 -1.6 -8.4 4.9 -2.5 110.9 7.2 130.7
--------------------------------------------------------------------------------
* For the period (net of tax)
SEGMENT INFORMATION*
MEUR III III I-III I-III I-IV
Net Sales by Operating Segment 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Group Fishing Products 32.9 29.7 119.3 110.1 139.5
Other Group Products 5.1 5.8 15.5 14.8 25.2
Third Party Products 25.1 25.3 84.4 84.7 105.6
Intra-Group (Other Group Products) -0.1 -0.2 -0.6 -0.6 -0.9
--------------------------------------------------------------------------------
Total 63.0 60.6 218.7 209.0 269.4
Operating Profit by Operating
Segment
--------------------------------------------------------------------------------
Group Fishing Products 1.6 0.7 18.0 17.4 21.4
Other Group Products -0.2 1.1 0.7 1.7 2.0
Third Party Products 0.9 1.1 8.5 8.0 7.8
--------------------------------------------------------------------------------
Total 2.3 2.9 27.2 27.1 31.3
Sep 30 Sep 30 Dec 31
Assets by Operating Segment 2011 2010 2010
-------------------------------------------------------------------------
Group Fishing Products 190.3 185.3 190.5
Other Group Products 17.8 10.2 12.7
Third Party Products 67.1 69.3 71.1
Intra-Group (Other Group Products) - -0.1 -
-------------------------------------------------------------------------
Non-interest-bearing assets total 275.2 264.7 274.3
Unallocated interest-bearing assets 34.7 33.4 29.7
-------------------------------------------------------------------------
Total assets 310.0 298.2 304.0
Liabilities by Operating Segment
-------------------------------------------------------------------------
Group Fishing Products 33.4 35.9 35.1
Other Group Products 4.2 2.4 2.9
Third Party Products 13.0 13.8 15.1
Intra-Group (Group Fishing Products) - -0.1 -
-------------------------------------------------------------------------
Non-interest-bearing liabilities total 50.7 52.0 53.1
Unallocated interest-bearing liabilities 128.6 121.4 121.7
-------------------------------------------------------------------------
Total liabilities 179.3 173.3 174.8
III III I-III I-III I-IV
Net Sales by Area** 2011 2010 2011 2010 2010
----------------------------------------------------------------
North America 13.1 12.7 50.4 51.8 68.5
Nordic 20.5 21.7 90.2 85.5 110.4
Rest of Europe 27.9 24.3 98.5 85.3 104.6
Rest of the world 18.7 19.4 55.5 54.8 69.6
Intra-Group -17.2 -17.6 -76.1 -68.4 -83.8
----------------------------------------------------------------
Total 63.0 60.6 218.7 209.0 269.4
* 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 III
MEUR 2010 2010 2010 2010 2010 2011 2011 2011
-------------------------------------------------------------------------
Net sales 70.8 77.6 60.6 60.4 269.4 74.7 80.9 63.0
EBITDA 13.1 14.1 4.5 5.7 37.4 13.7 14.4 4.1
Operating profit 11.7 12.5 2.9 4.2 31.3 12.1 12.8 2.3
Profit before taxes 12.1 12.1 1.7 3.5 29.5 11.1 11.3 0.3
Net profit for the period 9.1 8.4 1.4 1.8 20.7 7.9 8.0 0.2
-------------------------------------------------------------------------
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.
Presentation of financial statements has been changed regarding the share of
results in associates and joint ventures, which are presented in the
consolidated income statement before the operating profit. Previously the share
of profit or loss was presented after operating profit. Comparable periods have
been restated to reflect the change, which did not have any significant effect
on the figures presented in this interim report. Associated companies and joint
ventures are closely and essentially related to Group's businesses and therefore
including the share of profit or loss in the Group's operating profit gives a
more fair view on the Group's performance.
Use of estimates and rounding of figures
Complying with IFRS in preparing financial statements requires the management to
make estimates and assumptions. Such estimates affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the amounts of revenues and expenses. Although these estimates are based on the
management's best knowledge of current events and actions, actual results may
differ from these estimates.
All figures in these accounts have been rounded. Consequently, the sum of
individual figures can deviate from the presented sum figure. Key figures have
been calculated using exact figures.
Events after the end of the interim period
The Group has no knowledge of any significant events after the end of the
interim period that would have a material impact on the financial statements for
January-September 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 September 30, 2011, the book value of inventories included a provision for
net realizable value of 2.9 MEUR (3.3 MEUR at September 30, 2010 and 3.0 MEUR at
December 31, 2010).
Impact of acquisition on the consolidated financial statements
In July Rapala acquired 100% of the shares and voting rights of a small UK based
company Advance Carp Equipment Ltd ("ACE"), engaged in design and sales of
equipment and accessories for carp fishing. The consideration paid in cash
totaled 0.0 MGBP. ACE will form the platform for Rapala's fast entry into these
product categories in UK and in Europe. The acquisition has no significant
effect on the Group's consolidated financial statements.
In September, Rapala acquired 50% of the share capital and voting rights of
Shimano UK Ltd, forming a true 50/50 joint venture company, Shimano Normark UK
Ltd, to distribute both Rapala and Shimano products in the UK on an exclusive
basis. The preliminary consideration paid upon closing totaled to 1.8 MGBP. The
total consideration, still subject to finalization of the closing accounts, is
based on the net assets upon closing and is estimated to be some 1.4 MGBP. The
acquisition does not have a significant impact on the Group's consolidated
financial statements.
Non-recurring income and expenses included in
operating profit III III I-III I-III I-IV
MEUR 2011 2010 2011 2010 2010
--------------------------------------------------------------------------------
Costs related to business acquisitions 0.0 -0.2 -0.1 -0.2 -0.2
Restructuring of Hungarian operations - 0.0 - -0.2 -0.2
Relocation of Finnish operations -0.2 - -0.3 - -
Other restructuring costs -0.2 - -0.4 - -0.1
Other non-recurring items - 0.0 - 0.0 -0.1
--------------------------------------------------------------------------------
Total included in EBITDA -0.4 -0.2 -0.7 -0.4 -0.5
--------------------------------------------------------------------------------
Non-recurring impairment of non-current assets in
China - 0.0 - 0.0 -0.0
Impairment of non-current assets relating to
relocation of Finnish operations -0.2 - -0.2 - -
--------------------------------------------------------------------------------
Total included in operating profit -0.5 -0.2 -0.9 -0.4 -0.5
--------------------------------------------------------------------------------
Commitments Sep 30 Sep 30 Dec 31
MEUR 2011 2010 2010
--------------------------------------------------------------------------------
On own behalf
Business mortgage 16.1 16.1 16.1
Guarantees 0.1 0.1 0.1
Minimum future lease payments on operating
leases 16.8 9.6 9.3
--------------------------------------------------------------------------------
Related party Sales and
transactions other Pur- Rents Other Recei-
MEUR income chases paid expen-ses vables Paya-bles
--------------------------------------------------------------------------------
I-III 2011
Joint venture
Shimano Normark
UK Ltd 0.8 - - - 1.0 -
Associated
company Lanimo Oü - 0.1 - - 0.0 -
Entity with
significant
influence over
the Group* - - 0.1 0.1 0.0 0.0
Management - - 0.3 - 0.1 0.0
I-III 2010
Associated
company Lanimo Oü - 0.1 - - 0.0 -
Entity with
significant
influence over
the Group* - - 0.1 0.1 0.0 -
Management - - 0.2 - 0.0 0.1
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
--------------------------------------------------------------------------------
September 30, 2011
Foreign currency options 3.9 0.1 0.0 0.1
Interest rate swaps 86.1 - 2.2 -2.2
--------------------------------------------------------------------------------
Total 90.0 0.1 2.2 -2.1
September 30, 2010
Foreign currency options and
forwards 10.7 0.1 0.5 -0.4
Interest rate swaps 85.8 - 2.5 -2.5
--------------------------------------------------------------------------------
Total 96.5 0.1 3.0 -2.9
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. Currently, the
Group does not have any share-based payment programs.
The IFRS accounting effect of share based payment programs on operating profit
was 0.1 MEUR (-0.0 MEUR) in January-September 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 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 AGM.
On September 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-September 2011 was 39 468 449. At the end of
September 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 nine months, 5 667 519 shares (2 542 189) were traded at a high
of 7.38 EUR and a low of 4.86 EUR. The closing share price at the end of the
period was 5.42 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 as Rapala has continued to expand its operations.
Accordingly, Group management also continues to develop risk management
practices and internal controls during 2011. Detailed descriptions of the
Group's strategic, operative and financial risks as well as 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, the business has traditionally been seasonally stronger
in the first half of the year compared to the second half. The biggest
deliveries for both summer and winter seasons are concentrated into relatively
short time periods, and hence a well functioning supply chain is required. The
Group's sales are to some extent affected by weather as it impacts consumer
demand and the timing and length of the seasons. In northern hemisphere summer
fishing season is approaching its end and the success of the coming season for
winter sports equipment is partly dependent on the timing and length of the
winter weathers.
A major supply chain and logistics initiative to improve the Group's inventory
turnovers 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 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 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.
Even though the fishing tackle business has not traditionally been strongly
influenced by the increased uncertainties and downturns in the general economic
climate, these 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 the fishing tackle business.
However the underlying consumer demand has historically proven to be fairly
solid.
The truly global nature of the Group's sales and operations spreads the market
risks caused by the current uncertainties in the global economy. The Group is
cautiously monitoring the development both in the global macro economy as well
as in the various local markets it operates in. The uncertainties in future
demand as well as the length of the Group's supply chain increases the
importance of supply chain management. Management balances between risk of
shortages and risk of excess production and purchasing, which would lead to
excess inventories in the Group. Special attention is currently given to this
topic as the purchases to fill consumer demand for the summer season 2012 have
started. Also the importance of cash collection and credit risk management has
increased and this may affect sales to some customers. Quality of the accounts
receivables 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
disturbances in global economy may cause heavy and unexpected fluctuations in
foreign exchange rates. The Group is actively monitoring the currency position
and risks and using e.g. foreign currency denominated loans to generate natural
hedges. 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 to
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 rouble, which has become a significant inflow currency
to the Group. The continuing strengthening of the Chinese yuan coupled with the
possible strengthening of the US dollar increases cost pressures. Additionally,
certain inflationary trends increase this pressure. The Group is closely
monitoring market development and considering possibility and feasibility of
price increases and hedging actions.
No significant changes are identified in the Group's strategic risks or business
environment.[HUG#1558161]
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