2012-02-08 08:30:00 CET
2012-02-08 08:30:35 CET
REGULATED INFORMATION
Rapala VMC - Financial Statement Release
RAPALA ANNUAL ACCOUNTS 2011: GOOD YEAR IN CHALLENGING BUSINESS ENVIRONMENT
Rapala VMC Corporation
Stock Exchange Release
February 8, 2012 at 9.30 a.m.
* Net sales for the quarter increased by 1% to a new fourth quarter record of
60.8 MEUR (60.4 MEUR). Net sales for the year were also an all time high at
279.5 MEUR (269.4 MEUR), increasing 4% from last year.
* Comparable operating profit decreased from last year to 2.4 MEUR (4.3 MEUR)
for the fourth quarter and for the full year was close to last year's record
level at 30.5 MEUR (31.8 MEUR). Comparable operating margin was 4.0% (7.1%)
for the quarter and for the full year slightly lower than last year at
10.9% (11.8%). Reported operating profit for the fourth quarter was 3.5 MEUR
(4.2 MEUR) and 30.7 MEUR (31.3 MEUR) for the full year.
* Net profit for the fourth quarter reduced to 1.1 MEUR (1.8 MEUR) and was
17.2 MEUR (20.7 MEUR) for the year. Earnings per share were 0.02 EUR (0.04
EUR) and 0.36 EUR (0.46 EUR) respectively.
* Cash flow from operating activities for the fourth quarter improved slightly
to -1.6 MEUR (-2.2 MEUR) and was 15.2 MEUR (13.0 MEUR) for the full year.
Gearing reached all time lows and was 67.2% (71.2%) at the end of the year.
Strengthening of balance sheet is supporting future acquisition
opportunities.
* Implementation of the Group's strategy continued throughout the year by
taking several actions relating both to manufacturing and distribution
activities. Fourth quarter actions included opening a distribution company
in Kazakhstan and launching a webshop in the USA focusing on direct sales to
US consumers.
* It is expected that in 2012 the net sales will increase from 2011 and the
comparable operating profit is targeted to improve.
* Board proposes to the Annual General Meeting that a dividend of EUR 0.23 per
share to be paid. This represents 64% of earning per share.
The attachment presents the summary of the annual review by the Board of
Directors and extracts from the financial statements for 2011.
A conference call on the 2011 result will be arranged today at 2.00 p.m. Finnish
time (1.00 p.m. CET). Please dial +44 (0)20 3147 4972 or +1 212 444 0891 or
+358 (0)9 2310 1672 (pin code: 744345#) 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: 744345#).
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
The general sentiment in the world economy changed significantly during 2011.
Toward the end of the year this had some, although limited, negative impacts
also on Rapala's sales. Year started on a growth trend in line with the positive
expectations. Beginning of the year was supported by the good winter weathers in
the Nordic countries. At the same time summer fishing season started early and
lasted long in the major European markets. In North America beginning of the
season was delayed, but the sales came back strong during second half of the
year. In general the US consumer and retail confidence was still shadowed by the
economical uncertainties, but some indications of improvement were witnessed in
the end of the year. During the latter part of the year the increased
uncertainties in the world economy affected some markets and product categories
putting pressure on customers' financial position and creating some
uncertainties to the coming season. Late beginning of winter in 2011/2012
affected sales of winter sports and winter fishing equipment both to Rapala and
its customers. Regardless of the increased uncertainties Rapala's sales in 2011
reached all time record.
Net sales for fourth quarter increased by 1% from last year to a quarterly
record of 60.8 MEUR (60.4 MEUR), with no material impact from the currency
exchange rates compared to last year. New units contributed 0.1 MEUR net sales
in the fourth quarter. Net sales for 2011 increased by 4% to annual record of
279.5 MEUR (269.4 MEUR). Changes in currency exchange rates reduced the sales
3.0 MEUR compared to last year. With comparable exchange rates and organization
structure net sales increased by 2% compared to last year.
Full year net sales of Group Fishing Products increased by 9% compared to last
year, driven by good sales of fishing lines and accessories as well as new sales
generated by Dynamite Baits. Net sales of Other Group Products declined by 10%
in 2011, primarily due to reduced yearly sales of the gift products and reduced
sales of winter sports equipment in the fourth quarter. Annual net sales of
Third Party Products were at last year's level, with increased sales of third
party fishing and outdoor products, while sales of third party winter sports
equipment was down.
In North America in fourth quarter net sales increased by 12% from last year
following the strong order book and good in-sales of new products. Full year net
sales of North America increased by 1%. In local currency increase in sales was
higher, but this was offset by weakening of the US Dollar, which was on average
5% weaker against euro than last year. Sales were supported by the Group's good
delivery performance, high customer satisfaction and introduction of new range
of winter fishing products.
In Nordic countries fourth quarter sales were down 13% compared to last year.
Sales were negatively impacted by the late winter as well as restructuring of
the Norwegian winter sports business. Nordic sales in 2011 increased by 1%
compared to last year, mainly as a result of increased intra-group sales to
other geographical areas, whereas the external sales were negatively impacted by
reduced sales of winter sports and high-end hunting equipment.
Fourth quarter sales in Rest of Europe were at last year level. On annual basis
net sales in Rest of Europe increased by 13% compared to last year. Increase was
driven by strong sales in many East European countries and France as well as the
new sales generated by Dynamite Baits. Countries impacted by the economic
turbulence were Hungary and Portugal as well as Spain and Switzerland, where the
sales still remained at last year level.
In Rest of World fourth quarter sales increased by 3% compared to last year.
External sales increased in all markets except South Africa where the economy is
suffering. In 2011 the net sales in Rest of World increased 2% compared to last
year. In most of the South East Asian countries the annual growth of external
sales was in double-digits, while sales of gift products and internal sales of
the Asian manufacturing units was lower than last year.
Financial Results and Profitability
Comparable operating profit, excluding non-recurring items, for the fourth
quarter was down from last year at 2.4 MEUR (4.3 MEUR). Comparable operating
profit for 2011 was down 1.3 MEUR from last year's record level at 30.5 MEUR
(31.8 MEUR). Comparable operating profit margin was 4.0% (7.1%) for the fourth
quarter and for the full year slightly lower than last year at 10.9% (11.8%).
The gross margin for 2011 was burdened by the inventory clearance sales, being
still slightly better than in previous year, while comparable operating profit
margin was lowered by increased fixed costs.
Reported operating profit for the fourth quarter was 3.5 MEUR (4.2 MEUR) and
30.7 MEUR (31.3 MEUR) for the year 2011, 0.6 MEUR down from last year. In 2011
reported operating profit included net gain of non-recurring items of 0.2 MEUR
(non-recurring net costs of 0.5 MEUR in 2010). Non-recurring items included 1.5
MEUR net gain from divestment of the gift business closed during the fourth
quarter and various non-recurring relocation and restructuring costs and costs
relating to business acquisitions. Reported operating profit margin was 11.0%
(11.6%) and return on capital employed 13.7% (15.2%).
Key figures IV IV I-IV I-IV
MEUR 2011 2010 2011 2010
--------------------------------------------------------------
Net sales 60.8 60.4 279.5 269.4
EBITDA as reported 5.5 5.7 37.7 37.4
EBITDA excl. one-off items 4.1 5.8 37.1 37.9
Operating profit (EBIT) 3.5 4.2 30.7 31.3
EBIT excl. one-off items 2.4 4.3 30.5 31.8
--------------------------------------------------------------
In 2011 reported operating profit of Group Fishing Products reduced to 19.9 MEUR
(21.4 MEUR) and operating profit margin was 13.0% (15.4%). Operating profit was
negatively impacted by weakening US Dollar, increased share in sales of lower
margin baits and lower profitability in hooks. In 2011 operating profit of Other
Group Products was up from last year at 2.5 MEUR (2.0 MEUR), following the non-
recurring gain from divestment of the gift business. Comparable profitability
was lower than last year due to lower profits of gift and winter sports
equipment business. In 2011 operating profit of Third Party Products increased
from last year to 8.4 MEUR (7.8 MEUR). Biggest contribution to the profit
increase came from third party fishing products, while profitability of third
party winter sports equipment declined.
Total financial (net) expenses increased significantly in 2011 and amounted to
5.5 MEUR (1.8 MEUR). The increase was primarily due to 3.3 MEUR negative change
in (net) currency exchange expenses, which amounted to 1.8 MEUR (net gain 1.6
MEUR in 2010). Net interest and other financial expenses increased modestly to
3.7 MEUR (3.4 MEUR).
Net profit for the year and earnings per share decreased from last year's record
levels to 17.2 MEUR (20.7 MEUR) and 0.36 EUR (0.46 EUR) respectively, impacted
by increased effective tax rate and share of non-controlling interest in net
result.
Cash Flow and Financial Position
In 2011 cash flow from operations improved from last year to 15.2 MEUR (13.0
MEUR) and was -1.6 MEUR (-2.2 MEUR) for the fourth quarter. Compared to last
year, while net profit for the year was lower, positive cash flow impact came
from the change in inventories and accounts receivable. Cash flow impact of net
change in working capital was -7.3 MEUR (-13.0 MEUR) for the year and -1.6 MEUR
(-5.2 MEUR) for the fourth quarter. Year-end inventories amounted to 115.5 MEUR
(112.2 MEUR). The Group's inventories were at unsatisfactory high-levels
throughout the year, but were not on the same increasing trend as they were
especially in the end of last year.
Net cash used in investing activities was down to 9.6 MEUR (13.2 MEUR) for the
year, due to smaller business acquisitions.
In the end of 2011 net interest-bearing debt reduced to 91.2 MEUR (Dec
2010: 92.0 MEUR) and was impacted by divestment of the gift business. Equity-to-
assets ratio improved to 43.2% (Dec 2010: 42.6%). In line with increased equity
and reduced net debt, Group's balance sheet strengthened further and gearing was
at all time lows at 67.2% (71.2%).
Strategy Implementation
Implementation of Rapala's strategy continued during 2011 by taking actions
relating to both manufacturing and distribution activities.
The European distribution cooperation with Shimano was deepened in the UK by
establishing a true 50:50 joint venture company to distribute products of both
Rapala and Shimano to this fishing tackle market, which is one of the biggest in
Europe.
Also in the UK Rapala concluded a deal to acquire Advanced Carp Equipment Ltd
("ACE"), a company 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. Acquisition of ACE is a continuum to
the year 2010 acquisition of Dynamite Baits Ltd, leading manufacturer of carp
baits.
In order to secure access to cost competitive production resources also in the
future, Rapala made a decision to open new lure and hook manufacturing units on
Batam Island in Indonesia in 2011. At first stage the operation will employ some
200-250 people and run parallel to the Group's Chinese manufacturing operations.
Possibilities to expand the operations in Batam further will be studied once the
first stage is successfully implemented.
In December 2011 Rapala sold its non-core Chinese gift manufacturing business to
its largest customer French Pylones SAS, releasing funds and resources for
developing the core fishing tackle business.
New distribution companies started operations in Mexico, Indonesia and
Kazakhstan during 2011. In Kazakhstan the business is operated under the jointly
owned Russian distribution company. Special performance improvement initiatives
were carried out in the Norwegian and Australian distribution companies.
During the fourth quarter Rapala USA opened B2C webshop targeted solely to US
consumers. The webshop enables Rapala to offer full range of its products to
consumers.
Finnish distribution company Normark Suomi Oy and ski manufacturer Peltonen Ski
Oy relocated into new larger premises during 2011, enabling better distribution
efficiencies and larger production volumes and efficiencies.
Working capital and cash flow management was still one of the top priorities for
the Group. Net cash flow from operating activities improved from last year, but
inventory levels are still far from desired levels. Changes in the Group's
manufacturing units to provide better flexibility towards the distribution units
are gradually bearing fruit, and work to reduce the inventory levels and develop
the Group's internal supply chain will continue further to 2012.
Development of organic growth in terms of extensions of current product
categories continued. New products for the season 2012 were introduced to the
market in summer and were received well by the markets.
Discussions and negotiations regarding other acquisitions and business
combinations continued also during 2011. Rapala is a key player in the fishing
tackle industry with a recognized global distribution network and it has a good
access to any discussions concerning industry consolidation or other business
expansion possibilities. Strengthening of the Group's balance sheet further
supports such initiatives.
Short-term Outlook
The negative changes in the sentiment of the economy globally and especially in
Europe during latter part of the year increased the uncertainty concerning
retail and consumer demand. Despite these uncertainties expectations for the
coming year are optimistic.
There are promising signs of accelerating recovery in the USA and Rapala's
position with major US customers is currently very good. There is also good
progress in coming summer season's presales in several markets.
The late start of winter season 2011/2012 as well as the divestment of the gift
business will have some reducing impact on the Group's net sales and the
continuing inventory cleaning initiatives may pressure the profitability, while
at same time performance improvement initiatives in various units are expected
to show results.
It is expected that in 2012 the net sales will increase from 2011 and the
comparable operating profit is targeted to improve.
Proposal for profit distribution
The Board of Directors proposes to the Annual General Meeting that a dividend of
EUR 0.23 for 2011 (2010: EUR 0.23) per share be paid from the Group's
distributable equity and that any remaining distributable funds be allocated to
retained earnings. At December 31, 2011, the parent company's distributable
equity totaled 24.4 MEUR.
No material changes have taken place in the Group's financial position after the
end of the financial year 2011. Group's liquidity is good and the view of the
Board of Directors is that the distribution of the proposed dividend will not
undermine this liquidity.
Annual Report and Annual General Meeting
The Annual Report, including Financial Statements for 2011 and Corporate
Governance Statement will be published in week 12. Annual General Meeting is
planned to be held on April 11, 2012.
Helsinki, February 8, 2012
Board of Directors of Rapala VMC Corporation
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME IV IV I-IV I-IV
MEUR 2011 2010 2011 2010
--------------------------------------------------------------------------------
Net sales 60.8 60.4 279.5 269.4
Other operating income 2.3 0.3 2.9 0.7
Materials and services 28.6 27.5 129.0 123.9
Personnel expenses 16.3 15.8 62.4 59.1
Other costs and expenses 12.7 11.7 53.3 49.7
Share of results in associates and joint
ventures -0.1 0.0 -0.1 0.0
------------------------------------
EBITDA 5.5 5.7 37.7 37.4
Depreciation, amortization and impairments 1.9 1.5 7.0 6.1
------------------------------------
Operating profit (EBIT) 3.5 4.2 30.7 31.3
Financial income and expenses 1.0 0.7 5.5 1.8
------------------------------------
Profit before taxes 2.5 3.5 25.2 29.5
Income taxes 1.5 1.7 8.0 8.7
------------------------------------
Net profit for the period 1.1 1.8 17.2 20.7
------------------------------------
Attributable to:
Equity holders of the Company 0.9 1.7 14.0 18.0
Non-controlling interests 0.2 0.1 3.2 2.8
Earnings per share for profit attributable
to the equity holders of the Company
Earnings per share, EUR (diluted = non-
diluted) 0.02 0.04 0.36 0.46
STATEMENT OF COMPREHENSIVE INCOME IV IV I-IV I-IV
MEUR 2011 2010 2011 2010
--------------------------------------------------------------------------------
Net profit for the period 1.1 1.8 17.2 20.7
------------------------------------
Other comprehensive income, net of tax
Change in translation differences 4.9 2.7 2.0 7.8
Gains and losses on cash flow hedges 0.0 0.4 -0.1 -1.2
Gains and losses on hedges of net
investments -0.4 -0.2 -0.4 -1.1
------------------------------------
Total other comprehensive income, net of tax 4.5 2.8 1.5 5.5
------------------------------------
Total comprehensive income for the period 5.6 4.6 18.7 26.3
------------------------------------
Total comprehensive income attributable to:
Equity holders of the Company 5.2 4.3 15.8 23.1
Non-controlling interests 0.4 0.3 2.9 3.2
STATEMENT OF FINANCIAL POSITION Dec 31 Dec 31
MEUR 2011 2010
----------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 68.0 67.8
Property, plant and equipment 28.5 28.7
Non-current financial assets
Interest-bearing 7.6 1.7
Non-interest-bearing 9.1 9.2
--------------------
113.2 107.4
Current assets
Inventories 115.5 112.2
Current financial assets
Interest-bearing 1.6 0.0
Non-interest-bearing 55.0 56.5
Cash and cash equivalents 28.9 27.9
--------------------
201.0 196.6
Assets classified as held-for-sale 0.3 -
Total assets 314.5 304.0
--------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the Company 128.6 121.8
Non-controlling interests 7.2 7.4
--------------------
135.8 129.2
Non-current liabilities
Interest-bearing 12.7 27.1
Non-interest-bearing 13.5 13.7
--------------------
26.2 40.8
Current liabilities
Interest-bearing 116.6 94.6
Non-interest-bearing 35.9 39.4
--------------------
152.5 134.0
Total equity and liabilities 314.5 304.0
--------------------
IV IV I-IV I-IV
KEY FIGURES 2011 2010 2011 2010
--------------------------------------------------------------------------------
EBITDA margin, % 9.0% 9.5% 13.5% 13.9%
Operating profit margin, % 5.8% 6.9% 11.0% 11.6%
Return on capital employed, % 6.3% 8.1% 13.7% 15.2%
Capital employed at end of period, MEUR 227.0 221.3 227.0 221.3
Net interest-bearing debt at end of period,
MEUR 91.2 92.0 91.2 92.0
Equity-to-assets ratio at end of period, % 43.2% 42.6% 43.2% 42.6%
Debt-to-equity ratio at end of period, % 67.2% 71.2% 67.2% 71.2%
Earnings per share, EUR 0.02 0.04 0.36 0.46
Fully diluted earnings per share, EUR 0.02 0.04 0.36 0.46
Equity per share at end of period, EUR 3.30 3.13 3.30 3.13
Average personnel for the period 2 223 2 341 2 208 2 317
--------------------------------------------------------------------------------
Definitions of key figures in the interim report are consistent with those in
the Annual Report 2010.
STATEMENT OF CASH FLOWS IV IV I-IV I-IV
MEUR 2011 2010 2011 2010
--------------------------------------------------------------------------------
Net profit for the period 1.1 1.8 17.2 20.7
Adjustments to net profit for the period * 2.2 4.0 17.6 17.4
Financial items and taxes paid and received -3.3 -2.7 -12.3 -12.1
Change in working capital -1.6 -5.2 -7.3 -13.0
--------------------------------------------------------------------------------
Net cash generated from operating activities -1.6 -2.2 15.2 13.0
Investments -2.7 -1.7 -8.4 -6.2
Proceeds from sales of assets 0.3 0.2 0.7 0.3
Acquisition of joint venture Shimano Normark UK 0.5 - -1.5 -
Dynamite Baits acquisition, net of cash -0.1 -0.1 -0.1 -4.8
Sufix brand acquisition - - -0.7 -1.2
Acquisition of other subsidiaries, net of cash - 0.0 0.0 0.0
Proceeds from disposal of subsidiaries, net of
cash 0.6 - 0.6 -
Change in interest-bearing receivables 0.0 0.0 0.0 -1.3
--------------------------------------------------------------------------------
Net cash used in investing activities -1.4 -1.6 -9.6 -13.2
Dividends paid to parent company's shareholders - - -9.0 -7.4
Dividends paid to non-controlling interest -0.1 - -2.9 -
Net funding -0.8 -0.4 6.7 6.0
Purchase of own shares -0.1 -0.2 -0.1 -1.1
--------------------------------------------------------------------------------
Net cash generated from financing activities -1.0 -0.7 -5.2 -2.5
Adjustments 1.1 0.1 0.4 -0.5
Change in cash and cash equivalents -2.9 -4.4 0.8 -3.2
Cash & cash equivalents at the beginning of the
period 31.5 31.6 27.9 29.0
Foreign exchange rate effect 0.3 0.7 0.2 2.2
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of the
period 28.9 27.9 28.9 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* - - -1.2 6.3 - - 18.0 3.2 26.3
Purchase of
own shares - - - - - -1.1 - - -1.1
Dividends paid - - - - - - -7.4 - -7.4
Share based
payment - - - - - - -0.1 - -0.1
--------------------------------------------------------------------------------
Equity on Dec
31, 2010 3.6 16.7 -1.5 -6.0 4.9 -2.5 106.7 7.4 129.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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* - - -0.1 1.9 - - 14.0 2.9 18.7
Purchase of
own shares - - - - - -0.1 - - -0.1
Dividends paid - - - - - - -9.0 -3.2 -12.1
Other changes - - - - - - - 0.0 0.0
--------------------------------------------------------------------------------
Equity on Dec
31, 2011 3.6 16.7 -1.6 -4.1 4.9 -2.6 111.8 7.2 135.8
--------------------------------------------------------------------------------
* For the period (net of tax)
SEGMENT INFORMATION*
MEUR IV IV I-IV I-IV
Net Sales by Operating Segment 2011 2010 2011 2010
-------------------------------------------------------------------------
Group Fishing Products 33.0 29.4 152.3 139.5
Other Group Products 7.3 10.4 22.8 25.2
Third Party Products 20.6 21.0 105.0 105.6
Intra-Group (Other Group Products) -0.2 -0.3 -0.7 -0.9
-------------------------------------------------------------------------
Total 60.8 60.4 279.5 269.4
Operating Profit by Operating Segment
-------------------------------------------------------------------------
Group Fishing Products 1.8 4.0 19.9 21.4
Other Group Products 1.8 0.3 2.5 2.0
Third Party Products -0.1 -0.2 8.4 7.8
-------------------------------------------------------------------------
Total 3.5 4.2 30.7 31.3
Dec 31 Dec 31
Assets by Operating Segment 2011 2010
--------------------------------------------------------------
Group Fishing Products 195.5 190.5
Other Group Products 12.2 12.7
Third Party Products 68.8 71.1
Intra-Group (Other Group Products) 0.0 -
--------------------------------------------------------------
Non-interest-bearing assets total 276.5 274.3
Unallocated interest-bearing assets 38.1 29.7
--------------------------------------------------------------
Total assets 314.5 304.0
Liabilities by Operating Segment
--------------------------------------------------------------
Group Fishing Products 32.5 35.1
Other Group Products 2.5 2.9
Third Party Products 14.5 15.1
Intra-Group (Group Fishing Products) 0.0 -
--------------------------------------------------------------
Non-interest-bearing liabilities total 49.5 53.1
Unallocated interest-bearing liabilities 129.3 121.7
--------------------------------------------------------------
Total liabilities 178.8 174.8
IV IV I-IV I-IV
Net Sales by Area** 2011 2010 2011 2010
-------------------------------------------------------
North America 18.7 16.7 69.2 68.5
Nordic 21.7 24.9 111.9 110.4
Rest of Europe 19.2 19.2 117.8 104.6
Rest of the world 15.3 14.8 70.8 69.6
Intra-Group -14.1 -15.3 -90.2 -83.8
-------------------------------------------------------
Total 60.8 60.4 279.5 269.4
* 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 IV I-IV
MEUR 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011
--------------------------------------------------------------------------------
Net sales 70.8 77.6 60.6 60.4 269.4 74.7 80.9 63.0 60.8 279.5
EBITDA 13.1 14.1 4.5 5.7 37.4 13.7 14.4 4.1 5.5 37.7
Operating profit 11.7 12.5 2.9 4.2 31.3 12.1 12.8 2.3 3.5 30.7
Profit before taxes 12.1 12.1 1.7 3.5 29.5 11.1 11.3 0.3 2.5 25.2
Net profit for the
period 9.1 8.4 1.4 1.8 20.7 7.9 8.0 0.2 1.1 17.2
--------------------------------------------------------------------------------
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-December 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 December 31, 2011, the book value of inventories included a provision for net
realizable value of 3.2 MEUR (3.0 MEUR at December 31, 2010).
Assets held for sale
As part of the relocation of Finnish distribution operations, an office and
warehouse building in Korpilahti, Finland, was classified as held for sale. This
resulted in an impairment loss of 0.4 MEUR, of which 0,2 MEUR was booked in the
fourth quarter.
Impact of acquisitions and disposals 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 was based on the net assets upon closing and totaled to 1.4
MGBP. The acquisition does not have a significant impact on the Group's
consolidated financial statements.
In November 0.1 MEUR of the contingent consideration related to Dynamite Baits
acquisition in 2010 was paid to the sellers. The contingent consideration
requires acquired company Dynamite to receive a tax benefit of EUR 0.2 million
based on preliminary tax calculations. Rest of the contingent consideration is
expected to be paid according to the original estimation during 2012.
In December Rapala closed a deal to sell 100% of the shares of Willtech Gift
(HK) Ltd ("Willtech Gift "), the Rapala unit engaged in manufacturing of gift
items in China. Rapala's gift item manufacturing and distribution activities
were transferred under Willtech Gift before the transaction. Willtech Gift has
represented some 3-4 % of Rapala's net sales, while its profitability has been
lower than in Group's core fishing tackle business. The transaction has no
effect on Rapala's fishing tackle business. The transaction resulted into a gain
of 1.9 MEUR that was booked in other operating income in December. The value of
assets disposed totaled to 4.8 MEUR, including 1.0 MEUR of goodwill. Part of the
consideration was received in cash in December, and the rest was settled by a
guaranteed interest bearing promissory note that matures during 2012-2016.
Non-recurring income and expenses included in operating
profit IV IV I-IV I-IV
MEUR 2011 2010 2011 2010
--------------------------------------------------------------------------------
Costs related to business acquisitions -0.2 - -0.3 -0.2
Restructuring of Hungarian operations 0.1 0.0 0.1 -0.2
Relocation of Finnish operations -0.1 - -0.3 -
Net gain from sale of gift manufacturing unit in China* 1.7 - 1.5 -
Other restructuring costs -0.2 -0.1 -0.4 -0.1
Other non-recurring items - 0.0 - -0.1
--------------------------------------------------------------------------------
Total included in EBITDA 1.3 -0.1 0.6 -0.5
--------------------------------------------------------------------------------
Non-recurring impairment of non-current assets in China - 0.0 - 0.0
Impairment of non-current assets relating to relocation
of Finnish operations -0.2 - -0.4 -
Other non-recurring impairments 0.0 - 0.0 -
--------------------------------------------------------------------------------
Total included in operating profit 1.1 -0.1 0.2 -0.5
--------------------------------------------------------------------------------
* Including a gain of 1.9 MEUR and costs related to divestment
Commitments Dec 31 Dec 31
MEUR 2011 2010
-----------------------------------------------------------------------
On own behalf
Business mortgage 16.1 16.1
Guarantees 0.1 0.1
Minimum future lease payments on operating leases 15.2 9.3
-----------------------------------------------------------------------
Related party Sales and
transactions other Pur- Rents Other Recei-
MEUR income chases paid expen-ses vables Paya-bles
--------------------------------------------------------------------------------
I-IV 2011
Joint venture
Shimano Normark
UK Ltd 1.6 - - - 0.1 -
Associated
company Lanimo Oü - 0.1 - - 0.0 -
Entity with
significant
influence over
the Group* - - 0.2 0.1 0.0 0.0
Management - - 0.3 - 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
--------------------------------------------------------------------------------
December 31, 2011
Foreign currency options 3.4 0.2 - 0.2
Interest rate swaps 67.9 - -2.1 2.1
--------------------------------------------------------------------------------
Total 71.3 0.2 -2.1 2.4
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-December 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.
The Board has decided to postpone the establishment of the planned new share-
based long term retention and incentive program, principally decided upon in
June.
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 December 31, 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-December 2011 was 39 468 449. On November 17, 2011,
the Board decided to continue buying back own shares in accordance with the
authorization granted by the AGM on April 5, 2011. In 2011 a total of 11 859
shares were repurchased at the average price of EUR 5.46. At the end of
December 2011, Rapala held 552 057 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 4.73.
During the year, 6 479 735 shares (4 051 489) 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
5.65 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 continued 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 will be included in the Annual Report 2011.
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. In 2011, 56% of net
sales and 81% of operating profit was generated in the first half of the year.
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. The ongoing winter
season started late in northern hemisphere and this may have knock-on effects on
the coming summer and winter seasons sales, if retailers are left with excess
winter season inventories and are facing cash flow constrains.
A major supply chain and logistics initiative to improve the Group's inventory
turnovers and shorten the factory lead-times continued 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 business volumes and working capital levels have put some pressure
on the Group's financing facilities originating from 2006. As old term loans
have been amortized according to plan, the amount of committed, undrawn
revolving credit facility has decreased to low levels. The group's liquidity
position is however good and it is continuously monitored and managed by Group
management. Group has initiated negotiations on refinancing the existing credit
facilities and based on the responses received, Group has funding available at
competitive terms. Covenants of the current financing facilities are monitored
closely on a monthly basis.
The fishing tackle business has not traditionally been strongly influenced by
the increased uncertainties and downturns in the general economic climate. They
may however 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 are
ongoing. 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 monitors actively its currency position and
risks and uses 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 cost structure and considering possibility and
feasibility of price increases, hedging actions and cost rationalization.
No significant changes are identified in the Group's strategic risks or business
environment.
[HUG#1583455]
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