2014-04-17 08:30:00 CEST
2014-04-17 08:30:27 CEST
REGULATED INFORMATION
Rapala VMC - Interim report (Q1 and Q3)
RAPALA VMC CORPORATION'S JANUARY TO MARCH 2014: SLOW START FOR THE YEAR DUE TO WEATHER CONDITIONS, CURRENCY RATES AND ECONOMICAL UNCERTAINTIES
Rapala VMC Corporation
Interim report
April 17, 2014 at 9:30 a.m.
RAPALA VMC CORPORATION'S JANUARY TO MARCH 2014: SLOW START FOR THE YEAR DUE TO
WEATHER CONDITIONS, CURRENCY RATES AND ECONOMICAL UNCERTAINTIES
Q1 in brief:
* Net sales were 66.2 MEUR, down 12% from previous year (75.3). With
comparable exchange rates sales down 6%.
* Comparable operating profit was 6.7 MEUR (8.1).
* Cash flow from operations was -8.3 MEUR (-8.1).
* Earnings per share was 0.11 EUR (0.15).
* Batam lure factory ramp-up proceeding.
* Full year guidance unchanged.
President and CEO Jorma Kasslin: "Beginning of the year was challenging in many
respects. We witnessed abnormal weather conditions in many countries. Here in
Finland, lack of snow hurt our winter sports business, while in North America
winter was partly so extreme that it clearly delayed the beginning of summer
fishing season. The political unrest in Eastern Europe disturbed the business to
some extent, especially through major changes in currency rates. All in all
strengthening of the Euro explains nearly half of the total sales decline in the
first quarter.
Lower sales also had direct impact on our profitability, even though we managed
to improve our gross margins. The exit from China and ramp-up of the Batam
factory is proceeding, but these still burden our results. We have put a lot of
focus and resources to improve the Asian manufacturing situation, and we expect
to see clear results during the latter part of the year.
Summer fishing sales is picking up in USA as we speak and we expect early spring
to support the second quarter sales here in Europe."
Key figures
-------------------------------------------------------------------------------
I I change I-IV
MEUR 2014 2013 % 2013
-------------------------------------------------------------------------------
Net sales 66.2 75.3 -12% 286.6
Operating profit 7.4 8.6 -14% 26.1
% of net sales 11.2% 11.4% 9.1%
Operating profit comparable * 6.7 8.1 -17% 27.1
% of net sales 10.1% 10.8% 9.5%
Cash flow from operations -8.3 -8.1 -2% 15.3
Gearing % 76.5% 68.7% 71.2%
EPS, EUR 0.11 0.15 -27% 0.32
-------------------------------------------------------------------------------
* Excluding non-recurring items and mark-to-market valuations of operative
currency derivatives.
Market environment
Overall market conditions were challenging in several market areas. Unfavorable
weather conditions disturbed the business in many markets and retailers were
forced to put tight control on their purchases and cash flow. Political unrest
in Eastern Europe and continuing economical uncertainty in several other markets
had a negative impact on sales. Major changes in currencies caused additional
uncertainty and impacted customer behavior. However, economic indicators are
showing some positive signals in the US and certain European countries.
Business Review January-March 2014
Group net sales for the first quarter were down 12%. Changes in translation
exchange rates explain the net sales decline by some 4 MEUR. With comparable
translation exchange rates quarterly net sales were 6% behind last year's level.
North America
Currencies had a negative impact on North American sales compared to last year
and net sales were down 6% for the quarter with comparable exchange rates.
Extreme winter weathers and late start of spring delayed sales of summer fishing
products, but at the same time it is supporting the replenishment sales of ice
fishing products and cash flow of retailers.
Nordic
Nordic sales were down for the first quarter. Currencies had a small negative
impact on sales compared to last year. Nordic countries suffered from late and
exceptionally warm and snowless winter which impacted the winter sports and ice
fishing product sales especially in Finland. At the same time, early and warm
spring supported the beginning of sales of summer fishing products.
Rest of Europe
Political turbulence in Russia and Ukraine had some direct and indirect impact
on sales in these countries. Currencies, mainly Ruble, burdened the sales in the
Rest of Europe compared to last year and with comparable exchange rates net
sales were down 4% for the quarter. Quarterly sales were also negatively
impacted by delivery problems of suppliers as well as weak winter conditions.
Early spring supported the start of summer fishing product sales.
Rest of the World
In Rest of the World sales were also impacted negatively by currencies, for the
most part South African Rand and Australian dollar, and with comparable exchange
rates quarterly sales were 7% behind last year. Economic and political
instability was disturbing the business in South Africa and Thailand.
External Net Sales by Area
----------------------------------------------
I I change I-IV
MEUR 2014 2013 % 2013
----------------------------------------------
North America 19.4 21.7 -11% 88.4
Nordic 13.2 15.2 -13% 60.8
Rest of Europe 26.6 29.5 -10% 103.6 Rest of the World 7.1 8.9 -20% 33.8
Total 66.2 75.3 -12% 286.6
----------------------------------------------
Financial Results and Profitability
Comparable and reported operating profit decreased from last year. Comparable
and reported profit margins were almost at last year's level. First quarter
operating profit was positively supported by improved gross margin, but this was
not sufficient to offset the negative impact of lower sales. Ramp-up of the new
lure factory in Batam was burdening the profitability.
In the first quarter there were no material non-recurring items. Mark-to-market
valuation of operative currency derivatives included in the reported operating
profit was 0.7 MEUR (0.5).
Total financial (net) expenses for the first quarter were 1.9 MEUR (0.3). A
negative impact in financial items resulted from the (net) foreign exchange
expenses of 1.0 MEUR (gain 0.4). Net interest and other financing expenses
increased slightly from last year to 0.9 MEUR (0.7).
Net profit for the quarter reduced from last year and earnings per share were
0.11 EUR (0.15). Net profit includes a positive tax impact of 1.0 MEUR related
to an agreement with the Finnish tax authority on the parent company's taxation
in years 2006-2013. The share of non-controlling interest in net profit
decreased from last year and totaled 0.0 MEUR (0.9).
Key figures
-------------------------------------------------------------------------------
I I change I-IV
MEUR 2014 2013 % 2013
-------------------------------------------------------------------------------
Net sales 66.2 75.3 -12% 286.6
Operating profit 7.4 8.6 -14% 26.1
Operating profit, comparable * 6.7 8.1 -17% 27.1
Net profit 4.3 6.6 -35% 16.1-------------------------------------------------------------------------------
* Excluding non-recurring items and mark-to-market valuations of operative
currency derivatives.
Segment Review
Group Products
First quarter sales of Group Products decreased from last year. Sales were
burdened by foreign exchange rates and with comparable exchange rates net sales
were down 3%. Unfavorable weather conditions impacted negatively sales of summer
fishing tackle in the US and sales of winter fishing and winter sports products
in Europe.
Operating profit for Group Products decreased compared to last year. Operating
profit was supported by recovery of gross margins while negative impact was due
to lower sales and costs related to ramp-up of the Batam unit.
Third Party Products
Sales of Third Party Products were below last year in the first quarter. With
comparable exchange rates net sales were down 12%. Decrease in sales of third
party fishing and winter sports products resulted from supplier's delivery
problems, economical instabilities and weather conditions.
Operating profit for Third Party Products was at last year level burdened by
lower sales while supported by more favorable exchange rates on purchases and
recovery of margin.
Net Sales by Segment
-------------------------------------------------
I I change I-IV
MEUR 2014 2013 % 2013
-------------------------------------------------
Group Products 43.3 47.1 -8% 176.3
Third Party Products 22.9 28.1 -19% 110.5
Eliminations 0.0 - 0% -0.1
Total 66.2 75.3 -12% 286.6
-------------------------------------------------
Operating profit by Segment
-------------------------------------------------
I I change I-IV
MEUR 2014 2013 % 2013
-------------------------------------------------
Group Products 4.9 6.2 -21% 19.4
Third Party Products 2.5 2.4 4% 6.7
Total 7.4 8.6 -14% 26.1
-------------------------------------------------
Financial position
Cash flow from operations decreased slightly from last year to -8.3 MEUR (-
8.1). During the first quarter inventories and payables developed negatively
compared to last year whereas receivables developed positively. Net change in
working capital amounted to -16.0 MEUR (-15.1). Inventories increased seasonally
by 7.9 MEUR from the end of 2013, and increased by 1.8 MEUR from last March
amounting to 118.2 MEUR (116.4). Currency impact decreased inventories by some
11 MEUR. Increase in working capital, especially inventories, was driven by
slowdown in sales and transfer of production from China to Batam.
Net cash used in investing activities was at last year's level and totaled -2.1
MEUR (-2.0) for the first quarter, for the most part consisting of normal
operative capital expenditure.
Liquidity position of the Group was good. Following an increased focus on cash
management, cash and cash equivalents reduced to 11.0 MEUR (30.8) and undrawn
committed long-term credit facilities amounted to 78.5 MEUR at the end of the
period. Due to seasonality of working capital, net interest bearing debt
increased from year end and was 106.2 MEUR (100.4) at the end of March. Gearing
was 76.5% (68.7) and equity-to-assets ratio 43.9% (42.3). The Group fulfills all
financial covenants related to its credit facilities, and does not foresee any
factors impairing this ability.
Strategy Implementation
Execution of the Rapala Group's strategy of profitable growth is based on three
cornerstones: brands, manufacturing and distribution, supported by strong
corporate culture. During the first quarter strategy implementation continued in
various areas.
The Group's new ice drill manufacturing unit in Korpilahti, Finland, was ramping
up its production and is ready to produce significant volumes of Mora Ice and
Rapala UR branded ice drills and related accessories for the next winter season.
The new lure manufacturing unit in Batam, already employing more than 800
people, is intensively focusing on increasing the capacity, operative efficiency
and product quality, in order to capitalize the benefits of streamlined
production processes and cheaper production costs. The Group's own manufacturing
operations in China will be closed down by the end of second quarter, enabling
the targeted cost savings.
Initiatives to streamline the Group's supply chain are proceeding, focusing on
consolidating purchasing and logistics processes in selected third party
products in Europe and setting up a new logistics hub in Asia which enables
further growth for selected fishing accessory products.
Discussions and negotiations regarding acquisitions and business combinations
continued during the first quarter of the year, as the Group continues to seek
also non-organic growth opportunities.
Product Development
Continuous product development and consistent innovation are core competences
for the Group and major contributor to the value and commercial success of the
brands.
New products for 2015 season will be presented in EFTTEX and ICAST trade shows
during the coming summer, including among others new Scatter Rap, Balsa Extreme
and weedless lures under Rapala brand, expansion of Storm Arashi lure offering
as well as multitude of new hook series under VMC brand.
Organization and Personnel
Average number of personnel for the first quarter was 2 678 (2 130), majority of
the increase coming from expansion of lure manufacturing operations in Batam. At
the end of March, the number of personnel was 2 691 (2 183).
Short-term Outlook and Risks
Outlook for the rest of the year is still cautious and short-term visibility is
limited.
In the US the general retail and consumer sentiment is gradually improving and
the summer fishing sales is now picking up. After good winter sales retailers'
cash position is good and pipeline is clean for the next winter season. In
Europe, the early spring should support the summer fishing sales, and economic
indicators show improvement in certain European countries such as Spain.
However, retailers' financial position is weaker due to bad winter sales, and
this will have some knock-on impact on the next winter season.
The continuing political turbulence between Russia and Ukraine is raising
concerns on these markets. Further escalation of the crisis may have negative
impacts on customer consumption even more widely in Europe. Drastic changes in
foreign exchange rates are impacting negatively the profit margins and consumer
demand in some countries.
Closing down manufacturing operations in China and ramping up the new lure
factory in Batam are proceeding, but these will have some negative impact on
profits in 2014, although situation is expected to improve during the latter
part of the year.
The Group expects the sales to improve during the second quarter. Assuming
comparable translation exchange rates, the Group expects to maintain full year
net sales and comparable operating profit (excluding non-recurring items and
mark-to-market valuations of operative currency derivatives) at 2013 level.
Short term risks and uncertainties and seasonality of the business are described
in more detail in the end of this interim report.
Second quarter interim report will be published on July 21.
Helsinki, April 17, 2014
Board of Directors of Rapala VMC Corporation
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
A conference call on the quarter result will be arranged today at 2:00 p.m.
Finnish time (1:00 p.m. CET). Please dial +44 (0)20 3364 5719 or
+1 917 286 8055 or +358 (0)9 2310 1675 (pin code: 342486#) 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 3427 0598 (pin
code: 9070355#). Financial information and teleconference replay facility are
available at www.rapalavmc.com.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME I I I-IV
MEUR 2014 2013 2013
------------------------------------------------------------------------
Net sales 66.2 75.3 286.6
Other operating income 0.1 0.2 0.8
Materials and services 28.5 35.2 134.4
Personnel expenses 16.9 16.2 64.0
Other costs and expenses 11.8 13.6 54.9
Share of results in associates and joint ventures 0.0 -0.2 -0.5
----------------------
EBITDA 9.1 10.3 33.6
Depreciation, amortization and impairments 1.7 1.7 7.5
----------------------
Operating profit (EBIT) 7.4 8.6 26.1
Financial income and expenses 1.9 0.3 5.5
----------------------
Profit before taxes 5.5 8.3 20.6
Income taxes 1.2 1.7 4.6
----------------------
Net profit for the period 4.3 6.6 16.1
----------------------
Attributable to:
Equity holders of the company 4.3 5.7 12.5
Non-controlling interests 0.0 0.9 3.6
Earnings per share for profit attributable
to the equity holders of the company:
Earnings per share, EUR (diluted = non-diluted) 0.11 0.15 0.32
STATEMENT OF COMPREHENSIVE INCOME I I I-IV
MEUR 2014 2013 2013
-------------------------------------------------------------------
Net profit for the period 4.3 6.6 16.1
------------------
Other comprehensive income, net of tax
Change in translation differences* -1.2 2.0 -7.1
Gains and losses on cash flow hedges* 0.1 0.3 0.9
Gains and losses on hedges of net investments* 0.6 -0.3 -2.3
Actuarial gains (losses) on defined benefit plan - - 0.1
------------------
Total other comprehensive income, net of tax -0.4 2.1 -8.4
------------------
Total comprehensive income for the period 3.9 8.7 7.7
------------------
Total comprehensive income attributable to:
Equity holders of the Company 4.3 7.8 5.1
Non-controlling interests -0.4 0.9 2.6
* Item that may be reclassified subsequently to the statement of income
STATEMENT OF FINANCIAL POSITION Mar 31 Mar 31 Dec 31
MEUR 2014 2013 2013
------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 70.1 73.2 70.0
Property, plant and equipment 31.0 30.1 30.6
Non-current assets
Interest-bearing 3.0 3.4 3.0
Non-interest-bearing 10.1 11.4 10.1
---------------------
114.3 118.1 113.7
Current assets
Inventories 118.2 116.4 110.3
Current assets
Interest-bearing 1.0 2.4 1.0
Non-interest-bearing 72.1 77.7 62.1
Cash and cash equivalents 11.0 30.8 16.9
---------------------
202.3 227.2 190.3
Total assets 316.6 345.3 304.1
---------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the company 127.2 135.9 123.1
Non-controlling interests 11.6 10.2 12.0
---------------------
138.9 146.1 135.1
Non-current liabilities
Interest-bearing 39.4 77.0 39.4
Non-interest-bearing 12.8 15.4 12.8
---------------------
52.2 92.3 52.2
Current liabilities
Interest-bearing 81.8 60.0 77.8
Non-interest-bearing 43.7 46.9 38.9
---------------------
125.5 106.9 116.7
Total equity and liabilities 316.6 345.3 304.1
---------------------
I I I-IV
KEY FIGURES 2014 2013 2013
----------------------------------------------------------------
EBITDA margin, % 13.7% 13.6% 11.7%
Operating profit margin, % 11.2% 11.4% 9.1%
Return on capital employed, % 12.4% 14.5% 11.4%
Capital employed at end of period, MEUR 245.1 246.5 231.4
Net interest-bearing debt at end of 106.2 100.4 96.3
period, MEUR
Equity-to-assets ratio at end of period, 43.9% 42.3% 44.5%
%
Debt-to-equity ratio at end of period, % 76.5% 68.7% 71.2%
Earnings per share, EUR (diluted = non- 0.11 0.15 0.32
diluted)
Equity per share at end of period, EUR 3.30 3.51 3.19
Average personnel for the period 2 678 2 130 2 428
----------------------------------------------------------------
Definitions of key figures are consistent with those in the financial
statement 2013.
STATEMENT OF CASH FLOWS I I I-IV
MEUR 2014 2013 2013
---------------------------------------------------------------------
Net profit for the period 4.3 6.6 16.1
Adjustments to net profit for the period * 3.9 3.3 18.6
Financial items and taxes paid and received -0.5 -2.9 -8.6
Change in working capital -16.0 -15.1 -10.8
---------------------------------------------------------------------
Net cash generated from operating activities -8.3 -8.1 15.3
Investments -2.0 -2.0 -10.7
Proceeds from sales of assets 0.1 0.0 0.2
Sufix brand acquisition - - -0.7
Acquisition of other subsidiaries, net of cash -0.2 0.0 0.0
Proceeds from disposal of subsidiaries, net of - - 0.5
cash
Change in interest-bearing receivables 0.0 0.0 -0.1
---------------------------------------------------------------------
Net cash used in investing activities -2.1 -2.0 -10.8
Dividends paid to parent company's - - -8.9
shareholders
Net funding 4.0 2.6 -16.0
Purchase of own shares -0.1 -0.3 -1.0
---------------------------------------------------------------------
Net cash generated from financing activities 3.8 2.3 -25.9
Adjustments 0.8 0.1 1.5
Change in cash and cash equivalents -5.8 -7.8 -19.8
Cash & cash equivalents at the beginning of 16.9 38.2 38.2
the period
Foreign exchange rate effect -0.1 0.4 -1.4
---------------------------------------------------------------------
Cash and cash equivalents at the end of the 11.0 30.8 16.9
period
* Includes reversal of non-cash items, income taxes and financial income and
expenses.
CONSOLIDATED 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, 2013 3.6 16.7 -2.3 -4.1 4.9 -3.4 112.8 9.4 137.7
-------------------------------------------------------------------------------
Comprehensive
income * - - 0.3 1.7 - - 5.7 0.9 8.7
Purchase of
own shares - - - - - -0.3 - - -0.3
Share based
payment - - - - - - 0.1 - 0.1
Other changes - - - - - - 0.0 0.0 0.0
-------------------------------------------------------------------------------
Equity on Mar
31, 2013 3.6 16.7 -1.9 -2.3 4.9 -3.7 118.6 10.2 146.1
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Equity on Jan
1, 2014 3.6 16.7 -1.4 -12.5 4.9 -4.4 116.2 12.0 135.1
-------------------------------------------------------------------------------
Comprehensive
income * - - 0.1 -0.2 - - 4.3 -0.4 3.9
Purchase of
own shares - - - - - -0.1 - - -0.1
-------------------------------------------------------------------------------
Equity on Mar
31, 2014 3.6 16.7 -1.3 -12.7 4.9 -4.5 120.6 11.6 138.9
-------------------------------------------------------------------------------
* For the period, (net
of tax)
SEGMENT INFORMATION*
MEUR I I I-IV
Net Sales by Operating Segment 2014 2013 2013
-----------------------------------------------------
Group Products 43.3 47.1 176.3
Third Party Products 22.9 28.1 110.5
Eliminations 0.0 - -0.1
-----------------------------------------------------
Total 66.2 75.3 286.6
Operating Profit by Operating Segment
------------------------------------------------------
Group Products 4.9 6.2 19.4
Third Party Products 2.5 2.4 6.7
-----------------------------------------------------
Total 7.4 8.6 26.1
Mar 31 Mar 31 Dec 31
Assets by Operating Segment 2014 2013 2013
---------------------------------------------------------------
Group Products 226.7 226.7 215.7
Third Party Products 74.8 82.1 67.4
---------------------------------------------------------------
Non-interest-bearing assets total 301.5 308.7 283.1
Unallocated interest-bearing assets 15.0 36.6 21.0
---------------------------------------------------------------
Total assets 316.6 345.3 304.1
* Segments are consistent
with those in the financial statements 2013. Segments are described in detail in
note 2 of the financial statements 2013.
External Net Sales by Area I I I-IV
MEUR 2014 2013 2013
------------------------------------------------
North America 19.4 21.7 88.4
Nordic 13.2 15.2 60.8
Rest of Europe 26.6 29.5 103.6
Rest of the world 7.1 8.9 33.8
------------------------------------------------
Total 66.2 75.3 286.6
KEY FIGURES BY QUARTERS I II III IV I-IV I
MEUR 2013 2013 2013 2013 2013 2014
--------------------------------------------------------------
Net sales 75.3 81.4 66.6 63.3 286.6 66.2
EBITDA 10.3 15.2 4.5 3.7 33.6 9.1
Operating profit 8.6 13.4 2.6 1.5 26.1 7.4
Profit before taxes 8.3 11.6 -0.4 1.2 20.6 5.5
Net profit for the period 6.6 7.8 -1.2 2.9 16.1 4.3
--------------------------------------------------------------
NOTES TO THE INCOME STATEMENT AND FINANCIAL POSITION
The financial statement figures included in this release are unaudited.
This report has been prepared in accordance with IAS 34. Accounting principles
adopted in the preparation of this report are consistent with those used in the
preparation of the Financial Statements 2013, except for the adoption of the new
or amended standards and interpretations.
Adoption of the revised standards IFRS 10, IFRS 11, IFRS 12, IAS 27, IAS 28 as
well as the amended standards IAS 36 and IAS 39 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 2014. 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, 2014, the book value of inventories included a provision for net
realizable value of 4.5 MEUR (4.5 MEUR at March 31, 2013 and 4.5 MEUR at
December 31, 2013).
Impact of business acquisitions on the consolidated financial statements
In January 2014, the Group acquired 100% of the shares and voting rights of a
French coarse fishing attractant manufacturer Mystic s.a.r.l.. The consideration
amounted to 0.2 MEUR. The closing accounts were finalized during the first
quarter and goodwill of 0.3 MEUR was recognized. The acquisition does not have
material impact on the result or financial position of the Group.
Non-recurring income and expenses included in operating I I I-IV
profit
MEUR 2014 2013 2013
-------------------------------------------------------------------------------
Closure of Chinese lure manufacturing - - -0.8
Other restructuring costs 0.1 - -0.2
Other non-recurring items - 0.0 -0.1
-------------------------------------------------------------------------------
Total included in EBITDA and operating profit 0.1 0.0 -1.1
-------------------------------------------------------------------------------
Other non-recurring impairments - - -0.2
-------------------------------------------------------------------------------
Total included in operating profit 0.1 0.0 -1.3
-------------------------------------------------------------------------------
Commitments Mar 31 Mar 31 Dec 31
MEUR 2014 2013 2013
-----------------------------------------------------------------------------
On own behalf
Guarantees - 0.1 -
Minimum future lease payments on operating leases 16.6 15.2 16.8
-----------------------------------------------------------------------------
Sales Other
Related party transactions and other Pur- Rents expen- Recei- Paya-
MEUR income chases paid ses vables bles
-------------------------------------------------------------------------------
I 2014
Joint venture Shimano Normark 0.5 - - 0.0 0.4 0.0
UK Ltd
Associated company Lanimo Oü - - - - 0.0 -
Entity with significant - - 0.0 0.1 0.0 -
influence over the Group*
Management - - 0.1 - - 0.0
I 2013
Joint venture Shimano Normark 0.4 - - - 0.3 -
UK Ltd
Associated company Lanimo Oü 0.0 0.0 - - - -
Entity with significant - - 0.0 0.0 0.0 -
influence over the Group*
Management - - 0.1 - - 0.0
I-IV 2013
Joint venture Shimano Normark 3.0 - - - 0.1 -
UK Ltd
Associated company Lanimo Oü 0.0 0.1 - - 0.0 -
Entity with significant - - 0.2 0.1 0.0 -
influence over the Group*
Management - - 0.3 - - 0.0
-------------------------------------------------------------------------------
* Lease agreement for the real estate for the consolidated operations in
France and a service fee.
Mar 31 Mar 31 Dec 31
Open derivatives 2014 2013 2013
----------------------------------------------------------
Nominal Fair Nominal Fair Nominal Fair
MEUR Value Value Value Value Value Value
-------------------------------------------------------------------------------
Operative hedges
Foreign currency
derivatives 53.7 0.6 47.5 0.1 49.4 0.0
Monetary hedges
Foreign currency
derivatives 25.6 -0.4 16.6 0.0 24.6 0.1
Interest rate
derivatives* 69.5 -1.9 80.3 -3.5 69.5 -2.0
-------------------------------------------------------------------------------
* Includes also two cross-
currency swaps.
The changes in the fair values of derivatives that are designated as hedging
instruments but do not qualify for hedge accounting are recognized based on
their nature either in operative costs, if the hedged item is an operative
transaction, or in financial income and expenses if the hedged item is a
monetary transaction. Some derivatives designated to hedge monetary items are
accounted for according to hedge accounting. Financial risks and hedging
principles are described in detail in the financial statements 2013.
Changes in unrealized mark-to-market valuations for operative foreign
currency derivatives
I I I-IV
2014 2013 2013
-------------------------------------------------------------------------------
Included in operating profit 0.7 0.5 0.3
-------------------------------------------------------------------------------
Operative foreign currency derivatives that are marked-to-market on
reporting date cause timing differences between the changes in
derivative's fair values and hedged operative transactions. Changes in
fair values for derivatives designated to hedge future cash flow but are
not accounted for according to the principles of hedge accounting impact
the Group's operating profit for the accounting period. The underlying
foreign currency transactions will realize in future periods.
Fair values of Mar 31 Mar 31 Dec 31
financial
instruments
2014 2013 2013
---------------------------------------------------------------
MEUR Carrying Fair Carrying Fair Carrying Fair
value value value value value value
-------------------------------------------------------------------------------
Financial
assets
Loans and 81.2 81.2 106.7 106.7 77.8 77.8
receivables
Available-for- 0.3 0.3 0.3 0.3 0.3 0.3
sale financial
assets (level
3)
Derivatives 1.0 1.0 0.5 0.5 0.8 0.8
(level 2)
Financial
liabilities
Financial 147.4 147.9 166.5 167.1 138.1 138.7
liabilities at
amortized cost
Derivatives 2.6 2.6 3.9 3.9 2.8 2.8
(level 2)
-------------------------------------------------------------------------------
Shares
and share capital
On April 10, 2014 The Annual General Meeting (AGM) updated Board's authorization
on repurchase of shares. A separate stock exchange release on the decisions of
the AGM was given, and up to date information on the board's authorizations and
other decision of the AGM are available also on the corporate website.
At the end of the reporting period 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 during the reporting period was 39 468 449. During
the reporting period, company bought back a total of 26 548 own shares. At the
end of the reporting period the company held 933 856 own shares, representing
2.4% of the total number of shares and the total voting rights. The average
share price of all repurchased own shares held by the company was 4.82 EUR.
On April 10, 2014 the Board decided to cancel 468 449 treasury shares. After the
cancellation company has 465 407 treasury shares, which represent 1.2 per cent
of the total number of shares. The cancellation does not have an effect on the
share capital. A separate stock exchange release will be issued once the
cancellation is valid after it has been registered with the Trade Register. Once
the cancellation has been registered, the number of Rapala VMC Corporation's
shares is 39 000 000.
During the reporting period, 197 086 shares (1 000 860) were traded at a high of
5.69 EUR and a low of 5.09 EUR. The closing share price at the end of the period
was 5.65 EUR.
Short term risks and uncertainties
The objective of Rapala VMC Corporation'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 VMC Corporation has
continued to expand its operations. Accordingly, Group management continuously
develops it's risk management practices and internal controls. Detailed
descriptions of the Group's strategic, operative and financial risks as well as
risk management principles are included in the Financial Statements 2013.
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, although this
seasonality pattern may partly change as the Group has increased its role in
winter fishing business. Weathers impact consumer demand and may have impact on
the Group's sales for current and following seasons. The Group is more affected
by winter weathers after the expansion into winter fishing business, while the
impacts on summer and winter seasons are partly offsetting each other.
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 uncertainties in future demand as well as the length of the
Group's supply chain increases the challenges in supply chain management. Delays
in shipments from internal or external suppliers or unexpected changes in
customer demand upwards or downwards may lead to shortages and lost sales or
excess inventories and subsequent clearance sales with lower margins.
Closing down lure manufacturing operations in China and ramping up and expanding
the new production facility in Batam, Indonesia, may increase certain production
cost and supply chain risks temporarily. The same applies to the newly
established ice drill manufacturing unit in Finland.
The Group successfully refinanced its main credit facilities in 2012. These
credit facilities include some financial covenants, which are actively
monitored. The Group's liquidity and refinancing risks are well in control.
The fishing tackle business has not traditionally been strongly influenced by
increased uncertainties and downturns in the general economic climate. They may
influence, however, 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, sudden fluctuations in foreign exchange
rates 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.
Cash collection and credit risk management is high on the agenda of local
management 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 and the risks are monitored actively. To fix the exchange rates
of future foreign exchange denominated sales and purchases, the Group has
entered into several currency hedging agreements according to the foreign
exchange risk management policy set by the Board of Directors. As the Group is
not applying hedge accounting in accordance to IAS 39, the unrealized mark-to-
market valuations of currency hedging agreements have an impact on the Group's
reported operating profit. The Group is closely monitoring market development as
well as its 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#1778063]
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