2013-02-06 08:30:00 CET
2013-02-06 08:30:37 CET
REGULATED INFORMATION
Rapala VMC - Financial Statement Release
RAPALA VMC CORPORATION'S ANNUAL ACCOUNTS 2012: SALES, CASH FLOW AND GEARING REACHED RECORDS
Rapala VMC Corporation
Stock Exchange Release
February 6, 2013 at 9:30 a.m.
* Net sales for the fourth quarter increased by 12% to 67.9 (60.8 MEUR) and
was up by 4% at 290.7 MEUR (279.5 MEUR) for the year, reaching all time
record sales for the fourth quarter and full year. Sales were supported by
new ice fishing business, continuing growth in Russia and foreign exchange
rates.
* Comparable operating profit, excluding non-recurring items, decreased from
last year to 0.5 MEUR (2.4 MEUR) for the fourth quarter and 26.5 MEUR (30.5
MEUR) for the year. Profitability was weaker due to expenses related to
start-up of the new manufacturing units, lower gross margin and impact of
foreign exchange rates. Comparable operating profit margin was 0.7% (4.0%)
for the quarter and 9.1% (10.9%) for the full year.
* Net profit for the quarter reduced to -2.1 MEUR (1.1 MEUR) and was 13.9 MEUR
(17.2 MEUR) for the year. Earnings per share were -0.05 EUR (0.02 EUR) and
0.26 EUR (0.36 EUR) for the year.
* Cash flow from operating activities, following an intense focus on working
capital, reached historically high level of 6.0 MEUR (-1.6 MEUR) for the
fourth quarter. Cash flow from operations for the year was an all time
record at 25.2 MEUR (15.2 MEUR). Strengthening of Group's balance sheet
continued and gearing reached all time record low level of 65.1% (67.1%).
* Implementation of the Rapala Group's strategy of profitable growth continued
throughout the year by taking several actions relating to manufacturing and
distribution activities. New ice fishing business started in the latter part
of the year.
* The Group's outlook for 2013 is positive. The Group's sales are expected to
increase from last year and comparable operating profit, excluding non-
recurring items and mark-to-market valuations of currency derivatives, to be
30 MEUR plus or minus 10%.
* Board proposes to the Annual General Meeting that a divided of 0.23 EUR per
share to be paid. This represents 88% of earnings per share.
The attachment presents the summary of the annual review by the Board of
Directors as well as extracts from the financial statements for 2012.
Contact information and conference call details are at the end of the review by
the Board of Directors.
Distribution: NASDAQ OMX Helsinki ja Main Media
Market Situation and Sales
The Rapala Group's business developed positively during 2012 breaking sales
records despite the impact of divestment of the gift business in December
2011. 2012 sales were supported by introduction of the new ice fishing business,
continuing strong growth in Russia and foreign exchange rates, especially USD.
Winter 2011/2012 was short and spring early, which had a significant negative
impact on winter sports equipment sales in the Nordic countries in the first
quarter, but gave good start to summer fishing season in North America and
Europe. However, in the latter part of the summer season weather conditions
turned unfavorable in some European and Nordic markets. Difficult winter
2011/2012 conditions and continuing economical uncertainties had impact on some
customers' financial position, which together with tighter credit control
impacted the sales in some countries.
US economy showed clear signs of recovery supporting the sales in North America
although general economy was still dragging. Consumer spending was increasing,
while US retailers focused increasingly on sports categories other than fishing.
The new ice fishing business started in the latter part of the year and changed
the sales mix. Sales of ice fishing products started off well, but due to late
winter 2012/2013 in the USA and knock-on effect of previous year's mild winter,
the new ice fishing business generated less sales in 2012 than initially
expected.
The Group's intense focus on cash flow and working capital management resulted
in increasing inventory clearance sales towards the end of the year, which to
some extent replaced ordinary sales.
Net sales for the fourth quarter increased by 12% to all-time high of 67.9 (60.8
MEUR) with positive impact of currency exchange rates of 2.2 MEUR. Full year
sales were up by 4% at 290.7 MEUR (279.5 MEUR) for the year, also reaching all
time record. Changes in foreign exchange rates increased the full year sales by
9.4 MEUR. Establishment of new units and new ice fishing business offset by
divestment of gift business, increased quarterly sales by 5.5 MEUR and full year
sales by 1.3 MEUR. With comparable exchange rates and organization structure net
sales for the quarter and for the full year was at last year's level. New units
and new ice business included, net sales increased by 12% in the fourth quarter
and 4% compared to last year.
Fourth quarter net sales of Group Products increased 10% and full year sales 1%
from last year despite negative impact of the divestment of the gift business.
Excluding the impact of gift divestment, Group products' sales were up by 15%
for the fourth quarter and 7% for the year. Sales increase was driven by new ice
fishing sales and good sales of lures and baits. Sales growth was turned down by
slow winter sports equipment sales in the beginning of the year.
Net sales of Third Party Products increased 15% in the fourth quarter and 9% in
2012 compared to last year with increased sales of third party fishing and
hunting products, while sales of third party winter sports equipment was down.
Third Party Fishing sales was supported by new sales of MarCum underwater
cameras and sonars in North America.
In North America fourth quarter external sales were up by 37% and full year
sales up by 21% as a result of new ice fishing business, improving US business
conditions and strengthening of the US Dollar, which was 8% stronger in 2012
compared to 2011. With comparable exchange rates quarterly sales were up 30% and
full year 12% above last year's level.
In Nordic counties, sales were down by 11% for the fourth quarter and 4% for the
year. Sales were impacted by structural changes in Norway and challenging
2011/2012 winter conditions, which had knock-on effect also for the fourth
quarter especially in Finland.
Fourth quarter sales in Rest of Europe were 14% above last year's level and
increased by 5% for the year. 2012 sales developed positively in East Europe,
especially in Russia, and France, while change in distribution structure and bad
weathers reduced sales in the UK. Spain, Hungary and Switzerland suffered from
the impacts of the on-going uncertainties of the European economy.
In Rest of World fourth quarter sales were down by 5% and full year by 15%
compared to last year impacted by the divestment of the gift business. Excluding
the gift business divestment, net sales of Rest of the World were up by 17% in
the quarter and 12% during the full year. Full year sales grew in all
distribution markets, especially in Japan where fishing line sales were growing
heavily.
Financial Results and Profitability
Comparable operating profit, excluding non-recurring items, decreased from last
year to 0.5 MEUR (2.4 MEUR) for the fourth quarter and was down to 26.5 MEUR
(30.5 MEUR) for the full year. Comparable operating profit margin was 0.7%
(4.0%) for the fourth quarter and 9.1% (10.9%) for the full year. Decline of the
fourth quarter and full year comparable operating profit was driven by reduced
gross margin, which was largely impacted by the Group's intense focus on cash
flow and working capital and consequent inventory clearance initiatives. Fourth
quarter profitability was also impacted by slower than expected start of the
lower margin ice fishing business as well as foreign exchange rates, which also
hurt the full year profits. Full year profitability was also burdened by start-
up expenses and lower than expected demand for products from the Group's new
manufacturing facilities, divestment of gift business and difficult 2011/2012
winter season.
Reported operating profit for the fourth quarter decreased to 0.2 MEUR (3.5
MEUR) and 25.9 MEUR (30.7 MEUR) for the year 2012. Reported operating profit for
the fourth quarter included non-recurring costs of 0.3 MEUR (gain 1.1 MEUR)
related to the divestment of the gift business. Non-recurring costs for the full
year amounted to 0.6 MEUR (gain 0.2 MEUR) related to divestment of gift business
and other non-recurring costs. Reported operating margin for the quarter was
0.3% (5.8%) and for 2012 8.9% (11.0%). Return on capital employed was 0.4%
(6.2%) for the quarter and 11.4% (13.8%) for 2012.
Key figures IV IV I-IV I-IV
MEUR 2012 2011 2012 2011
------------------------------------------------------
Net sales 67.9 60.8 290.7 279.5
EBITDA as reported 1.9 5.5 32.6 37.7
EBITDA excl. one-off items 2.2 4.1 33.2 37.1
Operating profit (EBIT) 0.2 3.5 25.9 30.7
EBIT excl. one-off items 0.5 2.4 26.5 30.5
------------------------------------------------------
Group Products' reported operating profit for the fourth quarter was 2.0 MEUR
(3.7 MEUR). In 2012 reported operating profit of Group Products was 18.9 MEUR
(22.4 MEUR). Operating profit was negatively impacted by the divestment of the
gift business. Excluding the impact of the gift divestment quarterly operating
profit was at last year's level and full year operating profit was 7% behind
2011. Group products' operating profit margin was pushed down by lower margins
of the ice fishing business, increased fixed costs, inventory clearance
initiatives, establishment of new manufacturing units and difficult 2011/2012
winter season.
Third party products' operating profit was -1.8 MEUR (-0.1 MEUR) for the quarter
and 7.0 MEUR (8.4 MEUR) for the full year impacted by lower margin third party
ice fishing business, impact of currency exchange movements on purchases and
inventory clearance initiatives.
Total financial (net) expenses for the quarter increased to 2.0 MEUR (1.0 MEUR)
primarily due to negative change in (net) currency expenses. 2012 total
financial (net) expenses decreased to 4.9 MEUR (5.5 MEUR). 2012 net interest and
other financial expenses were close to last year's level at 4.0 MEUR (3.7 MEUR).
Financial items were positively impacted by the change in (net) currency
exchange expenses of 0.9 MEUR (1.8 MEUR).
Net profit for the year and earnings per share decreased from last year's levels
to 13.9 MEUR (17.2 MEUR) and 0.26 EUR (0.36 EUR) respectively, impacted by
increased profitability of joint venture companies with non-controlling
shareholders. Net profit was also impacted by start-up losses of the new units
increasing the effective tax rate.
Cash Flow and Financial Position
Following the Group's intense focus on cash flow and working capital, cash flow
from operating activities reached all time annual record of 25.2 MEUR (15.2
MEUR) and improved significantly also during the fourth quarter being 6.0 MEUR
(-1.6 MEUR) despite receivables tied up into the new ice fishing business.
Positive cash flow impact for the fourth quarter and whole year came from the
net change in working capital, which was 5.7 MEUR (-1.6 MEUR) and 4.2 MEUR (-
7.3 MEUR) respectively. Main driver for the positive working capital change were
the inventories, where the actions to reduce the tied up capital created
results.
The Group's inventories decreased by 4.9 MEUR from last December and 10.0 MEUR
from September 2012, amounting to 110.6 MEUR (115.5 MEUR) in December.
Inventories of the new ice fishing business, new business units and impact of
currency movements increased year-end inventories by 5.8 MEUR, thus on
comparable basis inventories reduced 10.7 MEUR from last year. On comparable
basis, excluding the impacts of the divested gift business and the new ice
fishing business, the inventory-to-sales ratio dropped more than five percentage
points from last year.
Net cash used in investing activities was 1.2 MEUR (1.4 MEUR) for the quarter
and 13.6 MEUR (9.6 MEUR) for the full year. Fourth quarter investing activities
included 0.8 MEUR (0.6 MEUR) of proceeds related to disposal of the gift
business. Operative capital expenditure was 2.1 MEUR (2.7 MEUR) for the fourth
quarter and 7.7 MEUR (8.4 MEUR) for the full year. 2012 investment activities
included the acquisition of the assets of Strike Master Corporation and Mora Ice
brand with total of 6.7 MEUR and 2011 investment activities include acquisition
of UK joint venture of 1.5 MEUR.
In the end of 2012 net interest bearing debt reduced to 89.9 MEUR (91.1 MEUR).
Strengthening of the Group's balance sheet continued and gearing reached all
time record low level of 65.1% (67.1%). Equity-to-assets ratio decreased
slightly and was 42.3% (43.2%).
Strategy Implementation
Implementation of the Rapala Group's strategy of profitable growth continued
throughout the year 2012 by taking several actions relating to manufacturing and
distribution activities.
In February the Group entered seriously into ice drill business and closed the
deals to acquire assets of Strike Master Corporation as well as the brand and
intellectual property rights relating to Mora Ice products. These deals together
with the US distribution agreements concluded for MarCum underwater cameras and
sonars and Otter Outdoors sleds and shelters, latter one starting in 2013, will
give the Rapala Group the global leadership position in the ice fishing
category. Strong expansion into ice fishing business will increase the sales in
the seasonally slower second half of the year in all main northern markets.
Deliveries of the new ice fishing products started as planned in autumn 2012 and
concentrated on the fourth quarter of the year, although suffering from
unfavorable winter conditions in the USA.
The Group's new lure and hook manufacturing units on Batam Island in Indonesia
started their operations during the first quarter and employed some 250 people
in the end of the year. Production volumes of lure production were ramped up
during the year as production was gradually transferred from China to Batam.
Operational efficiencies are in line with expectation. The first phase of lure
production transfer to Batam will be finalized during first quarter of 2013.
Construction and installation work for tripling the lure manufacturing
operations are proceeding and certain new production phases were already started
in the fourth quarter. New products and production phases will be added
gradually during the next 12-18 months. Hook manufacturing will be technically
fully ramped up by March 2013. In 2012, due to lack of demand, total production
volumes of the new Batam manufacturing operations were behind initial
expectations and thereby negatively impacting the expected profitability.
The Group's new distribution company in Chile started its operations in October
and will strengthen the Group's presence in Latin America. In September the
Group acquired 20% share in the Indonesian distribution company from its non-
controlling shareholder, increasing ownership to 100%. In the end of 2012 the
Group has wholly or partly owned distribution operations in 35 countries around
the world.
In 2012 special initiatives to improve the performance were carried out in
distribution companies in Norway and in Switzerland, where the program will
continue in 2013.
Working capital and cash flow management was still one of the top priorities of
the Group, and the Group continues to work to reduce the inventory levels and
develop the Group's internal supply chain as well as its purchasing processes.
In 2012 the Group introduced again a range of new innovative products to the
market and was honored with the Best New Hard Lure and Best New Metal Lure
awards at EFTTEX 2012, the Europe's largest and most important international
fishing tackle trade show. In February 2013 the Group will also launch a new
Scatter Rap lure family, which will be available in the USA for retailers and
consumers already for season 2013.
Discussions and negotiations regarding acquisitions and business combinations
continued during the year 2012.
Short-term Outlook
The Group's outlook for 2013 is positive.
Sales are expected to grow in most markets, especially in East Europe and USA.
In the biggest market USA growth is supported with early introduction of the new
Scatter Rap lure family and beginning of distribution of Otter winter fishing
products. In Finland first quarter winter sports equipment sales should benefit
from more favourable weathers than last year, while in USA and Central Europe it
is questionable whether summer season can start as early as last year and how
the foreign exchange rates will develop.
Profitability of the new manufacturing units as well as a few other
underperforming units is expected to improve gradually. The continuing actions
to reduce the Group's inventory levels may have some negative impact on
profitability, but support the cash flow generation.
The Group's sales are expected to increase from last year and comparable
operating profit, excluding non-recurring items and mark-to-market valuations of
currency derivatives, to be 30 MEUR plus or minus 10%.
Proposal for profit distribution
The Board of Directors proposes to the Annual General Meeting that a dividend of
EUR 0.23 for 2012 (2011: 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, 2012 the distributable equity totaled to
26.2 MEUR.
No material changes have taken place in the Group's financial position after the
end of the financial year 2012. The 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.
Financial Statements and Annual General Meeting
Financial Statements for 2012 and Corporate Governance Statement will be
published in week 12. Annual General Meeting is planned to be held on April
11, 2013.
Helsinki, February 6, 2013
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 2012 result will be arranged today at 4.00 p.m. Finnish
time (3.00 p.m. CET). Please dial +44 (0)20 3147 4971 or +1 212 444 0889 or
+358 (0)9 2310 1667 (pin code: 492802#) 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: 492802#).
Financial information and teleconference replay facility are available at
www.rapalavmc.com.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME IV IV I-IV I-IV
MEUR 2012 2011 2012 2011
-----------------------------------------------------------------------------
Net sales 67.9 60.8 290.7 279.5
Other operating income 0.6 2.3 1.3 2.9
Materials and services 35.8 28.6 140.7 129.0
Personnel expenses 15.8 16.3 62.6 62.4
Other costs and expenses 14.8 12.7 55.8 53.3
Share of results in associates and joint ventures -0.2 -0.1 -0.3 -0.1
----------------------------
EBITDA 1.9 5.5 32.6 37.7
Depreciation, amortization and impairments 1.7 1.9 6.8 7.0
----------------------------
Operating profit (EBIT) 0.2 3.5 25.9 30.7
Financial income and expenses 2.0 1.0 4.9 5.5
----------------------------
Profit before taxes -1.8 2.5 21.0 25.2
Income taxes 0.3 1.5 7.1 8.0
----------------------------
Net profit for the period -2.1 1.1 13.9 17.2
----------------------------
Attributable to:
Equity holders of the Company -2.1 0.9 10.1 14.0
Non-controlling interests 0.0 0.2 3.8 3.2
Earnings per share for profit attributable
to the equity holders of the company:
Earnings per share, EUR (diluted = non-diluted) -0.05 0.02 0.26 0.36
STATEMENT OF COMPREHENSIVE INCOME IV IV I-IV I-IV
MEUR 2012 2011 2012 2011
-------------------------------------------------------------------
Net profit for the period -2.1 1.1 13.9 17.2
----------------------
Other comprehensive income, net of tax
Change in translation differences -1.9 4.9 -0.3 2.0
Gains and losses on cash flow hedges 0.1 0.0 -0.6 -0.1
Gains and losses on hedges of net investments 0.1 -0.4 0.2 -0.4
----------------------
Total other comprehensive income, net of tax -1.7 4.5 -0.8 1.5
----------------------
Total comprehensive income for the period -3.8 5.6 13.2 18.7
----------------------
Total comprehensive income attributable to:
Equity holders of the company -3.8 5.2 9.4 15.8
Non-controlling interests 0.0 0.4 3.7 2.9
STATEMENT OF FINANCIAL POSITION Dec 31 Dec 31
MEUR 2012 2011
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 72.6 68.0
Property, plant and equipment 29.3 28.5
Non-current financial assets
Interest-bearing 3.7 5.8
Non-interest-bearing 11.2 10.9
----------------------------------------
116.9 113.2
Current assets
Inventories 110.6 115.5
Current financial assets
Interest-bearing 2.5 1.1
Non-interest-bearing 58.5 55.4
Cash and cash equivalents 38.2 28.9
---------------------------------------- 209.7 201.0
Assets classified as held-for-sale - 0.3
Total assets 326.6 314.5
----------------------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity 128.6 128.6
holders of the company
Non-controlling interests 9.4 7.2
----------------------------------------
138.0 135.8
Non-current liabilities
Interest-bearing* 49.7 10.8
Non-interest-bearing 15.1 15.5
----------------------------------------
64.8 26.2
Current liabilities
Interest-bearing* 84.5 116.2
Non-interest-bearing 39.3 36.3
----------------------------------------
123.8 152.5
Total equity and liabilities 326.6 314.5
----------------------------------------
* As of April 2012 the new revolving credit facilities of the new bank loan
agreements were classified as non-current liabilities to the extent banks'
commitment is valid for longer than 12 months.
IV IV I-IV I-IV
KEY FIGURES 2012 2011 2012 2011
--------------------------------------------------------------------------------
EBITDA margin, % 2.8% 9.0% 11.2% 13.5%
Operating profit margin, % 0.3% 5.8% 8.9% 11.0%
Return on capital employed, % 0.4% 6.2% 11.4% 13.8%
Capital employed at end of 227.9 226.9 227.9 226.9
period, MEUR
Net interest-bearing debt at 89.9 91.1 89.9 91.1
end of period, MEUR
Equity-to-assets ratio at end 42.3% 43.2% 42.3% 43.2%
of period, %
Debt-to-equity ratio at end of 65.1% 67.1% 65.1% 67.1%
period, %
Earnings per share, EUR -0.05 0.02 0.26 0.36
(diluted = non-diluted)
Equity per share at end of 3.32 3.30 3.32 3.30
period, EUR
Average personnel for the 1 993 2 223 1 994 2 208
period
--------------------------------------------------------------------------------
Definitions of key figures are consistent with those in the financial statement
2011 and can be found on corporate website.
STATEMENT OF CASH FLOWS IV IV I-IV I-IV
MEUR 2012 2011 2012 2011
--------------------------------------------------------------------------------
Net profit for the period -2.1 1.1 13.9 17.2
Adjustments to net profit for the period * 5.2 2.2 20.6 17.6
Financial items and taxes paid and received -2.9 -3.3 -13.6 -12.3
Change in working capital 5.7 -1.6 4.2 -7.3
--------------------------------------------------------------------------------
Net cash generated from operating activities 6.0 -1.6 25.2 15.2
Investments -2.1 -2.7 -7.7 -8.4
Proceeds from sales of assets 0.1 0.3 0.8 0.7
Acquisition of joint venture Shimano Normark UK - 0.5 - -1.5
Dynamite Baits acquisition, net of cash - -0.1 - -0.1
Sufix brand acquisition - - -0.8 -0.7
Strikemaster and Mora Ice acquisitions - - -6.7 -
Acquisition of other subsidiaries, net of cash - 0.0 0.0 0.0
Proceeds from disposal of subsidiaries, net of cash 0.8 0.6 0.8 0.6
Change in interest-bearing receivables 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------
Net cash used in investing activities -1.2 -1.4 -13.6 -9.6
Dividends paid to parent company's shareholders - - -8.9 -9.0
Dividends paid to non-controlling interest -0.1 -0.1 -1.6 -2.9
Net funding 2.1 -0.8 9.1 6.7
Purchase of own shares -0.5 -0.1 -0.7 -0.1
--------------------------------------------------------------------------------
Net cash generated from financing activities 1.4 -1.0 -2.2 -5.2
Adjustments 0.2 1.1 0.2 0.4
Change in cash and cash equivalents 6.3 -2.9 9.6 0.8
Cash & cash equivalents at the beginning of the 32.0 31.5 28.9 27.9
period
Foreign exchange rate effect -0.1 0.3 -0.4 0.2
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 38.2 28.9 38.2 28.9
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 3.6 16.7 -1.5 -6.0 4.9 -2.5 106.7 7.4 129.2
1, 2011
--------------------------------------------------------------------------------
Comprehensive - - -0.1 1.9 - - 14.0 2.9 18.7
income *
Purchase of own - - - - - -0.1 - - -0.1
shares
Dividends - - - - - - -9.0 -3.2 -12.1
Other changes - - - - - - - 0.0 0.0
--------------------------------------------------------------------------------
Equity on Dec 3.6 16.7 -1.6 -4.1 4.9 -2.6 111.8 7.2 135.8
31, 2011
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity on Jan 3.6 16.7 -1.6 -4.1 4.9 -2.6 111.8 7.2 135.8
1, 2012
--------------------------------------------------------------------------------
Comprehensive - - -0.6 0.0 - - 10.1 3.7 13.2
income *
Purchase of own - - - - - -0.7 - - -0.7
shares
Dividends - - - - - - -8.9 -1.5 -10.4
Share based - - - - - - 0.3 - 0.3
payments
Other changes - - - - - - - 0.0 0.0
--------------------------------------------------------------------------------
Equity on Dec 3.6 16.7 -2.3 -4.1 4.9 -3.4 113.2 9.4 138.0
31, 2012
--------------------------------------------------------------------------------
* For the period,
(net of tax)
SEGMENT INFORMATION*
MEUR IV IV I-IV I-IV
Net Sales by Operating Segment 2012 2011 2012 2011
-----------------------------------------------------------------
Group Products 44.2 40.2 176.4 174.5
Third Party Products 23.7 20.6 114.3 105.0
-----------------------------------------------------------------
Total 67.9 60.8 290.7 279.5
Operating Profit by Operating Segment
-----------------------------------------------------------------
Group Products 2.0 3.7 18.9 22.4
Third Party Products -1.8 -0.1 7.0 8.4
-----------------------------------------------------------------
Total 0.2 3.5 25.9 30.7
Dec 31 Dec 31
Assets by Operating Segment 2012 2011
---------------------------------------------------------
Group Products 213.8 209.9
Third Party Products 68.5 68.8
---------------------------------------------------------
Non-interest bearing assets total 282.3 278.7
Unallocated interest-bearing assets 44.3 35.9
---------------------------------------------------------
Total assets 326.6 314.5
Net Sales by Area** IV IV I-IV I-IV
MEUR 2012 2011 2012 2011
-----------------------------------------------
North America 25.6 18.7 83.6 69.1
Nordic 13.4 15.1 62.7 65.3
Rest of Europe 19.1 16.7 108.2 102.7
Rest of the world 9.8 10.3 36.2 42.4
-----------------------------------------------
Total 67.9 60.8 290.7 279.5
* As of January 1, 2012 the reportable
operating segments include the following
product lines: Group Products include Group Fishing Products, such as Lures,
Fishing Hooks, Fishing Lines and Fishing Accessories, as well as Other Group
Products, mainly Winter Sports and some other non-fishing related business
manufactured and/or sourced by the Group and sold under the Group's brands.
Third Party Products include non-Group branded fishing products and third party
products for hunting, outdoor and winter sports distributed by the Group.
** Geographical information has been prepared on source basis i.e. based on the
location of the business unit. As of January 1, 2012 the net sales is presented
excluding intra-Group transactions, i.e. including only Group's external sales
KEY FIGURES BY I II III IV I-IV I II III IV I-IV
QUARTERS
MEUR 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012
--------------------------------------------------------------------------------
Net sales 74.7 80.9 63.0 60.8 279.5 73.5 83.7 65.6 67.9 290.7
EBITDA 13.7 14.4 4.1 5.5 37.7 12.0 13.3 5.4 1.9 32.6
Operating profit 12.1 12.8 2.3 3.5 30.7 10.4 11.6 3.7 0.2 25.9
Profit before taxes 11.1 11.3 0.3 2.5 25.2 10.4 10.5 1.9 -1.8 21.0
Net profit for the 7.9 8.0 0.2 1.1 17.2 7.5 7.2 1.3 -2.1 13.9
period
--------------------------------------------------------------------------------
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 2011, except for the adoption of the new or
amended standards and interpretations. Adoption of amendment of IFRS 7 and IAS
12 did not result in any changes in the accounting principles that would have
affected the information presented in this interim report.
The Group changed its reportable operating segments from January 1, 2012.
Reportable operating segments are Group Products consisting of Group Fishing
Products and Other Group Products, and Third Party Products.
Classification of certain balance sheet items between interest-bearing and non-
interest-bearing assets and liabilities were redefined. The change in
presentation led into changes in calculation of some non-IFRS based key figures.
All comparative periods have been restated accordingly.
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 2012. 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, 2012, the book value of inventories included a provision for net
realizable value of 4.4 MEUR (3.2 MEUR at December 31, 2011).
Assets held for sale
As a part of the relocation of Finnish distribution operations, a real estate in
Korpilahti, Finland, was classified as held for sale during the fourth quarter
of 2011. During the last quarter of 2012 a decision was made to restore the real
estate to manufacturing use. The classification as held for sale was ceased and
the carrying amount was adjusted by depreciation for the full year 2012.
Impact of business acquisitions and disposals on the consolidated financial
statements
In September 2012, the Group purchased a 20% share of the Indonesian
distribution company. This acquisition raised the Group's ownership to 100%.
Acquisition has no significant impact on the Group's consolidated financial
statements.
During the first quarter the Group acquired the assets, including Mora trademark
in North America, of Minnesota based Strike Master Corporation ("Strike
Master"), the leading supplier of ice augers in the US. The Group also acquired
100% of the share capital of Swedish Mora Ice Ab including the Mora Ice brand,
together with all intellectual property rights relating to the Mora Ice
products. Mora Ice is Europe's leading and premium brand of ice augers and auger
cutting blades. Both of the acquisitions were completed in February. The closing
accounts were finalized during the third quarter and the final payment of 0.4
MEUR was made to the sellers in August. Total considerations for the
acquisitions during 2012 amounted to 6.8 MEUR.
These strategic initiatives will give the Rapala Group global leadership
position in the ice fishing category. The Group is well equipped to exploit this
position as it is having strong distribution companies in all main arctic
markets: US, Canada, Russia, East European and Nordic countries, Japan and
China.
Net sales after the acquisitions, 5.1 MEUR, are included in the consolidated
income statement. The acquisitions did not have material impact on the profit of
the Group. Due to the structure of the acquisitions it is not possible to
reliably determine pre-transaction sales and profit prior in 2012.
The transaction costs of 0.0 MEUR have been expensed and are included in the
other operating expenses in the income statement and treated as a non-recurring
item.
The goodwill of 0.7 MEUR is justified by expansion of product assortment and
market coverage as well as utilization of economies of scale in sourcing and
distribution. None of the goodwill is expected to be deductible for income tax
purposes. The goodwill was be tested for impairment.
The business combinations are accounted for by applying the acquisition method.
The fair value of intellectual property rights is established using the relief
from royalty method. The fair value of customer relationships is established
with the income approach based on the future economic returns from the customers
over their useful lives.
The first installment of 1.1 MEUR of the promissory note related to the disposal
of the Gift manufacturing unit in China in 2011 was received in December 2012
according to the terms of the agreement. The sales price was adjusted as a
result of the finalization of the closing accounts. Price adjustment of 0.3 MEUR
was paid during the fourth quarter. Net effect to the Group cash flow in 2012
was 0.8 MEUR.
MEUR 2012
-------------------------------------------------------
Inventories 1.8
Trade and other non-interest-bearing receivables 0.3
Intangible assets 4.4
Tangible assets 0.1
Trade and other non-interest-bearing payables 0.0
Deferred tax liability (net) -0.6
Non-controlling interests 0.0
-------------------------------------------------------
Fair value of acquired net assets 6.0
-------------------------------------------------------
MEUR 2012
-------------------------------------------------------
Cash paid upon closing 6.4
Cash paid later 0.4
-------------------------------------------------------
Total purchase consideration 6.8
-------------------------------------------------------
Goodwill 0.7
-------------------------------------------------------
Cash paid for the acquisitions 6.8
Cash and cash equivalents acquired -
-------------------------------------------------------
Net cash flow 6.8
-------------------------------------------------------
Non-recurring income and expenses IV IV I-IV I-IV
included in operating profit
MEUR 2012 2011 2012 2011
--------------------------------------------------------------------------------
Costs related to business 0.0 -0.2 0.0 -0.3
acquisitions
Restructuring of Hungarian - 0.1 - 0.1
operations
Relocation of Finnish operations - -0.1 - -0.3
Net gain from sale of gift -0.3 1.7 -0.7 1.5
manufacturing unit in China*
Other restructuring costs - -0.2 - -0.4
Gain on disposal of real estate in - - 0.1 -
Finland
Other non-recurring items 0.0 - 0.0 -
--------------------------------------------------------------------------------
Total included in EBITDA -0.3 1.3 -0.6 0.6
--------------------------------------------------------------------------------
Impairment of non-current assets - -0.2 - -0.4
relating to relocation of Finnish
operations
Other non-recurring impairments - 0.0 - 0.0
--------------------------------------------------------------------------------
Total included in operating profit -0.3 1.1 -0.6 0.2
--------------------------------------------------------------------------------
* I-IV 2011: Including a gain of 1.9 MEUR and costs related to divestment. I-IV
2012: including an adjustment to sales price and costs related to the disposed
business.
Commitments Dec 31 Dec 31
MEUR 2012 2011
--------------------------------------------------------------------------------
On own behalf
Business mortgage* - 16.1
Guarantees 0.1 0.1
Minimum future lease payments on 16.6 15.2
operating leases
--------------------------------------------------------------------------------
* The Group refinanced its loan facilities in April 2012, and the business
mortgage related to the previous facility was released. The new loan facilities
are unsecured and include normal financial covenants.
Sales Other
Related party transactions and other Pur- Rents expen- Recei- Paya-
MEUR income chases paid ses vables bles
--------------------------------------------------------------------------------
I-IV 2012
Joint venture Shimano Normark 3.9 - - - 0.1 0.0
UK Ltd
Associated company Lanimo Oü - 0.0 - - 0.0 -
Entity with significant - - 0.2 0.1 0.0 -
influence over the Group*
Management 0.0 - 0.4 - - 0.0
I-IV 2011
Joint venture Shimano Normark 1.6 - - - 0.1 -
UK Ltd
Associated company Lanimo Oü - 0.1 - - 0.0 -
Entity with significant - - 0.2 0.1 0.0 0.0
influence over the Group*
Management - - 0.3 - 0.0 0.0
--------------------------------------------------------------------------------
* 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
-----------------------------------------------------------------------
Dec 31, 2012
Foreign currency 62.3 0.3 0.7 -0.4
options and
forwards
Interest rate swaps 85.0 0.3 3.3 -3.0
-----------------------------------------------------------------------
Total 147.3 0.6 4.0 -3.4
Dec 31, 2011
Foreign currency 3.4 0.2 - 0.2
options
Interest rate swaps 67.9 - 2.1 -2.1
-----------------------------------------------------------------------
Total 71.3 0.2 2.1 -1.9
-----------------------------------------------------------------------
Financial risks and hedging principles are described in detail in the financial
statement 2011 and will be updated in financial statements 2012.
Share based incentive plan
In June 2012, the Board approved a new share based incentive plan for the
Group's key personnel. The plan includes one earning period which commenced on
April 1, 2012 and will end on June 30, 2013. The potential reward from the plan
will be based on development of Rapala Group's inventory levels and EBITDA. The
potential reward will be paid primarily as Rapala VMC Corporation's shares in
August 2013. The target group of the plan consists of 20 key employees. The
gross rewards to be paid on the basis of the plan will correspond to the value
maximum total of 235 000 company shares.
Shares and share capital
On April 11, 2012 The Annual General Meeting updated Board's authorization on
issuance and repurchase of shares.
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 149 343 own shares. At the
end of the reporting period the company held 701 400 own shares, representing
1.8% 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 4.78 EUR.
During the reporting period, 5 679 621 shares (6 479 735) were traded at a high
of 6.50 EUR and a low of 4.52 EUR. The closing share price at the end of the
period was 4.85 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 continued to
develop risk management practices and internal controls during 2012. Detailed
descriptions of the Group's strategic, operative and financial risks as well as
risk management principles will be included in the Financial Statements 2012.
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 2012, 54% of net
sales and 85% 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 summer fishing
season in the USA and Europe started early in 2012 and the summer season 2013
may start later impacting the sales. The Group is more affected by winter
weathers after the expansion into winter fishing business. On the other hand,
unfavorable winter weathers may lead to early summer fishing season and
resulting in higher summer fishing sales.
A major supply chain and logistics initiative to improve the Group's inventory
turnovers and shorten the factory lead-times continued in 2012, including
planning and implementation of new initiatives. Inventory clearance sales
supporting the inventory reduction targets may have some short-term negative
impacts on sales and profitability of some product groups. The uncertainties in
future demand as well as the length of the Group's supply chain increases the
importance of supply chain management. Strong and rapid increases in consumer
demand may put challenges on Group's supply chain to meet the demand. Management
balances between risk of shortages and risk of excess production and purchasing,
which would lead to excess inventories in the Group.
The ramp-up phase of the new production facilities in Batam, Indonesia, may
increase certain production and supply chain risks temporarily.
The Group successfully refinanced its credit facilities in April, 2012. This has
decreased the Group's liquidity and refinancing risks. The new credit facilities
include some financial covenants, which are actively monitored.
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. Declining oil
price may negatively impact the growing Russian market, while same time
supporting consumption in USA. 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. 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 hedges risks in several currencies by
following the risk policy set by the Board of Directors. 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 has an impact on the Group's
operating profit. Following the implementation of an updated risk policy in
2012 the nominal value of hedging instruments were increased and thereby
potentially increasing the quarterly volatility of unrealized items in operating
profit. 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#1675745]
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