2009-07-24 08:30:00 CEST
2009-07-24 08:31:25 CEST
REGULATED INFORMATION
Rapala VMC - Interim report (Q1 and Q3)
INTERIM REPORT JANUARY TO JUNE 2009
Rapala VMC Corporation
Stock Exchange Release
July 24, 2009 at 9.30 a.m.
Turnaround in cash flow in a tough market situation with positive
signs in North America
- Net sales for the second quarter were below last year levels at
67.7 MEUR (II/08: 74.2 MEUR). Net sales for the first six months
decreased to 132.9 MEUR (I-II/08:139.4 MEUR).
- Operating profit for April to June, excluding non-recurring items,
was affected by the decrease in sales and negative currency movements
especially in Scandinavia and East Europe and reached 10.2 MEUR (14.1
MEUR). Comparable operating profit for the six-month period was 20.4
MEUR (23.8 MEUR). Reported operating profit was 9.4 MEUR (13.8 MEUR)
for the quarter and 19.5 MEUR (24.5 MEUR) for the first half of the
year.
- Net profit for the second quarter was 7.4 MEUR (9.4 MEUR) and 13.6
MEUR (16.2 MEUR) for the first half of the year. Earnings per share
were 0.16 EUR (0.21 EUR) for April to June and 0.31 EUR (0.37 EUR)
for January to June.
- The major working capital initiative started last November
progressed on plan and the results started to gradually materialize
during the second quarter. The general economic situation and
simultaneous working capital actions of several customers have slowed
down the speed of the change but the positive progress started in the
second quarter is expected to continue until the end of the year with
additional improvement continuing in 2010. Accordingly, the cash flow
from operating activities for the second quarter improved to 17.8
MEUR (6.2 MEUR) and was -2.0 MEUR (-10.1 MEUR) for the first six
months.
- In the second quarter, the Group continued to implement its
strategy for profitable growth. The establishment of a distribution
company in Romania was started and a performance improvement project
initiated in Hungary. Integration of Sufix fishing line business and
development of manufacturing operations in China proceeded on plan.
Manufacturing volumes have been adjusted to support the ongoing
working capital initiative.
- Since the beginning of the year, there has been no material change
in the market situation and general outlook for 2009
The attachment presents the interim review by the Board of Directors
as well as the accounts.
A conference call on the second quarter result will be arranged today
at 4 p.m. Finnish time (3 p.m. CET). Please dial +44 (0)20 7784 1038
or +1 347 366 9564 (pin code: 543443#) five minutes before the
beginning of the event and request to be connected to Rapala
teleconference. A replay facility will be available for 14 days
following the teleconference. The number (pin code: 543443#) to dial
is +44 (0)20 7806 1970. Financial information and teleconference
replay facility are available at www.rapala.com.
For further information, please contact:
Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540
Jouni Grönroos, Chief Financial Officer, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
Distribution: NASDAQ OMX Helsinki and Main Media
Market Situation and Sales
Continuing weakness and uncertainty in global economy, as well as
unfavorable foreign exchange movements affected the Group's net sales
negatively during the second quarter. In the Nordic countries, the
net sales were also affected by the late spring. In North America,
the market conditions seem to have stabilized and show increasing
number of positive signs although the sales volumes between different
retailers seem to change significantly. The general market conditions
in Australia, South Africa and in part of the Asia continued tight
during the second quarter but many of the Asian distribution units
improved their sales from last year. Market situation in many
European countries like France and Spain as well as Eastern Europe is
still under pressure. Sales in Baltic countries have clearly suffered
from the bad economic situation in the area. Additional price
increases introduced earlier in the year are compensating part of the
weakness of local currencies and slower demand for higher price
category products.
Net sales for April to June, which traditionally is the strongest
quarter of the year due to seasonality, were below last year levels
at 67.7 MEUR (2008: 74.2 MEUR). Net sales for the first half of the
year were 132.9 MEUR (139.4 MEUR). The net effect of the
strengthening of the US dollar (USD) and weakening of many other
currencies like Swedish and Norwegian crowns decreased the net sales
for the second quarter by 1.7 MEUR and 1.3 MEUR for the first six
months.
Net sales of Group Fishing Products, supported by the sales of new
Sufix fishing lines and strengthening of USD, were up 4% for the
second quarter and 7% for the first half of the year. Net sales of
Other Group Products decreased 32% for the quarter and 26% for the
six-month period as a result of reduced sales of gift products and
subcontracting services. Net sales of Third Party Products decreased
19% for April to June and 15% for January to June mainly because of
the weakening of many East European and Scandinavian currencies and
decreased sales of higher price category products like fishing
electronics and expensive reels.
Net sales in North America increased 19% for the second quarter and
16% for the first half of the year as a result of the strengthening
of the USD and increased business activity. In the Nordic countries,
second quarter net sales decreased 25% as a result of weakening of
Swedish and Norwegian crowns, late spring and summer as well as
timing of some deliveries between the first two quarters.
Accordingly, the six-month net sales in Nordics were down only 5%.
Net sales in Rest of Europe were down by 19% for the quarter and 17%
for the six-month period due to relatively weak sales in East Europe,
which was further reduced by weakening of local currencies. Net sales
in Rest of the World were in April to June on last year level and up
10% for January to June as a result of the new sales of Sufix
products, good performance of many Asian distribution units and
strengthening of USD.
Financial Results and Profitability
Operating profit for April to June, excluding non-recurring items,
was affected by the decrease in sales and negative currency movements
especially in Scandinavia and East Europe and reached 10.2 MEUR (14.1
MEUR). Profitability was also affected by special low-margin sales
campaigns to reduce inventories. Second quarter operating profit
decreased 0.4 MEUR from last year due to non-cash bookings related to
share based incentive plans. Operating margin, excluding
non-recurring items, was 15.1% (19.0%).
Reported operating profit for the second quarter was at 9.4 MEUR
(13.8 MEUR) and it included 0.7 MEUR of write downs on lease
improvements in the Chinese factory, from where the operations were
partly moved to other locations and external outsourcing partners as
well as 0.1 MEUR other non-recurring costs. Operating profit for
April to June in 2008 included 0.3 MEUR (net) non-recurring expenses.
Reported three-month operating margin was 13.9% (18.7%) and return on
capital employed 18.6% (29.3%).
Key figures II II I-II I-II I-IV
MEUR 2009 2008 2009 2008 2008
Net sales 67.7 74.2 132.9 139.4 243.0
EBITDA as reported 11.5 15.4 23.1 27.6 37.5
EBITDA excl. one-off items 11.6 15.7 23.3 26.9 36.7
Operating profit as reported 9.4 13.8 19.5 24.5 31.3
Operating profit excl. one-offs 10.2 14.1 20.4 23.8 30.5
Comparable operating profit for the first half of the year was down
mainly as a result of decrease in sales, and reached 20.4 MEUR (23.8
MEUR). Operating profit for the six-month period decreased 0.3 MEUR
from last year due to the non-cash bookings related to share based
incentive plans. Operating margin, excluding non-recurring items,
decreased to 15.3% (17.1%).
Reported operating profit for the first half of the year amounted to
19.5 MEUR (24.5 MEUR) including 0.9 MEUR of non-recurring write-downs
and costs. Operating profit for January to June in 2008 included 0.7
MEUR (net) non-recurring gains. Reported six-month operating margin
was 14.6% (17.6%) and return on capital employed 19.2% (25.9%).
Operating profit of Group Fishing Products decreased 24% for the
second quarter as a result of non-recurring costs and write-downs as
well as weakening of many currencies but was still 4% above last year
level for the first half of the year as a result of strong sales.
Operating profit of Other Group Products fell to a loss for both the
quarter and for the six-month period as a result of the major drop in
sales of gift products and subcontracting services. Operating profit
of Third Party Products decreased 40% for April to June and 40% for
January to June due to negative currency movements and reduced sales.
Financial (net) income was 0.4 MEUR (expense of 1.1 MEUR) for the
second quarter. Net interest expenses were down to 1.0 MEUR (1.5
MEUR) and the (net) currency exchange gains booked in financial items
were 1.4 MEUR (0.4 MEUR). For the first six months, financial (net)
expenses were 1.2 MEUR (2.4 MEUR), net interest expenses 1.9 MEUR
(2.9 MEUR) and (net) currency exchange gains 0.8 MEUR (0.5 MEUR).
Net profit decreased for the second quarter to 7.4 MEUR (9.4 MEUR)
and for the first half of the year to 13.6 MEUR (16.2 MEUR). Earnings
per share were 0.16 EUR (0.21 EUR) for April to June and 0.31 EUR
(0.37 EUR) for January to June.
Cash Flow and Financial Position
Cash flow from operating activities increased from last year as a
result of decrease in working capital and amounted to 17.8 MEUR (6.2
MEUR) for the second quarter and -2.0 MEUR
(-10.1 MEUR) for the first half of the year.
The major working capital initiative started last November progressed
on plan and the results started to gradually materialize during the
second quarter. Inventories decreased 9.5 MEUR (decrease of 0.0
MEUR). This initiative includes a wide variety of actions to develop
the Group's internal and external supply chains, change ways of
working in production planning and internal order management and, to
implement supporting IT systems to facilitate the new processes. The
general financial situation and simultaneous working capital actions
of several customers have slowed down the speed of the change but the
positive progress started in the second quarter is expected to
continue until the end of the year with additional improvement
continuing in 2010.
Cash used in investing activities amounted to 1.9 MEUR (1.4 MEUR) for
the second quarter. In addition to the normal capital expenditure of
1.0 MEUR (1.4 MEUR) and 1.2 MEUR (0.1 MEUR) of acquisitions, it
included 0.3 MEUR (0.0 MEUR) proceeds from sale of assets. Cash used
in investing activities for the six-month period, 2.4 MEUR (3.4
MEUR), included capital expenditure of 2.5 MEUR (3.2 MEUR),
acquisitions of 1.2 MEUR (0.4 MEUR) and 1.3 MEUR (0.1 MEUR) proceeds
from sale of assets.
Net interest-bearing debt was up from last June at 101.0 MEUR (Dec
2008: 89.5 MEUR) due to higher level of working capital. The
liquidity of the Group remained good throughout the quarter.
Equity-to-assets ratio remained at the levels of last June at 37.5%
(Dec 2008: 38.0%). Gearing was seasonally up from the end of 2008
(Dec 2008: 86.4%) but improved from last June from 96.1% to 91.4%.
Strategy Implementation - Growth
During the second quarter, the management continued discussions and
negotiations regarding acquisitions and business combinations to
further implement the Group's strategy for profitable growth.
Development of organic growth also in terms of extensions of current
product categories as well as special marketing, sales and brand
initiatives continued.
During the quarter, the Group started the needed procedures to
establish a distribution company in Romania to support the sales
growth in South East Europe. Romanian population of almost 22 million
and fast developing economy provide a solid basis for a distribution
company while being so far served from the Hungarian distribution
centre.
Integration of the new Sufix business acquired in 2008 progressed on
plan and sales of Sufix fishing lines have had a good start. Rapala
aims to expand its fishing line sales in the next 2-3 years to above
20 MEUR. The strategic long-term target is to increase the fishing
line sales to 30-40 MEUR and gain a significant market share of the
global fishing line business.
The sales of the new Trigger X products with fish pheromones have
started with selected distribution channels. These new products will
be offered later on to a wider distribution in line with the ongoing
increase of production capacity. A big variety of new products for
2010 season were introduced for the global fishing tackle market in
June and July and the new generation lure - Max Rap - has already
started to gain rewards, e.g. in the world's biggest fishing tackle
show EFTTEX it was awarded in June as the most innovative lure of the
year.
Strategy Implementation - Profitability
Strong emphasis on performance improvement initiatives continued in
the second quarter. New performance improvement initiatives were
started while the benefits from the previous initiatives have started
to capitalize.
A new performance improvement initiative was initiated in Hungary to
ensure continuous leadership in the fast growing South East European
market as well as improved financial performance and reduced working
capital.
In the USA, the custom paint shop for Luhr Jensen lures was closed
and the previously outsourced production of Terminator lures was
transferred to the Group's Chinese factory.
A major supply chain and logistics initiative was also started in the
second quarter to shorten the lead times and further improve the
service levels to customers.
The performance improvement initiatives at the Group's manufacturing
facilities in China continued. As a result of streamlining the
operations, increasing subcontracting and cutting the capacity to
more quickly adjust to and, more accurately meet the market
requirements, the Group has reduced the headcount in China by some 2
300 persons since June 2008. The selection and auditing of major
subcontractors have been finalized and manufacturing agreements have
been signed. With the most important subcontractors the Group entered
into exclusive manufacturing agreements to secure and guarantee the
high quality of products and agreed service levels. Despite the
increased use of outsourcing, key manufacturing processes will be
kept in-house. Further development and fine-tuning of the new
operating model in the Chinese manufacturing operations will continue
during the second half of 2009.
Total Group headcount at the end of June was 2 233, down 52% from
June 2008. This major reduction results mainly from the changes in
the operating model in the Chinese manufacturing unit but the
consolidation of French operations, restructuring of European lure
manufacturing and adjusting manufacturing volumes to support ongoing
working capital project have also resulted in a further reduction of
almost 150 employees. At the same time, new personnel have been
recruited to the new Sufix business and to support sales growth in
some distribution units.
Short-term Outlook
Since the beginning of the year, there has been no material change in
the market situation and general outlook for 2009, which remains
challenging. There are some signs of stabilization in the North
American market but the slowdown and uncertainty in European
economies as well as in many Asian countries and the Southern
hemisphere are expected to continue during the coming months.
Despite this challenging market situation but affected by the
weakening of many local currencies in countries where the Group
operates, it is expected that the net sales for 2009 will be somewhat
below the previous year level. Excluding non-recurring items, the
target is to maintain the operating margin quite close to the good
levels reached in 2008.
While the Group continues to implement its strategy for profitable
growth, reducing working capital and increasing cash flow from
operating activities will be one of the key themes in the second half
of 2009 together with the finalization of the ongoing performance
improvement initiatives and the integration of the new fishing line
business.
At the end of June 2009, the Group's order backlog was down 8% from
last June to 22.6 MEUR (Dec. 2008: 34.5 MEUR).
Third quarter interim report will be published on October 23.
Helsinki, July 24, 2009
Board of Directors of Rapala VMC Corporation
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
INCOME STATEMENT II II I-II I-II I-IV
MEUR 2009 2008 2009 2008 2008
Net sales 67.7 74.2 132.9 139.4 243.0
Other operating income 0.3 0.3 0.4 1.8 3.1
Cost of sales 38.0 39.9 73.5 74.6 135.3
Other costs and expenses 18.4 19.2 36.7 38.9 73.2
EBITDA 11.5 15.4 23.1 27.6 37.5
Depreciation and amortization 2.1 1.5 3.6 3.1 6.2
Operating profit 9.4 13.8 19.5 24.5 31.3
Finance income and expenses -0.4 1.1 1.2 2.4 4.8
Share of results in associates 0.0 0.0 0.0 0.0 0.0
Profit before taxes 9.8 12.8 18.3 22.1 26.5
Income taxes 2.4 3.4 4.7 5.8 7.3
Net profit for the period 7.4 9.4 13.6 16.2 19.2
Attributable to:
Equity holders of the Company 6.2 8.2 12.1 14.5 17.7
Minority interest 1.3 1.2 1.5 1.7 1.6
Earnings per share for profit
attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted =
non-diluted) 0.16 0.21 0.31 0.37 0.45
STATEMENT OF COMPREHENSIVE INCOME II II I-II I-II I-IV
MEUR 2009 2008 2009 2008 2008
Net profit for the period 7.4 9.4 13.6 16.2 19.2
Other comprehensive income, net of tax
Change in translation differences -1.3 0.5 0.2 -3.0 -1.2
Gains and losses on cash flow hedges 0.4 0.2 0.4 -0.1 -0.2
Gains and losses on hedges of net
investments 1.0 0.0 0.1 -0.1 -2.8
Fair value gains on available-for-sale
investments - - - - -0.1
Total other comprehensive income, net of
tax 0.2 0.7 0.7 -3.2 -4.3
Total Comprehensive Income for the
period 7.6 10.1 14.3 13.1 14.9
Total comprehensive income attributable
to:
Equity holders of the Company 6.2 8.9 12.8 11.3 13.4
Minority interest 1.4 1.2 1.5 1.7 1.6
STATEMENT OF FINANCIAL POSITION June 30 June 30 Dec 31
MEUR 2009 2008 2008
ASSETS
Non-current assets
Intangible assets 57.6 49.4 57.6
Property, plant and equipment 26.8 27.9 28.7
Non-current financial assets
Interest-bearing 1.0 0.6 0.5
Non-interest-bearing 7.5 7.3 7.7
92.9 85.3 94.6
Current assets
Inventories 103.2 89.7 98.4
Current financial assets
Interest-bearing 0.1 0.0 0.4
Non-interest-bearing 58.2 74.9 49.5
Cash and cash equivalents 40.6 23.8 30.6
202.0 188.5 178.9
Assets classified as held-for-sale 0.3 0.5 -
Total assets 295.2 274.2 273.4
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of
the Company 107.0 100.2 101.7
Minority interest 3.5 2.4 1.9
110.5 102.7 103.7
Non-current liabilities
Interest-bearing 43.8 48.3 42.8
Non-interest-bearing 10.0 6.3 10.5
53.8 54.6 53.3
Current liabilities
Interest-bearing 98.8 74.8 78.1
Non-interest-bearing 32.1 42.1 38.3
130.9 116.9 116.4
Total equity and liabilities 295.2 274.2 273.4
KEY FIGURES II II I-II I-II I-IV
2009 2008 2009 2008 2008
EBITDA margin, % 17.1% 20.7% 17.4% 19.8% 15.5%
Operating profit margin, % 13.9% 18.7% 14.6% 17.6% 12.9%
Return on capital employed, % 18.6% 29.3% 19.2% 25.9% 16.9%
Capital employed at end of period, MEUR 211.5 201.4 211.5 201.4 193.2
Net interest-bearing debt at end of
period, MEUR 101.0 98.7 101.0 98.7 89.5
Equity-to-assets ratio at end of
period, % 37.5% 37.5% 37.5% 37.5% 38.0%
Debt-to-equity ratio at end of period,
% 91.4% 96.1% 91.4% 96.1% 86.4%
Earnings per share, EUR 0.16 0.21 0.31 0.37 0.45
Fully diluted earnings per share, EUR 0.16 0.21 0.31 0.37 0.45
Equity per share at end of period, EUR 2.73 2.54 2.73 2.54 2.59
Average personnel for the period 2 447 4 489 2 449 4 580 4 143
STATEMENT OF CASH II I-II
FLOWS II 2008 2009 I-II I-IV
MEUR 2009 2008 2008
Net profit for the period 7.4 9.4 13.6 16.2 19.2
Adjustments to net profit
for the period * 4.9 3.7 10.1 8.7 13.0
Financial items and taxes
paid and received -1.3 -3.5 -3.5 -6.3 -14.0
Change in working capital 6.7 -3.4 -22.3 -28.7 -12.7
Net cash generated from
operating activities 17.8 6.2 -2.0 -10.1 5.4
Investments -1.0 -1.4 -2.5 -3.2 -7.1
Proceeds from sales of
assets 0.3 0.0 1.3 0.1 2.2
Sufix brand acquisition -1.1 - -1.1 - -1.5
Acquisition of
subsidiaries, net of cash -0.1 -0.1 -0.1 -0.4 -0.5
Change in interest-bearing
receivables -0.1 0.1 -0.1 0.1 0.0
Net cash used in investing
activities -1.9 -1.4 -2.4 -3.4 -6.8
Dividends paid -7.5 -6.9 -7.5 -6.9 -6.9
Net funding 1.9 1.6 22.0 18.3 11.9
Purchase of own shares - -0.3 0.0 -0.3 -0.9
Net cash generated from
financing activities -5.6 -5.6 14.5 11.1 4.1
Adjustments -0.3 -0.4 -0.1 -0.6 0.9
Change in cash and cash
equivalents 10.0 -1.3 10.0 -3.1 3.6
Cash & cash equivalents at
the beginning of the period 30.8 24.9 30.6 27.3 27.3
Foreign exchange rate
effect -0.3 0.2 0.0 -0.5 -0.4
Cash and cash equivalents
at the end of the period 40.6 23.8 40.6 23.8 30.6
* 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
Share Fair trans- invested Re- Mino-
pre- value lation non-rest- Own tained rity
Share mium re- diffe- ricted sha- earn- inte- Total
capital fund serve rences equity res ings rest equity
Equity on Jan
1, 2008 3.6 16.7 0.0 -9.8 4.9 - 80.6 0.9 96.9
Comprehensive
income* - - -0.1 -3.1 - - 14.5 1.7 13.1
Purchase of
own shares - - - - - -0.3 - - -0.3
Dividends
paid - - - - - - -6.9 - -6.9
Share based
payment - - - - - - 0.1 - 0.1
Other changes - - - - - - 0.0 -0.2 -0.2
Equity on
June 30, 2008 3.6 16.7 -0.1 -12.9 4.9 -0.3 88.3 2.4 102.7
Equity on Jan
1, 2009 3.6 16.7 -0.3 -13.8 4.9 -0.9 91.5 1.9 103.7
Comprehensive
Income* - - 0.4 0.3 - - 12.1 1.5 14.3
Purchase of
own shares - - - - - 0.0 - - 0.0
Dividends
paid - - - - - - -7.5 - -7.5
Equity on
June 30, 2009 3.6 16.7 0.1 -13.5 4.9 -0.9 96.2 3.5 110.5
* For the period (net of tax)
SEGMENT INFORMATION* II II I-II I-II III IV I-IV
Net Sales by Operating
Segment 2009 2008 2009 2008 2008 2008 2008
Group Fishing Products 38.0 36.7 75.4 70.4 23.4 26.7 120.4
Other Group Products 3.8 5.6 7.7 10.4 5.8 6.5 22.7
Third Party Products 26.1 32.1 50.1 59.0 23.8 17.9 100.7
Intra-Group (Other Group
Products) -0.2 -0.2 -0.3 -0.5 -0.2 -0.2 -0.9
Total 67.7 74.2 132.9 139.4 52.7 50.9 243.0
Operating Profit by Operating
Segment
Group Fishing Products 6.1 8.0 13.9 13.4 1.7 4.0 19.1
Other Group Products -0.1 0.2 0.0 1.7 0.4 0.2 2.2
Third Party Products 3.4 5.7 5.6 9.4 1.6 -1.0 10.0
Total 9.4 13.8 19.5 24.5 3.6 3.2 31.3
June 30 June 30 Sept 30 Dec. 31
Assets by Operating Segment 2009 2008 2008 2008
Group Fishing Products 163.8 158.5 165.2 167.5
Other Group Products 9.9 11.4 12.4 9.3
Third Party Products 80.0 80.0 65.0 65.3
Intra-Group -0.1 -0.1 -0.1 -0.1
Non-interest bearing assets total 253.6 249.8 242.5 242.0
Unallocated interest-bearing assets 41.7 24.4 28.0 31.4
Total assets 295.2 274.2 270.5 273.4
Liabilities by Operating Segment
Group Fishing Products 27.3 29.6 33.7 30.1
Other Group Products 4.6 3.0 1.8 2.6
Third Party Products 10.3 15.9 11.9 16.1
Intra-Group (Other Group Products) -0.1 -0.1 -0.1 -0.1
Non-interest bearing liabilities
total 42.0 48.4 47.2 48.8
Unallocated interest-bearing
liabilities 142.7 123.1 116.9 121.0
Total liabilities 184.7 171.5 164.1 169.7
Net Sales by Area** II II I-II I-II I-IV
MEUR 2009 2008 2009 2008 2008
North America 18.3 15.4 37.8 32.7 57.5
Nordic 26.4 35.3 62.2 65.8 105.9
Rest of Europe 25.9 31.9 51.4 61.6 101.3
Rest of the world 12.7 12.9 29.0 26.3 54.3
Intra-Group -15.6 -21.2 -47.6 -47.1 -76.0
Total 67.7 74.2 132.9 139.4 243.0
* The new operating segments (IFRS 8) 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 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
MEUR 2008 2008 2008 2008 2008 2009 2009
Net sales 65.1 74.2 52.7 50.9 243.0 65.2 67.7
EBITDA 12.2 15.4 5.2 4.8 37.5 11.6 11.5
Operating profit 10.6 13.8 3.6 3.2 31.3 10.0 9.4
Profit before taxes 9.3 12.8 2.6 1.9 26.5 8.5 9.8
Net profit for the period 6.8 9.4 2.0 1.0 19.2 6.2 7.4
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 2008, except
for the adoption of the new or amended standards and interpretations.
Adoption of the amended standard IAS 1 affected the presentation of
Group's consolidated financial statements, especially the
consolidated income statement and the statement of changes in equity.
Adoption of IFRS 8 changed the presentation of segment information.
Adoption of IAS 23, IAS 32, IFRS 2 and IAS 39/IFRS 7 as well as the
new interpretation IFRIC 13 did not result in any changes in the
accounting principles that would have affected the information
presented in this interim report.
Definition of key figures
Definitions of key figures used in the interim report are consistent
with those used in the Annual Report 2008.
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-June 2009. Material events after the end of
the interim period, if any, have been discussed in the interim review
by the Board of Directors.
Inventories
At June 30, 2009, the book value of inventories differed from its net
realizable value by 2.2 MEUR (2.2 MEUR at June 30, 2008 and 2.4 MEUR
at December 31, 2008).
Assets held-for-sale and sale of assets
As part of the consolidation of French operations, Rapala sold few
warehouses and office buildings in France in 2008. This resulted in a
capital gain of 1.4 MEUR in 2008. Rapala is in the process of
disposing its old office premises in Hong Kong, which are recognized
as assets held-for-sale in June 2009.
Non-recurring income and expenses included
in operating profit II II I-II I-II I-IV
MEUR 2009 2008 2009 2008 2008
Consolidation of French operations 0.0 - 0.0 -0.1 -0.1
Closure of Irish lure factory 0.0 0.0 -0.1 0.0 0.0
Sale of French warehouse and office building - -0.1 - 1.2 1.4
Other restructuring costs -0.1 0.0 -0.1 -0.2 -0.3
Other non-recurring items - -0.2 - -0.2 -0.2
Total included in EBITDA -0.1 -0.3 -0.2 0.7 0.8
Non-recurring impairment of tangible assets
in China -0.7 - -0.7 - -
Total included in operating profit -0.8 -0.3 -0.9 0.7 0.8
Commitments June 30 June 30 Dec 31
MEUR 2009 2008 2008
On own behalf
Business mortgage 16.1 16.1 16.1
Guarantees 0.7 0.6 0.3
Minimum future lease payments on operating
leases 9.9 7.9 11.3
Related party
transactions Rents Other
MEUR Purchases paid expenses Receivables Payables
I-II 2009
Associated company
Lanimo Oü 0.1 - - 0.0 -
Entity with
significant influence
over the Group* - 0.1 0.0 0.0 0.0
Management - 0.1 0.0 - 0.0
I-II 2008
Associated company
Lanimo Oü 0.1 - - 0.0 -
Entity with
significant influence
over the Group - 0.1 0.0 0.0 -
Management 0.0 0.1 0.1 - 0.0
I-IV 2008
Associated company
Lanimo Oü 0.1 - - 0.0 -
Entity with
significant influence
over the Group* - 0.2 0.1 0.0 0.0
Management* - 0.2 0.0 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 fair Net fair
MEUR amount values values values
June 30, 2009
Foreign currency
forwards 2.6 0.1 0.0 0.0
Interest rate swaps 140.4 0.4 0.3 0.1
Total 143.1 0.5 0.3 0.1
June 30, 2008
Foreign currency
forwards 6.5 0.0 0.3 -0.3
Interest rate swaps 14.3 0.0 0.1 -0.1
Total 20.8 0.0 0.4 -0.4
Dec 31, 2008
Foreign currency
forwards 7.2 0.3 - 0.3
Interest rate swaps 14.1 0.0 0.4 -0.4
Total 21.3 0.3 0.4 -0.1
Group's financial risks and hedging principles are described in
detail in the Annual Report 2008.
Share-based payments
The Group had two separate share-based payment programs in place on
June 30, 2009: one stock option program and one synthetic option
program settled in cash. Terms and conditions of the option program
are described in detail in the Annual Report 2008. The options are
valued at fair value on the grant date by using the Black-Scholes
option-pricing model. The total estimated value of the programs in
place is 1.4 MEUR. Share-based payment programs are valued at fair
value on the grant date and recognized as an expense in the income
statement during the vesting period with a corresponding adjustment
to the equity or liability.
Grant date is the date at which the entity and another party agree to
a share-based payment arrangement, being when the entity and the
counterparty have a shared understanding of the terms and conditions
of the arrangement. Regarding the option programs in place, 454 750
share options (2004B) were granted on June 8, 2004, 46 250 share
options (2004B) on February 14, 2006 and 978 500 synthetic options
(2006A and 2006B) on December 14, 2006. On March 31, 2009, the
exercise period for the 2004A stock option program expired. The 2004B
stock option program is exercisable between March 31, 2008 and March
31, 2010 at an exercise price of 6.09 EUR, the 2006A synthetic option
program is exercisable between March 31, 2009 and March 31, 2011 at
an exercise price of 6.14 EUR and the 2006B synthetic option program
is exercisable between March 31, 2010 and March 31, 2012 at an
exercise price of 5.95 EUR. The exercise prices have been reduced by
the amount of dividends distributed after the subscription period for
option rights has ended and before the commencement of the
subscription period. Applying of IFRS 2 increased operating profit
with 0.3 MEUR in January-December 2008 and 0.2 MEUR in January-June
2008 and reduced operating profit 0.1 MEUR in January-June 2009
mainly due to change in fair value of the synthetic option program.
In March 2009, Rapala announced that its Board had approved a new
share-based incentive plan (Plan) for the Group's key personnel. The
aim of the Plan is to combine the objectives of the shareholders and
the key personnel in order to increase the value of the Company, to
commit the key personnel to the Company, and to offer them a
competitive reward plan based on holding the Company shares. The Plan
includes one earning period, which commenced on January 1, 2009 and
will end on December 31, 2010. The potential reward from the Plan
will be based on the Rapala's earnings per share (EPS) in 2010. The
potential reward from the Plan will be paid as the Company's shares
in 2011. The target group of the Plan consists of some 50 key
employees. The gross rewards to be paid on the basis of the Plan will
correspond to the value of a maximum total of 200 000 Rapala shares.
Since the grant date of the Plan was June 23, 2009 it had not a
material impact on operating profit in January-June 2009.
Shares and share capital
Based on authorization given by the Annual General Meeting in April
2007, the Board can decide to issue shares through issuance of
shares, options or special rights entitling to shares in one or more
issues. The number of new shares to be issued including the shares to
be obtained under options or special rights shall be no more than 10
000 000 shares. This authorization includes the right for the Board
to resolve on all terms and conditions of the issuance of new shares,
options and special rights entitling to shares, including issuance in
deviation from the shareholders' preemptive rights. This
authorization is in force for a period of 5 years from the resolution
by the Annual General Meeting. The Board is also authorized to
resolve to repurchase a maximum of 2 000 000 shares by using funds in
the unrestricted equity. This amount of shares corresponds to less
than 10% of all shares of the company. The shares will be repurchased
through public trading arranged by NASDAQ OMX Helsinki at the market
price of the acquisition date. The shares will be acquired and paid
in pursuance of the rules of NASDAQ OMX Helsinki and applicable rules
regarding the payment period and other terms of the payment. This
authorization is effective until the end of the next Annual General
Meeting.
On June 30, 2009, 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-June 2009 was 39
468 449. On February 6, 2009 the Board decided to continue buying
back own shares in accordance with the authorization granted by the
Annual General Meeting on April 3, 2008. The repurchasing of shares
ended on March 30, 2009. At June 30, 2009 Rapala held 221 936 of its
own shares, representing 0.6% of the total number of Rapala shares
and the total voting rights. The average price for the repurchased
own shares in January-March 2009 was EUR 3.82. No Rapala shares were
bought after March 2009.
As a result of the share subscriptions with the 2004B stock option
program, and if all stock options are fully exercised, the Group's
share capital may still be increased by a maximum of 38 970 EUR and
the number of shares by a maximum of 433 000 shares. The shares that
can be subscribed with these stock options correspond to 1.1% of the
Company's shares and voting rights.
During the first six months of 2009, 3 006 603 shares (2 184 117)
were traded. The shares traded at a high of 4.46 EUR and a low of
3.50 EUR during the period. The closing share price at the end of the
period was 4.25 EUR.
Short term risks and uncertainties
The objective of Rapala's risk management is to support the
implementation of the Group's strategy and execution of business
targets. The importance of risk management has increased when Rapala
has continued to expand its operations fast. Accordingly, Group
management has continued to develop risk management practices and
this work continues also in 2009. Detailed description of Group's
strategic, operative and financial risks and risk management
principles are included in the Annual Report 2008, see
www.rapala.com.
Due to the nature of the fishing tackle business and the geographical
scope of Group's operations, Group's deliveries and sales as well as
operating profit have traditionally been seasonally stronger in the
first half of the financial year compared to the second half. In 2008
even if more than 40% of the net sales were generated during the
second half of the year, almost 80% of the operating profit was still
generated in the first six months. In the first half of 2009,
deliveries to customers realized mostly according to plan. A major
supply chain and logistics initiative was started in the second
quarter to shorten the lead times and further improve the service
levels to customers.
Group's sales are also to some extent affected by the weather. In
several areas, last winter season was longer than previously. This
supported the sales of winter sports equipment but simultaneously
delayed the beginning of the summer season sales, which led to higher
than anticipated inventory levels in the end of March. During the
second quarter, inventory levels started to decrease mostly as a
result of the major working capital initiative started last November.
Further reduction in inventory levels is expected for the second half
of the year. The Group also renegotiated its bank covenants during
the second quarter and gained flexibility to its cash flow covenant
for the rest of the year together with some other benefits at the
expense of a moderate increase in interest margins and slight
tightening of two less critical covenants. Further reduction of
inventory levels and improvement of cash flow remains a top priority
in the Group.
Even if the fishing tackle business has traditionally not been
strongly influenced by the increased uncertainties and downturns in
the general economic climate, this may influence, at least for a
short while, the sales of fishing tackle when retailers reduce their
inventory levels and face financial challenges. While continuing,
these uncertainties may also affect the amount retailers invest in
advertising and promotions, which may affect consumer spending at
least temporarily. Also quick and strong increases in living expenses
and uncertainties concerning employment may temporarily affect
consumer spending also in fishing tackle, even though historically
the underlying consumer demand has proven to be fairly solid.
The truly global nature of Group's sales and operations is spreading
the market risks caused by the current uncertainties in the global
economy. Already in 2007, the Group started initiatives to improve
the performance of its own operations and actively monitors the
performance of its customers and other counterparties. Especially,
the importance of cash collection and credit risk management has
increased and this may affect sales to some customers.
Group's sales and profitability are impacted by the changes in
foreign exchange rates, especially US dollar. Group is actively
monitoring the currency position and risks and using e.g. foreign
currency nominated loans to manage the natural hedging. In order to
fix the exchange rate of some of the future USD-nominated purchases,
the Group has entered into currency hedging agreements. As the Group
is not applying hedge accounting in accordance to IAS 39, also the
change in fair value of these unrealized currency hedging agreements
have an impact on the Group's operating profit. In some countries and
especially in Eastern Europe, the local currency weakened
dramatically during the second half of last year. This weakening was
taken into account in price setting, which has together with the
general economic downturn somewhat negatively impacted the number of
units sold in these countries.
The integration of the new Sufix-fishing line business to the Group's
distribution network in 27 countries has progressed well but will
still require special attention of the management.
No significant changes are identified in the Group's strategic risks
or business environment.
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