Rapala VMC - Interim report (Q1 and Q3)

RAPALA VMC CORPORATION'S TRADING REPORT JANUARY TO MARCH 2017: SALES AT LAST YEAR'S LEVEL, OUTLOOK REVISED FOLLOWING CHANGES IN THE US RETAIL ENVIRONMENT

Rapala VMC Corporation
Trading report
April 28, 2017 at 9:00 a.m.
RAPALA VMC CORPORATION'S TRADING REPORT JANUARY TO MARCH 2017: SALES AT LAST
YEAR'S LEVEL, OUTLOOK REVISED FOLLOWING CHANGES IN THE US RETAIL ENVIRONMENT
January-March (Q1) in brief:
  * First quarter net sales were 69.5 MEUR, at last year's level (69.7). With
    comparable exchange rates sales down 4%.
  * Following the recent changes in the US retail environment, the Group's 2017
    full year outlook has been updated: Full year net sales are now expected to
    be above last year's level and comparable operating profit below last year
    level. Outlook will be specified as the season progresses.
  * The leverage ratio (net debt to EBITDA) continues to be high and the Group
    has agreed with its lenders on higher covenant levels covering also first
    quarter of 2017.
  * Various initiatives relating to execution of the Group's updated strategy
    are proceeding and progress will be communicated in more detail later during
    the year.

President and CEO Jussi Ristimäki: "With support of favorable exchange rates,
the first quarter sales were at last year's level and quite well in line with
expectations in many respects. The positive highlights of the period included
good sales of ice fishing and winter sport products as well as Marttiini knives
and Dynamite Baits' products. Sales developed well in Canada, Norway and
Portugal, among others.

Simultaneously, the beginning of the year was shadowed by the rapid changes in
the retail environment in the US. The US retail scene is disrupted by
digitalization and these changes were now showing fast-increasing effects also
on the fishing tackle business. Some major retailers' and distributors'
financial challenges are causing significant turbulence in the market and
affected the sales negatively. The year also started slower than expected in
Europe's big markets. In France sales were burdened by tough competition and
continuing depressed market sentiment. In Russia, the strengthening of the ruble
did not give the anticipated boost to the consumer demand.

Especially the US market development is causing increasing uncertainties
concerning the outlook for this year and the future visibility is quite limited
at the moment. These market challenges further encourage the Group to proceed
swiftly with the various strategic initiatives to boost the organic growth and
to improve the cost and capital efficiency as well as the operational
performance.

Also in the future, the capability to create products that appeal to both fish
and fishermen and to introduce these products to the global market will be the
Group's key competitive advantages. An illustration of this strength are
International Game Fish Association's latest records showing that again more
world-record fish were caught last year on Rapala lures than on any other brand
of baits in the world. And the most recent example of the Group's innovations is
the new Storm 360GT soft plastic lure, the sales of which are now exceeding the
expectations in the US."

Helsinki, April 28, 2017

Board of Directors of Rapala VMC Corporation

For further information, please contact:

Jussi Ristimäki, President and Chief Executive Officer, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540

Market environment

The fishing tackle retail business is under turmoil and structural changes,
especially in the Group's biggest market, the US, as consumers are increasingly
shifting into digital channels. Several big players, including some of the
Group's biggest customers, are in financial distress, several bankruptcies have
been filed and this development has accelerated in past months. The changes have
a negative effect both on sales and the price competition in the marketplace.
Similar uncertainties in the trade have also to some extent been witnessed in
Europe. However, the underlying consumer demand seems to remain at earlier
levels in most big markets.

Business Review January-March 2017

The Group's net sales for the first quarter were at last year's level. Changes
in translation exchange rates increased sales by approximately 2.3 MEUR as the
US dollar and the Russian ruble strengthened. With comparable translation
exchange rates, quarterly net sales were down 4% from last year.

North America

With  comparable exchange rates,  sales in North  America were below last year's
level due to slower sales in the US. North American ice fishing sales were above
last  year's level.  The sales  in Canada  recovered and  were above last year's
level,  as the economic and market  situation in Canada was gradually improving.
The  retail  landscape  in  the  US  is  going  through  a  structural change as
traditional retail business is giving way to e-commerce and this development has
accelerated  recently. This has resulted in  many big retailers and distributors
facing  financial challenges  or even  closing business,  among them some of the
main customers in the US. Despite these changes, there is no sign that the Group
has  lost market share as  the whole fishing tackle  business is hit by the same
challenges.  Strengthening of the US dollar had a positive impact on the regions
sales.

Nordic

In  the Nordic countries, the sales grew from last year, driven by good sales in
Norway  and the Group's Marttiini knife unit. The sales in Finland were slightly
behind  last year's strong level.  The sales in Denmark  fell behind last year's
level, due to lower hunting sales and tightening price competition. The sales in
Sweden were slightly above last year's level, even though impacted negatively by
late deliveries of third party products.

Rest of Europe

The  first quarter sales  were below last  year's level, hurt  by the continuing
challenges in the region's biggest markets, Russia and France. While the Russian
ruble  has strengthened, having  a positive impact  on the regions EUR-nominated
sales,  it has not materialized  into higher consumer demand  and the market was
still  volatile. In France the  sales were below last  year's level, impacted by
tightening  competition and general consumer uncertainties. In Poland, the sales
fell below last year's level as expected following changes in product portfolio.
In  the  UK,  supported  by  change  in  the business model, and in Portugal the
business showed positive growth trends.

Rest of the World

With  comparable exchange rates, the sales for the region were below last year's
level,  mainly affected by a decrease in  sales in Thailand, where the market is
suffering. Sales to non-Group distribution channels were also down. Low consumer
demand  and economic  uncertainties affected  the sales  in Asia,  especially in
Japan  and  Korea.  The  sales  in  South  Africa  were above last year's level,
supported  by new  hunting and  outdoor business  and sales to Middle East-North
Africa.



External Net Sales by Area



------------------------------------------------------
                      Q1    Q1 change comparable    FY

 MEUR               2017  2016      %   change %  2016
------------------------------------------------------
 North America      23.6  23.5    +0%        -3%  91.3

 Nordic             15.8  14.9    +6%        +6%  55.3

 Rest of Europe     22.5  24.1    -7%       -10%  81.3

 Rest of the World   7.5   7.2    +4%        -4%  32.7

 Total              69.5  69.7     0%        -4% 260.6
------------------------------------------------------



Segment Review

Group Products

Group fishing products sales were down, partly offset by increase in other group
product sales.

Lure sales were below last year's level in North America, but increased in some
other areas, including Portugal and Latin America. The sales of fishing tools
and accessories were also below last year's level. Winter fishing product sales
benefited from good winter conditions and were higher than last year, especially
in the US. Carp fishing product sales increased from last year.

Sales of other group products were up. The sales of hunting products were
supported by increased Marttiini knife sales, especially good sales of the
Finland 100 Years jubilee knife. More favorable winter weathers boosted the
sales of winter sport products.

Third Party Products

Third party fishing product sales were behind last year, reduced by the loss of
a product category in Poland as well as the challenging market situation
affecting the sales especially in France and Russia. Good winter fishing
conditions helped grow the winter fishing electronics sales in the US.

Third party hunting product sales increased slightly from last year's level.
Third party winter sport sales were also above last year.



Net Sales by Segment



---------------------------------------------------------
                         Q1    Q1 change comparable    FY

 MEUR                  2017  2016      %   change %  2016
---------------------------------------------------------
 Group Products        47.6  47.2    +1%        -2% 172.1

 Third Party Products  22.0  22.5    -2%        -6%  88.5

 Total                 69.5  69.7     0%        -4% 260.6
---------------------------------------------------------



Short-term Outlook

 Despite the Group's first quarter sales having been at last year's level, the
full year outlook has become more reserved due to the recent developments in the
US. Full impact of this development is difficult to predict, but it is likely to
have negative impact on Group's sales and profitability both at distribution and
manufacturing level in 2017.

The Group has launched various strategic initiatives to boost the organic growth
and  improve the cost and capital  efficiency as well as operational performance
in  the  future.  These  initiatives  will  trigger some additional expenses and
investments in 2017.

Driven  by the rapidly increasing uncertainty  in the US retail environment, the
Group's  2017 full year outlook  has been updated.  Full year net  sales are now
expected  to be  above last  year's level  and comparable operating profit below
last  year's level, while  previously net sales  were expected to  be above last
year's  level and  comparable operating  profit in  the same  range as in 2016.
Development  in  the  main  markets  will  be  closely  monitored  as the season
progresses and the outlook will be specified after the second quarter.

Annual General Meeting

The  Annual General Meeting  (AGM) kept on  March 30, 2017 approved the Board of
Director's  proposal that a dividend of EUR 0.10 per share is paid. The dividend
will  be paid in two installments,  EUR 0.05 each. First dividend installment of
1.8 MEUR  was paid on April 10, 2017. The Board of Directors will in its meeting
scheduled  for  October  26, 2017 decide  on  the  dividend  record date and the
payment  date. The dividend record date for the second installment would then be
October  30, 2017 and  the  dividend  payment  date November 6, 2017. A separate
stock  exchange release on  the decisions of  the AGM has  been given, and up to
date information on the Board's authorizations and other decision of the AGM are
available also on the corporate website.


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Liitteet:

Rapala VMC Corp. Trading Report Q1 2017.pdf