Rapala VMC Corporation
Stock Exchange Release
October 22, 2013 at 8:30 a.m.
* Net sales for the third quarter increased from last year by 2% to 66.6 (65.6
MEUR) and the nine-month net sales were slightly above last year's level at
223.3 MEUR (222.8 MEUR), reaching all time record sales for the quarter and
the nine months. Sales were heavily burdened by foreign exchange rates. With
comparable foreign exchange rates net sales increased by 9% in the third
quarter and 3% during the nine months.
* Comparable operating profit, excluding non-recurring items and mark-to-
market valuation of operative currency derivatives, declined from last year
to 3.2 MEUR (3.9 MEUR) for the third quarter and to 24.4 MEUR (26.1 MEUR)
for the nine-month period. Comparable operating profit margin was 4.8%
(6.0%) for the quarter and 10.9% (11.7%) for the nine months.
* Net profit was down to -1.2 MEUR (1.3 MEUR) for the quarter and 13.2 MEUR
(16.0 MEUR) for the nine months, impacted by foreign exchange movements on
financial items. Earnings per share was down to -0.06 EUR (0.00 EUR) for the
third quarter and was 0.25 EUR (0.31 EUR) for the nine-month period.
* Cash flow from operations was down from last year's at 6.7 MEUR (7.1 MEUR)
for the quarter and at 14.8 MEUR (19.2 MEUR) for the nine months. Net
interest bearing debt was at last year's level. Gearing was 67.7% (65.4%)
and equity-to-assets ratio 43.9% (42.8%).
* Installation work for tripling the size of lure manufacturing operations in
Batam is proceeding. The Group is currently evaluating all possibilities to
speed-up the transfer of lure production from China to Batam, originally
planned to be carried out gradually during next 6-9 months.
* Guidance remains unchanged. 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 operative currency derivatives, to be 30 MEUR
plus or minus 10%.
The attachment presents the interim review by the Board of Directors as well as
the accounts.
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
During the third quarter and the nine months Rapala Group's sales continued to
develop in line with expectations again breaking sales records despite heavy
negative impact from foreign exchange rates. Quarterly sales growth was driven
by good performance especially in North America, Russia, France, South America
and some Asian counties. Third quarter sales were supported positively by new
ice fishing pre-sales program in North America. Nine months sales were
positively impacted by good new product introductions, while late spring and
floods in Central Europe as well as delays in shipments from suppliers impacted
sales negatively. Fluctuations in foreign exchange rates and continuing
economical uncertainties are increasingly starting to impact consumer behavior
and trading environment in several countries, putting some retailers' financial
position in constraint and thereby limiting the future visibility.
Net sales for the third quarter increased from last year by 2% to 66.6 (65.6
MEUR) and the nine month net sales were slightly above last year's level at
223.3 MEUR (222.8 MEUR). Changes in foreign exchange rates decreased quarterly
sales significantly by 4.6 MEUR and nine months sales by 7.2 MEUR. With
comparable foreign exchange rates net sales increased 9% in the third quarter
and 3% during the nine months.
Net sales of Group Products increased by 2% from last year to 38.2 MEUR (37.5
MEUR) for the third quarter and 2% to 134.7 MEUR (132.2 MEUR) for the nine
months, following strong ice fishing pre-sales and improved sales of lures and
hooks. Sales of Third Party Products were up 1% to 28.5 MEUR (28.1 MEUR) for the
quarter and down 2% to 88.7 MEUR (90.6 MEUR) for the nine months. Quarterly
sales were supported by third party ice fishing products. Sales of both
operating segments suffered from changes in foreign exchange rates and late
spring.
Net sales in North America were up by 20% for the quarter and by 9% for the nine
months. The growth came from strong ice fishing pre-sales and positive
development in sales of Rapala lures and VMC hooks. Currencies had negative
impact on quarterly and nine months sales compared to last year. With comparable
exchange rates North American quarterly sales were up 29% and nine months sales
12%. The US consumer and retail sentiment continued to improve slowly. US
retailers continued focusing on other sports categories than fishing and putting
more emphasis on promoting their own brands.
In Nordic counties, sales were down by 7% for the quarter and down by 4% for the
nine months. Quarterly sales were negatively impacted by slow sales in Sweden,
delayed winter sport equipment deliveries from suppliers and foreign exchange
rates. With comparable exchange rates quarterly sales were down 4%. Nine months
sales were also impacted by delayed start of summer fishing season and delayed
deliveries of suppliers for summer fishing.
Third quarter net sales in Rest of Europe decreased by 1% and nine months sales
by 2%. Sales continued strong in France and Russia, although in Russia and
Eastern Europe sales and consumer sentiment were increasingly stressed by
weakening of currencies and economical uncertainties. Nine months sales in
Central Europe were impacted by late spring and floods. With comparable exchange
rates quarterly sales were up by 4% and nine months sales were at last year's
level. Macro-economic situation continued to burden sales in Spain and Hungary
and in the UK difficult market conditions and increasing competition was
impacting sales negatively. The restructuring of operations in Switzerland
continued.
In Rest of the World sales decreased by 11% for the quarter and by 3% for the
nine months burdened by foreign exchange rates, especially weakening of South
African Rand, Australian Dollar and Japanese Yen. With comparable exchange rates
quarterly sales were up 4% and nine months sales up 7%. Sales were supported by
the new distribution company in Chile and good sales in Latin America as well as
in some Asian countries. South Africa continues to suffer from macro-economic
uncertainties and weakening of the currency.
Financial Results and Profitability
Comparable operating profit, excluding non-recurring items and mark-to-market
valuation of operative currency derivatives, declined from last year to 3.2 MEUR
(3.9 MEUR) for the third quarter and to 24.4 MEUR (26.1 MEUR) for the nine-month
period. Comparable operating profit margin was 4.8% (6.0%) for the quarter and
10.9% (11.7%) for the nine months. Third quarter profitability was supported by
strong sales in North America and foreign exchange rate benefit on purchases.
However, simultaneously quarterly profitability was burdened by negative gross
margin impact of change in product and customer mix, increased fixed costs and
costs related to ramping up the operations in Batam. Nine months profitability
was stressed by late start of summer fishing season, foreign exchange rates and
impact of inventory reduction initiatives, latter impacting especially first
quarter profitability.
Key figures III III I-III I-III I-IV
MEUR 2013 2012 2013 2012 2012
-------------------------------------------------------------------------------
Net sales 66.6 65.6 223.3 222.8 290.7
EBITDA as reported 4.5 5.4 29.9 30.7 32.7
Comparable EBITDA* 4.9 5.6 29.5 31.1 33.8
Operating profit (EBIT) 2.6 3.7 24.6 25.7 25.9
Comparable EBIT* 3.2 3.9 24.4 26.1 27.1
-------------------------------------------------------------------------------
* Excluding non-recurring items and mark-to-market valuations of operative
currency derivatives.
Reported operating profit was 2.6 MEUR (3.7 MEUR) for the quarter and 24.6 MEUR
(25.7 MEUR) for the nine months. Reported operating margin was 3.9% (5.6%) and
11.0% (11.5%) respectively. Reported operating profit included net loss of non-
recurring items of 0.2 MEUR (0.3 MEUR) for the quarter and 0.4 MEUR (0.3 MEUR)
for the nine months consisting mainly of restructuring costs in Switzerland.
Reported operating profit included mark-to-market valuation of operative
currency derivatives of 0.4 MEUR loss (0.1 MEUR gain) for the quarter and 0.6
MEUR gain (0.1 MEUR loss) for the nine months.
Operating profit for Group Products stayed in last year's level in the third
quarter amounting to 2.1 MEUR (2.1 MEUR) and increased from last year to 17.4
MEUR (16.8 MEUR) in the nine-month period supported by increased sales, while
negatively affected by setting up the second phase of lure production in Batam.
Operating profit for Third Party Products decreased to 0.5 MEUR (1.5 MEUR) in
the third quarter and 7.2 MEUR (8.8 MEUR) in the nine months burdened by change
in product mix. Nine months profitability of both operating segments suffered
from late spring and inventory clearances.
Total financial (net) expenses were above last year's level at 3.0 MEUR (1.7
MEUR) for the quarter and 5.2 MEUR (2.9 MEUR) for the nine months. Net interest
and other financing expenses were 1.0 MEUR (1.3 MEUR) for the quarter and 2.8
MEUR (3.1 MEUR) for the nine months. A significant negative impact in financial
items resulted from the (net) foreign exchange expenses of 1.9 MEUR (0.5 MEUR)
for the quarter and 2.3 MEUR (0.2 MEUR gain) for the nine-month period. These
were in particular caused by sharp weakening of the Indonesian Rupiah, which on
the other hand will have positive impact on the labor costs of the new Batam
manufacturing units.
Due to lower operating profit and increased financial foreign exchange expenses
and income taxes net profit for the quarter decreased to -1.2 MEUR (1.3 MEUR)
and 13.2 MEUR (16.0 MEUR) for the nine months. Earnings per share for the third
quarter turned negative amounting to -0.06 EUR (0.00 EUR) and was 0.25 EUR (0.31
EUR) for the nine-month period.
Cash Flow and Financial Position
Cash flow from operations was down from last year's at 6.7 MEUR (7.1 MEUR) for
the quarter and at 14.8 MEUR (19.2 MEUR) for the nine months. Third quarter cash
flow was impacted by lower profitability and working capital required by earlier
start of the ice fishing business. Simultaneously, third quarter cash flow
benefitted from timing of cash flows between second and third quarter impacted
by late start of summer fishing season.
The Group's inventory levels continued to develop positively. Inventories
decreased by 7.8 MEUR from September 2012 to 112.8 MEUR (120.6 MEUR), even if
the ice fishing business was tying more inventories in the third quarter than
last year. On comparable basis, taking into account decreasing impact of foreign
exchange rate movements and increasing impacts of the additional ice fishing
inventory in USA and new business units, inventories reduced net of 6.3 MEUR
from September 2012.
Net cash used in investing activities was 3.0 MEUR (1.6 MEUR) for the third
quarter and 7.4 MEUR (12.3 MEUR) for the nine-month period. Operative capital
expenditure was 3.0 MEUR (1.3 MEUR) for the quarter and 6.9 MEUR (5.5 MEUR) for
the nine months due to expanding lure manufacturing operations in Batam and
setting up new ice drill manufacturing unit in Finland. 2012 nine months
investing activities include acquisition of the assets of Strike Master
Corporation and Mora Ice brand with total of 6.4 MEUR and proceeds from the sale
of a real estate in Finland of 0.3 MEUR.
The liquidity position of the Group was good. Following the increased focus on
cash management, cash and cash equivalents reduced to 24.2 MEUR (32.0 MEUR) and
undrawn committed long-term credit facilities amounted to 75.0 MEUR at the end
of the period. Net interest-bearing debt was at last year's levels at 93.1 MEUR
(93.0 MEUR) in the end of September. Gearing was slightly higher at 67.7%
(65.4%) and equity-to-assets ratio improved to 43.9% (42.8%).
Strategy Implementation
Execution of Rapala Group's strategy of profitable growth is based on three
cornerstones: brands, manufacturing and distribution, supported by strong
corporate culture. In 2013 strategy implementation will continue in various
areas.
To strengthen its position in global ice drill business, the Group made a
decision to establish own ice drill manufacturing operations in Korpilahti,
Finland. Preparations to start the operations are proceeding according to plans.
Installation of equipment and machinery begins in October, with a target to
gradually start the manufacturing by the end of the year.
The first phase of setting up lure production in Batam was technically finalized
during second quarter and bulk of the products planned to be transferred from
China at the first phase have been transferred. The second phase of the project
for tripling the size of lure manufacturing operations in Batam is proceeding.
Additional machinery is being installed, new personnel is being trained and
production of some new product categories has already started. Streamlining the
production process and supply chain as well as rationalization of the product
range is continuing. Lure production was originally planned to be gradually
transferred from China during next 6-9 months, but in order to minimize the
negative impacts of running two parallel manufacturing operations, the Group is
currently evaluating all possibilities to speed-up the transfer.
The establishment of new VMC hook manufacturing unit in Batam was finalized
during the first quarter and the production volumes are increasing. The unit is
offering flexible production at good quality level and new products are being
added to the production range.
During first quarter the Group increased its ownership in Peltonen cross country
ski factory to 100%. Previously Group's ownership was 90%. The restructuring of
Group's distribution company in Switzerland is proceeding.
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. A new
initiative has been launched to co-ordinate the purchasing and supply chain of
certain third party products sourced from Asia and North America. Group's key
personnel is subject to a share based incentive plan, connected to Group's
inventory levels in the year-end.
Production and shipments of new products for summer season 2014 started during
third quarter, including the Rapala Scatter Rap lure family, which was
successfully launched this summer in USA and now expanded to other markets.
Development of new products for future seasons is proceeding well.
Discussions and negotiations regarding acquisitions and business combinations
continued during third quarter of 2013.
Short-term Outlook
In general the Group's sales in the first nine months have developed well,
without any major problems. Changes in foreign exchange rates have and will
impact the Group's sales and profitability negatively this year and this
together with continuing economic turbulence causes increasing uncertainties in
several markets, which reduces the short-term visibility.
The Group's sales of ice fishing products for coming season has started
positively and earlier than last year and the order book is still strong. The
Group's fourth quarter and full year sales will be dependent on success of sales
of this product category, which is also influenced by external factors such as
the weather and timing of year-end shipments.
Expanding the lure manufacturing operations in Batam and setting up new ice
drill manufacturing unit in Finland will generate some additional expenditure,
while profitability of few other underperforming units is expected to improve
from last year.
The guidance for 2013 remains unchanged. 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 operative currency derivatives, to be 30
MEUR plus or minus 10%.
Short term risks and uncertainties are described in more detail in the end of
this release.
Fourth quarter interim report and annual accounts 2013 will be published on
February 6, 2014.
Helsinki, October 22, 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 quarter result will be arranged today at 2:00 p.m.
Finnish time (1:00 p.m. CET). Please dial +44 (0)20 3147 4971 or
+1 212 444 0889 or +358 (0)9 2310 1667 (pin code: 677172#) 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: 677172#). Financial information and teleconference replay facility are
available at www.rapalavmc.com.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME III III I-III I-III I-IV
MEUR 2013 2012 2013 2012 2012
------------------------------------------------------------------------------
Net sales 66.6 65.6 223.3 222.8 290.7
Other operating income 0.1 0.2 0.4 0.7 1.3
Materials and services 33.1 32.3 104.3 104.9 140.7
Personnel expenses 15.6 15.1 48.5 46.8 62.6
Other costs and expenses 13.4 13.0 40.7 41.0 55.8
Share of results in associates and joint -0.1 0.0 -0.2 -0.1 -0.3
ventures
------------------------------------
EBITDA 4.5 5.4 29.9 30.7 32.7
Depreciation, amortization and 1.9 1.7 5.3 5.1 6.8
impairments
------------------------------------
Operating profit (EBIT) 2.6 3.7 24.6 25.7 25.9
Financial income and expenses 3.0 1.7 5.2 2.9 4.9
------------------------------------
Profit before taxes -0.4 1.9 19.4 22.8 21.0
Income taxes 0.8 0.6 6.3 6.7 7.1
------------------------------------
Net profit for the period -1.2 1.3 13.2 16.0 14.0
------------------------------------
Attributable to:
Equity holders of the company -2.4 0.0 9.5 12.2 10.1
Non-controlling interests 1.1 1.3 3.6 3.8 3.8
Earnings per share for profit attributable
to the equity holders of the company:
Earnings per share, EUR (diluted = non- -0.06 0.00 0.25 0.31 0.26
diluted)
STATEMENT OF COMPREHENSIVE INCOME III III I-III I-III I-IV
MEUR 2013 2012 2013 2012 2012
------------------------------------------------------------------------------
Net profit for the period -1.2 1.3 13.2 16.0 14.0
------------------------------
Other comprehensive income, net of tax
Change in translation differences* -1.7 -0.5 -4.6 1.6 -0.3
Gains and losses on cash flow hedges* 0.1 -0.1 0.8 -0.7 -0.6
Gains and losses on hedges of net investments* 0.0 0.2 -0.1 0.1 0.2
Actuarial gains (losses) on defined benefit - - - - -0.3
plan
------------------------------
Total other comprehensive income, net of tax -1.6 -0.4 -3.9 1.0 -1.0
------------------------------
Total comprehensive income for the period -2.8 0.9 9.3 17.0 12.9
------------------------------
Total comprehensive income attributable to:
Equity holders of the Company -3.8 -0.5 6.3 13.2 9.2
Non-controlling interests 0.9 1.4 2.9 3.8 3.7
* Item that may be reclassified subsequently to the statement of income
STATEMENT OF FINANCIAL POSITION Sept 30 Sept 30 Dec 31
MEUR 2013 2012 2012
--------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 70.6 73.2 72.6
Property, plant and equipment 30.1 28.9 29.3
Non-current assets
Interest-bearing 3.4 7.1 3.7
Non-interest-bearing 10.3 11.8 11.4
------------------------
114.4 121.0 117.1
Current assets
Inventories 112.8 120.6 110.6
Current assets
Interest-bearing 1.1 1.1 2.5
Non-interest-bearing 60.9 57.4 58.5
Cash and cash equivalents 24.4 32.0 38.2
------------------------
199.2 211.1 209.7
Assets classified as held-for-sale - 0.3 -
Total assets 313.6 332.4 326.8
------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the 125.3 132.8 128.3
company
Non-controlling interests 12.3 9.4 9.4
------------------------
137.6 142.2 137.7
Non-current liabilities
Interest-bearing 52.6 76.7 78.7
Non-interest-bearing 13.8 17.5 15.6
------------------------
66.4 94.3 94.3
Current liabilities
Interest-bearing 69.4 56.5 55.5
Non-interest-bearing 40.1 39.5 39.3
------------------------
109.6 95.9 94.8
Total equity and liabilities 313.6 332.4 326.8
------------------------
III III I-III I-III I-IV
KEY FIGURES 2013 2012 2013 2012 2012
-------------------------------------------------------------------------------
EBITDA margin, % 6.8% 8.2% 13.4% 13.8% 11.2%
Operating profit margin, % 3.9% 5.6% 11.0% 11.5% 8.9%
Return on capital employed, % 4.4% 6.2% 14.3% 14.8% 11.4%
Capital employed at end of period, MEUR 230.8 235.2 230.8 235.2 227.5
Net interest-bearing debt at end of 93.1 93.0 93.1 93.0 89.9
period, MEUR
Equity-to-assets ratio at end of period, 43.9% 42.8% 43.9% 42.8% 42.2%
%
Debt-to-equity ratio at end of period, % 67.7% 65.4% 67.7% 65.4% 65.3%
Earnings per share, EUR (diluted = non- -0.06 0.00 0.25 0.31 0.26
diluted)
Equity per share at end of period, EUR 3.25 3.42 3.25 3.42 3.31
Average personnel for the period 2 291 2 070 2 347 2 081 2 127
-------------------------------------------------------------------------------
Definitions of key figures are consistent with those in the financial
statement 2012.
STATEMENT OF CASH FLOWS III III I-III I-III I-IV
MEUR 2013 2012 2013 2012 2012
-------------------------------------------------------------------------------
Net profit for the period -1.2 1.3 13.2 16.0 14.0
Adjustments to net profit for the period * 7.0 4.6 17.9 15.4 20.6
Financial items and taxes paid and received -4.2 -4.2 -8.3 -10.6 -13.6
Change in working capital 5.1 5.3 -8.0 -1.5 4.2
-------------------------------------------------------------------------------
Net cash generated from operating 6.7 7.1 14.8 19.2 25.2
activities
Investments -3.0 -1.3 -6.9 -5.5 -7.7
Proceeds from sales of assets 0.0 0.1 0.2 0.7 0.8
Sufix brand acquisition - - -0.7 -0.8 -0.8
Strikemaster and Mora Ice acquisitions - -0.3 - -6.7 -6.7
Acquisition of other subsidiaries, net of - 0.0 0.0 0.0 0.0
cash
Proceeds from disposal of subsidiaries, net - - - - 0.8
of cash
Change in interest-bearing receivables 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------
Net cash used in investing activities -3.0 -1.6 -7.4 -12.3 -13.6
Dividends paid to parent company's - - -8.9 -8.9 -8.9
shareholders
Dividends paid to non-controlling interest - - - -1.5 -1.6
Net funding -7.0 -17.8 -11.5 7.1 9.1
Purchase of own shares -0.3 -0.2 -0.8 -0.3 -0.7
-------------------------------------------------------------------------------
Net cash generated from financing -7.3 -18.0 -21.2 -3.6 -2.2
activities
Adjustments 0.3 -0.2 1.4 0.0 0.2
Change in cash and cash equivalents -3.3 -12.7 -12.6 3.4 9.6
Cash & cash equivalents at the beginning of 28.1 45.0 38.2 28.9 28.9
the period
Foreign exchange rate effect -0.4 -0.3 -1.2 -0.3 -0.4
-------------------------------------------------------------------------------
Cash and cash equivalents at the end of the 24.4 32.0 24.4 32.0 38.2
period
* Includes reversal of non-cash items, income taxes and financial income and
expenses.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the company
---------------------------------------------------
Cumul. Fund for Non-
Share Fair trans- invested Re- contr-
pre- value lation non-rest- Own tained olling
Share mium re- diffe- ricted sha- earn- inte- Total
MEUR capital fund serve rences equity res ings rests equity
-------------------------------------------------------------------------------
Equity on Jan 3.6 16.7 -1.6 -4.1 4.9 -2.6 111.8 7.2 135.8
1, 2012
-------------------------------------------------------------------------------
Impact of new - - - - - - -0.1 - -0.1
standards
-------------------------------------------------------------------------------
Restated 3.6 16.7 -1.6 -4.1 4.9 -2.6 111.7 7.2 135.7
balance
-------------------------------------------------------------------------------
Comprehensive - - -0.7 1.7 - - 12.2 3.8 17.0
income *
Purchase of - - - - - -0.3 - - -0.3
own shares
Dividends - - - - - - -8.9 -1.5 -10.4
Share based - - - - - - 0.1 - 0.1
payment
Other changes - - - - - - - 0.0 0.0
-------------------------------------------------------------------------------
Equity on Sep 3.6 16.7 -2.3 -2.3 4.9 -2.9 115.2 9.4 142.2
30, 2012
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Equity on Jan 3.6 16.7 -2.3 -4.1 4.9 -3.4 112.8 9.4 137.7
1, 2013
-------------------------------------------------------------------------------
Comprehensive - - 0.8 -4.0 - - 9.5 2.9 9.3
income *
Purchase of - - - - - -0.8 - - -0.8
own shares
Dividends - - - - - - -8.9 - -8.9
Share based - - - - - - 0.4 - 0.4
payments
Other changes - - - - - - 0.0 0.0 0.0
-------------------------------------------------------------------------------
Equity on Sep 3.6 16.7 -1.4 -8.1 4.9 -4.2 113.9 12.3 137.6
30, 2013
-------------------------------------------------------------------------------
* For the
period, (net of
tax)
SEGMENT INFORMATION*
MEUR III III I-III I-III I-IV
Net Sales by Operating Segment 2013 2012 2013 2012 2012
------------------------------------------------------------------
Group Products 38.2 37.5 134.7 132.2 176.4
Third Party Products 28.5 28.1 88.7 90.6 114.3
Eliminations 0.0 - -0.1 - -
------------------------------------------------------------------
Total 66.6 65.6 223.3 222.8 290.7
Operating Profit by Operating Segment
------------------------------------------------------------------
Group Products 2.1 2.1 17.4 16.8 18.9
Third Party Products 0.5 1.5 7.2 8.8 7.0
------------------------------------------------------------------
Total 2.6 3.7 24.6 25.7 25.9
Sept 30 Sept 30 Dec 31
Assets by Operating Segment 2013 2012 2012
---------------------------------------------------------------------
Group Products 214.4 220.6 214.0
Third Party Products 70.2 71.6 68.5
---------------------------------------------------------------------
Non-interest-bearing assets total 284.7 292.2 282.5
Unallocated interest-bearing assets 28.9 40.2 44.3
---------------------------------------------------------------------
Total assets 313.6 332.4 326.8
* Segments are consistent with those in the financial statements 2012. Segments
are described in detail in note 2 of the financial statements 2012.
External Net Sales by Area III III I-III I-III I-IV
MEUR 2013 2012 2013 2012 2012
--------------------------------------------------------------
North America 19.4 16.1 63.1 58.0 83.6
Nordic 12.5 13.4 47.4 49.3 62.7
Rest of Europe 25.7 26.0 87.2 89.1 108.2
Rest of the world 9.0 10.1 25.6 26.5 36.2
--------------------------------------------------------------
Total 66.6 65.6 223.3 222.8 290.7
KEY FIGURES BY QUARTERS I II III IV I-IV I II III
MEUR 2012 2012 2012 2012 2012 2013 2013 2013
--------------------------------------------------------------------------
Net sales 73.5 83.7 65.6 67.9 290.7 75.3 81.4 66.6
EBITDA 12.0 13.3 5.4 1.9 32.7 10.3 15.2 4.5
Operating profit 10.4 11.6 3.7 0.2 25.9 8.6 13.4 2.6
Profit before taxes 10.4 10.5 1.9 -1.7 21.0 8.3 11.6 -0.4
Net profit for the period 7.5 7.2 1.3 -2.1 14.0 6.6 7.8 -1.2
--------------------------------------------------------------------------
NOTES TO THE INCOME STATEMENT AND FINANCIAL POSITION
The financial statement figures included in this release are unaudited.
This report has been prepared in accordance with IAS 34. Accounting principles
adopted in the preparation of this report are consistent with those used in the
preparation of the Financial Statements 2012, except for the adoption of the new
or amended standards and interpretations.
Presentation of comparative periods has been adjusted following the
reclassification of interest-bearing and non-interest bearing items as announced
on stock exchange release on January 4, 2013.
Adoption of amendment of IFRS 7 did not result in any changes in the accounting
principles that would have affected the information presented in this interim
report. The adoption of IFRS 13 added notes related to fair values. The
amendment to IAS 1 standard changed the grouping of items presented in other
comprehensive income. Items that would be reclassified to profit or loss at
future point of time are presented separately from items that will never be
reclassified.
The revised IAS 19 standard removed the option for corridor approach in
recognizing the actuarial gains and losses from defined benefit plans. Under the
revised standard, actuarial gains and losses are required to be recognized
immediately and in full in other comprehensive income and they are excluded
permanently from the consolidated income statement. Previously, actuarial gains
and losses were deferred in accordance with the corridor method.
The amendments to IAS 19 have been applied retrospectively. The impact on
comparative figures presented in the statement of financial position, statement
of income and statement of other comprehensive income in this interim report are
presented in first quarter interim report. The change impacted also key figures,
which have been restated in this interim report. The adjustment on income
statement and other comprehensive income was booked in the fourth quarter.
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-September 2013. 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 September 30, 2013, the book value of inventories included a provision for
net realizable value of 4.4 MEUR (3.6 MEUR at September 30, 2012 and 4.4 MEUR at
December 31, 2012).
Impact of business acquisitions on the consolidated financial statements
In March 2013, the Group purchased a 10% share of the Finnish ski manufacturing
unit. This acquisition raised the Group's ownership to 100%. Acquisition has no
significant impact on the Group's consolidated financial statements.
In September, the escrow deposit of 1.3 MEUR relating to the acquisition of
Dynamite Baits in 2010 was released to the sellers.
Non-recurring income and expenses included in III III I-III I-III I-IV
operating profit
MEUR 2013 2012 2013 2012 2012
-------------------------------------------------------------------------------
Costs related to business acquisitions - 0.0 - 0.0 0.0
Sale of gift manufacturing unit in China - -0.3 - -0.4 -0.7
Gain on disposal of real estate in Finland - - - 0.1 0.1
Other restructuring costs 0.0 - -0.1 - -
Other non-recurring items - 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------
Total included in EBITDA and operating profit 0.0 -0.3 -0.2 -0.3 -0.6
-------------------------------------------------------------------------------
Other non-recurring -0.2 - -0.2 - -
impairments
-------------------------------------------------------------------------------
Total included in operating -0.2 -0.3 -0.4 -0.3 -0.6
profit
-------------------------------------------------------------------------------
Commitments Sept 30 Sept 30 Dec 31
MEUR 2013 2012 2012
--------------------------------------------------------------------------
On own behalf
Guarantees - 0.1 0.1
Minimum future lease payments on operating 15.1 15.8 16.6
leases
--------------------------------------------------------------------------
Sales Other
Related party transactions and other Pur- Rents expen- Recei- Paya-
MEUR income chases paid ses vables bles
-------------------------------------------------------------------------------
I-III 2013
Joint venture Shimano Normark 2.7 - - - 0.4 -
UK Ltd
Associated company Lanimo Oü 0.0 0.1 - - 0.0 -
Entity with significant - - 0.1 0.1 0.0 0.0
influence over the Group*
Management - - 0.2 - - 0.0
I-III 2012
Joint venture Shimano Normark 3.4 - - - 0.5 0.0
UK Ltd
Associated company Lanimo Oü - 0.0 - - 0.0 -
Entity with significant - - 0.1 0.1 0.0 -
influence over the Group*
Management - - 0.3 - 0.0 0.0
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
-------------------------------------------------------------------------------
* Lease agreement for the real estate for the consolidated operations in
France and a service fee.
Sep 30 Sep 30 Dec 31
Open derivatives 2013 2012 2012
--------------------------------------------
Nominal Fair Nominal Fair Nominal Fair
MEUR Value Value Value Value Value Value
--------------------------------------------------------------------
Operative hedges
Foreign currency 53.1 0.2 39.3 0.1 35.1 -0.4
derivatives
Monetary hedges
Foreign currency 13.9 -0.1 12.8 -0.1 27.2 0.0
derivatives
Interest rate 79.7 -2.3 90.2 -2.0 85.0 -3.0
derivatives
-------------------------------------------------------------------
The changes in the fair values of derivatives that are designated as hedging
instruments but do not qualify for hedge accounting are recognized based on
their nature either in operative costs, if the hedged item is an operative
transaction, or in financial income and expenses if the hedged item is a
monetary transaction. Some derivatives designated to hedge monetary items are
accounted for according to hedge accounting. Financial risks and hedging
principles are described in detail in the financial statements 2012.
Changes in unrealized mark-to-market valuations for operative foreign currency
derivatives
III III I-III I-III I-IV
2013 2012 2013 2012 2012
---------------------------------------------------------
Included in operating profit -0.4 0.1 0.6 -0.1 -0.6
---------------------------------------------------------
Operative foreign currency derivatives that are marked-to-market on reporting
date cause timing differences between the changes in derivative's fair values
and hedged operative transactions. Changes in fair values for derivatives
designated to hedge future cash flow but are not accounted for according to
the principles of hedge accounting impact the Group's operating profit for the
accounting period. The underlying foreign currency transactions will realize
in future periods.
Fair values of financial instruments Sept 30
2013
MEUR Carrying value Fair value
------------------------------------------------------------------------
Financial assets
Loans and receivables 82.4 82.4
Available-for-sale financial assets (level 3) 0.3 0.3
Derivatives (level 2) 0.6 0.6
Financial liabilities
Financial liabilities at amortized cost 142.3 142.9
Derivatives (level 2) 2.9 2.9
------------------------------------------------------------------------
Changes to share based incentive plan resolved in June 2012
The Group has one share based incentive plan for the Group's key personnel. In
line with the terms of the share-based payment program, the Board modified the
conditions and term of the program during the second quarter. Earning period was
prolonged to December 31, 2013. The potential reward from the plan remains to be
based on development of Rapala Group's inventory levels and EBITDA. The Group
has reassessed the fair value of the program.
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, 2013 The Annual General Meeting (AGM) updated Board's authorization
on repurchase of shares. A separate stock exchange release on the decisions of
the AGM was given, and up to date information on the board's authorizations and
other decision of the AGM are available also on the corporate website.
At the end of the reporting period the share capital fully paid and reported in
the Trade Register was 3.6 MEUR and the total number of shares was 39 468 449.
The average number of shares during the reporting period was 39 468 449. During
the reporting period, company bought back a total of 172 338 own shares. At the
end of the reporting period the company held 873 738 own shares, representing
2.2% 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 4.79 EUR.
During the reporting period, 2 400 379 shares (2 823 789) were traded at a high
of 5.40 EUR and a low of 4.56 EUR. The closing share price at the end of the
period was 5.32 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 continues to
develop risk management practices and internal controls during 2013. Detailed
descriptions of the Group's strategic, operative and financial risks as well as
risk management principles are 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, although this
seasonality pattern may partly change as the Group has increased its role in
winter fishing business. Weathers impact consumer demand and may have impact on
the Group's sales for current and following seasons. The Group is more affected
by winter weathers after the expansion into winter fishing business, while the
impacts on summer and winter seasons are partly offsetting each other. The
biggest deliveries for both summer and winter seasons are concentrated into
relatively short time periods, and hence a well functioning supply chain is
required.
Working capital and inventory management is still a top priority for the Group
and initiatives to improve the Group's inventory turnovers and shorten factory
lead-times continue in 2013. 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 the Group's supply chain to meet the demand. Management balances
between the risk of shortages and the risk of excess production and purchasing,
which would lead to excess inventories in the Group.
The lure production transfer from China and ramp-up phase of the new production
facility in Batam, Indonesia, may increase certain production cost and supply
chain risks temporarily. The same applies to establishment of the new ice drill
manufacturing unit in Finland.
The Group successfully refinanced its credit facilities in April, 2012. These
credit facilities include some financial covenants, which are actively
monitored. The Group's liquidity and refinancing risks are well in control.
The fishing tackle business has not traditionally been strongly influenced by
increased uncertainties and downturns in the general economic climate. They may
influence, however, at least for a short while, the sales of fishing tackle,
when retailers reduce their inventory levels and face financial challenges. Also
quick and strong increases in living expenses, such as gasoline price,
uncertainties concerning employment and governmental austerity measures may
temporarily affect consumer spending also in the fishing tackle business.
However, the underlying consumer demand has historically proven to be fairly
solid.
The truly global nature of the Group's sales and operations spreads the market
risks caused by the current uncertainties in the global economy. The Group is
cautiously monitoring the development both in the global macro economy as well
as in the various local markets it operates in.
Cash collection and credit risk management is high on the agenda of local
management and this may affect sales to some customers. Quality of the accounts
receivables is monitored closely and write-downs are initiated if needed.
The Group's sales and profitability are impacted by the changes in foreign
exchange rates and the risks are monitored actively. To fix the exchange rates
of future foreign exchange denominated sales and purchases, the Group has
entered into several currency hedging agreements according to the foreign
exchange risk management policy set by the Board of Directors. As the Group is
not applying hedge accounting in accordance to IAS 39, the unrealized mark-to-
market valuations of currency hedging agreements has an impact on the Group's
reported 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#1736914]
RAPALA VMC CORPORATION'S JANUARY TO SEPTEMBER 2013: SALES GROWTH CONTINUED. NET RESULT NEGATIVELY IMPACTED BY FOREIGN EXCHANGE RATES.
| Source: Rapala VMC
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