Rapala VMC Corporation
Interim report
July 21, 2014 at 2:00 p.m.
RAPALA VMC CORPORATION'S JANUARY TO JUNE 2014: SALES AND PROFITS UNDER PRESSURE,
CASH FLOW AT RECORD LEVEL
April-June in brief:
* Net sales were 77.7 MEUR, down 5% from previous year (81.4). With comparable
exchange rates sales up 1%.
* Comparable operating profit was 9.7 MEUR (13.1).
* Cash flow from operations was 22.3 MEUR (16.2).
* Earnings per share was 0.08 EUR (0.16).
* Own lure manufacturing operations in China ceased.
* Full year net sales and comparable operating profit are expected to be below
2013 levels. Guidance unchanged from July 11, 2014.
January-June in brief:
* Net sales were 143.9 MEUR, down 8% from previous year (156.7). With
comparable exchange rates sales down 2%.
* Comparable operating profit was 16.3 MEUR (21.2).
* Cash flow from operations was 14.0 MEUR (8.1).
* Earnings per share was 0.19 EUR (0.31).
President and CEO Jorma Kasslin: "In second quarter the development of our
business was twofold. In several European and overseas markets our sales were
growing well, having support from the early start of the season. However in the
same time in some of our biggest markets, like in USA and Russia, our sales
were behind last year, impacted by the slow-down of the consumer demand,
unfavorable currency movements and weathers. This together with the extra costs
relating to ramping up the production in Batam was burdening our second quarter
profitability. On positive side, our second quarter operating cash flow reached
record level.
Our own manufacturing operations in China have now practically ceased, which
will start to show its positive results towards the end of this year and give us
totally new start for the next year."
Key figures
II II change I-II I-II change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
Net sales 77.7 81.4 -5% 143.9 156.7 -8% 286.6
Operating profit 8.6 13.4 -36% 16.0 22.0 -27% 26.1
% of net sales 11.1% 16.5% 11.1% 14.1% 9.1%
Comparable operating
profit * 9.7 13.1 -26% 16.3 21.2 -23% 27.1
% of net sales 12.4% 16.1% 11.4% 13.5% 9.5%
Cash flow from
operations 22.3 16.2 +38% 14.0 8.1 +73% 15.3
Gearing % 73.2% 68.1% 73.2% 68.1% 71.2%
EPS, EUR 0.08 0.16 -50% 0.19 0.31 -39% 0.32
* Excluding non-recurring items and mark-to-market valuations of operative
currency derivatives.
Market environment
Global market conditions continue challenging with positive signs in some
regions. Sales developed positively in several European countries and pre-sales
of ice fishing products for the coming winter season in the US has been good.
Political unrest in Eastern Europe, unfavourable development of several
currencies and ongoing economical uncertainties in some other markets continue
to hurt sales. Abnormal and extreme weather conditions had an adverse impact on
the peak season of summer fishing sales in some markets. Tough economic
situation and extraordinary weather conditions have impacted customer spending,
timing and length of seasons and forced retailers to put tighter control on
their purchases.
Business Review April-June 2014
The Group's net sales for the second quarter were down 5%. Changes in
translation exchange rates explain approximately 4.8 MEUR of the decline in net
sales. With comparable translation exchange rates quarterly net sales grew 1%
from last year.
North America
Despite gradual positive development of general consumer sentiment in North
America, the retail sales of fishing tackle products slowed down. This was
impacted by late and rainy spring and summer as well as flooding, which have
impacted fishing conditions in some main areas. More than half of the decline
net sales is due to change in currency exchange rates. With comparable rates
sales were down 4%.
Nordic
Nordic sales increased in local currency terms. With comparable rates net sales
were 2% above last year level. Early spring supported the beginning of the
summer fishing season, while subsequent cooling down of the weathers partly hurt
the sales. Consequently second quarter sales were partly negatively impacted by
earlier timing of summer fishing sales. Sales were supported by growth in Norway
and Marttiini kitchen knife sales in Finland.
Rest of Europe
Sales in Russia and Ukraine continued to suffer from the political and
economical unrest in the area. Currencies, mainly Ruble, had a strong negative
impact on the sales in the Rest of Europe compared to last year and with
comparable rates net sales were up 3%. Excluding Russia and Ukraine sales of
Rest of Europe sales increased 6% from last year, assuming comparable rates.
Sales improved in France and UK as well as in Hungary and Spain where economies
show cautious recovery. Quarterly sales were negatively impacted by delivery
problems of suppliers.
Rest of the World
Despite volume growth net sales declined due to currency impact, most of all
South African Rand and Australian dollar. With comparable rates sales were 8%
above last year's level. Business developed well in Korea and Thailand, while
the business conditions were tough in Australia. Economic and political
instability continued to disturb the business in South Africa.
External Net Sales by Area
II II change I-IV
MEUR 2014 2013 % 2013
North America 19.8 21.9 -10% 88,4
Nordic 19.5 19.8 -2% 60,8
Rest of Europe 30.7 31.9 -4% 103,6
Rest of the World 7.6 7.8 -3% 33,8
Total 77.7 81.4 -5% 286,6
Business Review January-June 2014
The Group net sales for the first half of the year were down 8%. Changes in
translation exchange rates explain approximately 8.9 MEUR of the decline in net
sales. With comparable translation exchange rates six-month net sales were 2%
behind last year's level.
North America
Currencies cut North American sales compared to last year, with comparable rates
net sales were down 5%. Extreme winter weathers, late start of spring and rainy
summer delayed sales of summer fishing products, but conversely supported the
replenishment sales of ice fishing products of 2013/2014 winter season.
Nordic
Nordic sales were down 3% with comparable rates. Nordic countries suffered from
late and exceptionally mild and snowless winter which impacted the sales of
winter sports and ice fishing products especially in Finland. Sales in Norway
have developed positively.
Rest of Europe
Political and economical turbulence in Russia and Ukraine had adverse impact on
sales in these countries. Currencies, mainly Ruble, had a clear negative impact
on sales in the Rest of Europe compared to last year and with comparable rates
net sales were slightly behind last year. Excluding Russia and Ukraine sales of
Rest of Europe in local currency term improved 2% from last year supported by
growth in Poland, Hungary, Spain and UK.
Rest of the World
Rest of the World sales were also impacted negatively by weakening of several
currencies and with comparable rates sales were slightly above last year level.
Local currency sales developed well in several Asian and Latin American
countries, while suffered in Australia. Transfer of production from China to
Batam impacted negatively external sales of the Asian manufacturing unit.
External Net Sales by Area
I-II I-II change I-IV
MEUR 2014 2013 % 2013
North America 39.2 43.7 -10% 88,4
Nordic 32.7 34.9 -6% 60,8
Rest of Europe 57.3 61.4 -7% 103,6
Rest of the World 14.7 16.6 -11% 33,8
Total 143.9 156.7 -8% 286,6
Financial Results and Profitability
Comparable (excluding non-recurring items and mark-to-market valuations of
operative currency derivatives) and reported operating profit decreased from
last year for the second quarter and for the first half of the year. Changes in
translation exchange rates decreased quarterly operating profit by approximately
0.5 MEUR and six-month operating profit by approximately 0.6 MEUR. With
comparable translation exchange rates comparable operating profit was 2.9 MEUR
behind last year's level for the quarter and 4.3 MEUR for the first half of the
year.
Comparable operating profit margin was 12.4% (16.1) for the quarter and 11.4%
(13.5) for the six-month period. Second quarter profitability was hurt by lower
sales, both at distribution and manufacturing level, as well as more aggressive
sales campaigns reducing the margins. Ramp-up of the new factory in Batam had a
significant negative contribution in the Group's profitability. Profitability
was supported by the favourable exchange rate impact on purchases, improved
result of the UK joint venture and improved margin in the first quarter of the
year.
Respectively reported operating profit margin was 11.1% (16.5) for the quarter
and 11.1% (14.1) for the six-month period. Reported operating profit included
net loss of non-recurring items of 0.5 MEUR (0.1) for the quarter and 0.4 MEUR
(0.1) for the first half of the year related to the closing down of the
manufacturing operations in China. Mark-to-market valuation of operative
currency derivatives included in the reported operating profit was 0.6 MEUR loss
(0.5 gain) for the quarter and 0.1 MEUR gain (0.9 gain) for six-months.
Total financial (net) expenses were 1.6 MEUR (1.9) for the quarter and 3.5 MEUR
(2.2) for the first half. Financial items were negatively impacted by the (net)
foreign exchange expenses of 0.5 MEUR (0.8) for the quarter and 1.5 MEUR (0.4)
for the six-months. Net interest and other financing expenses were at last
year's level at 1.0 MEUR (1.0) for the quarter and 1.9 MEUR (1.8) for the first
half.
Net profit for the quarter reduced from last year and earnings per share were
0.08 EUR (0.16) for the quarter and 0.19 EUR (0.31) for the first half of the
year. Six-month net profit includes a positive tax impact of 1.0 MEUR related to
an agreement with the Finnish tax authority on the parent company's taxation in
years 2006-2013. The share of non-controlling interest in net profit decreased
from last year and totalled 1.0 MEUR (1.6) for the quarter and 0.9 MEUR (2.5)
for the first half of the year.
Key figures
II II change I-II I-II change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
Net sales 77.7 81.4 -5% 143.9 156.7 -8% 286.6
Operating profit 8.6 13.4 -36% 16.0 22.0 -27% 26.1
Comparable operating
profit * 9.7 13.1 -26% 16.3 21.2 -23% 27.1
Net profit 4.1 7.8 -47% 8.4 14.4 -42% 16.1
* Excluding non-recurring items and mark-to-market valuations of operative
currency derivatives.
Segment Review
Group Products
Second quarter and six-months sales of Group Products decreased from last year.
Sales were burdened by foreign exchange rates and with comparable exchange rates
net sales were at last year's level for the quarter and down 2% for the first
half of the year. Quarterly sales was supported by increased sales of fishing
accessories. Unfavourable weather conditions impacted negatively quarterly sales
of summer fishing tackle in some markets, particularly the US. First half sales
were also impacted by lower sales of winter fishing and winter sports products
in Europe due to mild winter.
Operating profit for Group Products decreased from last year in the second
quarter and first half of the year. Operating profit was negatively impacted by
foreign exchange rates, lower sales impacting profitability both at distribution
and manufacturing level, special campaigns and costs related to closing down the
manufacturing unit in China and ramp-up of the Batam unit.
Third Party Products
Sales of Third Party Products were below last year in the second quarter and
first half of the year. With comparable exchange rates net sales were up 3% in
the quarter and down 4% in the six-month period. Quarterly sales increase
resulted from increase in sales of third party fishing products. Third Party
Products sales faced challenges due to supplier's delivery problems, economical
instabilities and weather conditions.
Operating profit for Third Party Products was slightly behind last year level
supported by more favourable exchange rates on purchases and recovery of margin
while burdened by lower sales.
Net Sales by Segment
II II change I-II I-II change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
Group Products 47.0 49.4 -5% 90.3 96.6 -7% 176.3
Third Party Products 30.7 32.1 -4% 53.6 60.2 -11% 110.5
Eliminations 0.0 -0.1 0.0 -0.1 -0.1
Total 77.7 81.4 -5% 143.9 156.7 -8% 286.6
Operating profit by Segment
II II change I-II I-II change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
Group Products 4.7 9.1 -48% 9.7 15.3 -37% 19.4
Third Party Products 3.9 4.3 -9% 6.4 6.7 -4% 6.7
Total 8.6 13.4 -36% 16.0 22.0 -27% 26.1
Financial position
Cash flow from operations improved significantly and reached record levels of
22.3 MEUR (16.2) for the second quarter and 14.0 MEUR (8.1 MEUR) for the first
half of the year, despite the reduced net result. Improvement was driven by
positive development in the net working capital as especially receivables
released more cash. High second quarter cash flow reflects earlier timing of
purchases and later collection of cash compared to last year. Net change in
working capital amounted to 13.6 MEUR (2.1) for the quarter and -2.4 MEUR (-
13.0) for the six-month period. Inventories increased by 1.4 MEUR from last June
amounting to 113.9 MEUR (112.5). Currency impact decreased inventories by some
5.8 MEUR. Increase in inventories was driven primarily by slowdown in sales and
transfer of production from China to Batam.
Net cash used in investing activities was at last year's level and totalled 2.4
MEUR (2.4) for the quarter and 4.5 MEUR (4.5) for the first half of the year,
for the most part consisting of normal operative capital expenditure.
Liquidity position of the Group was good. Following an increased focus on cash
management, cash and cash equivalents reduced to 15.6 MEUR (28.1) and undrawn
committed long-term credit facilities amounted to 78.5 MEUR at the end of the
period. Net interest-bearing debt and gearing increased from last year and
equity-to-assets ratio was slightly below last year level. The Group fulfils all
financial covenants related to its credit facilities.
Key figures
II II change I-II I-II change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
Cash flow from operations 22.3 16.2 +38% 14.0 8.1 +73% 15.3
Net interest-bearing debt at
end of period 96.4 95.7 +1% 96.4 95.7 +1% 96.3
Gearing % 73.2% 68.1% 73.2% 68.1% 71.2%
Equity-to-assets ratio at end
of period, % 42.6% 42.8% 42.6% 42.8% 44.5%
Strategy Implementation
Execution of the Rapala Group's strategy of profitable growth is based on three
cornerstones: brands, manufacturing and distribution, supported by strong
corporate culture. During the second quarter strategy implementation continued
in various areas.
Ramp-up of the Group's new ice drill manufacturing unit in Korpilahti, Finland,
has been finalized and the unit is on time producing Mora Ice and Rapala UR
branded ice drills and related accessories for the next winter season.
The operations of the Group's own lure manufacturing unit in China ceased during
the second quarter and remaining premises will be handed over during third
quarter. The new lure manufacturing unit in Batam, employing more than 800
people, is intensively focusing on increasing the operative efficiencies, in
order to capitalize the benefits of streamlined production processes and cheaper
production costs.
Initiatives to streamline the Group's supply chain are proceeding, focusing on
consolidating purchasing and logistics processes in selected third party
products in Europe and setting up a new logistics hub in Asia. The Group-level
supply chain organization has been restructured and formalized to further boost
the initiatives to bring down the Group's inventory levels.
Discussions and negotiations regarding acquisitions and business combinations
continued during the second quarter of the year, as the Group continues to seek
also non-organic growth opportunities.
Product Development
Continuous product development and consistent innovation are core competences
for the Group and major contributor to the value and commercial success of the
brands.
New products for 2015 season were presented in EFTTEX and ICAST trade shows
during the summer. Rapala's Interface Rain Suit and Dynamite Baits' Trout
Nuggets won Best New Products Awards at the 2014 EFTTEX, Europe's largest and
most important international fishing tackle trade show.
Organization and Personnel
Average number of personnel for the second quarter was 2 672 (2 183) and 2 666
(2 235) for the first half of the year, majority of the increase relating to
expansion of lure manufacturing operations in Batam and reduction of outsourcing
in China. At the end of June, the number of personnel was 2 692 (2 425).
Short-term Outlook and Risks
First half of the year was affected by adverse weathers, volatile currency
exchange rates and economical and political uncertainties, which have
contributed in the slowdown of sales in several major markets. While there were
also some positive signs especially in Europe, the short-term visibility is
still limited and outlook is cautious.
In the US the consumer demand for guns and ammunition is slowing down and
consequently retailers are turning their focus more towards other outdoor
categories such as fishing.
In North America the presales of ice fishing products for the coming winter
season has been good and will support the sales in latter part of the year. In
Europe previous winter's bad weathers will have some knock-on impact on next
winter season's sales in latter part of the year.
The continuing political turbulence between Russia and Ukraine is still a
concern for these markets. Further escalation of the crisis may have negative
impacts on customer consumption even more widely in Europe. Drastic changes in
foreign exchange rates may impact negatively the profit margins and consumer
demand in some countries.
The closure of manufacturing operations in China will still trigger some extra
costs during 2014, but the new lure factory in Batam is expected to clearly
improve the situation during latter part of the year as the ramp-up period is
coming to the end.
The Group will increase the focus on bringing down the increased inventory
levels.
The Group expects full year net sales and comparable operating profit (excluding
non-recurring items and mark-to-market valuations of operative currency
derivatives) to be below 2013 levels. The guidance is unchanged from July
11, 2014.
Short term risks and uncertainties and seasonality of the business are described
in more detail in the end of this interim report.
Third quarter interim report will be published on October 21.
Helsinki, July 21, 2014
Board of Directors of Rapala VMC Corporation
For further information, please contact:
Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540
Jussi Ristimäki, Chief Financial Officer, +358 40 700 1344
Olli Aho, Investor Relations, +31 653 140 818
A conference call on the quarter result will be arranged today at 3:00 p.m.
Finnish time (2:00 p.m. CET). Please dial +44 (0)20 3364 5719 or
+1 212 444 0096 or +358 (0)9 2310 1675 (pin code: 763161#) five minutes before
the beginning of the event. A replay facility will be available for 14 days
following the teleconference. The number to dial is +44 (0)20 3427 0598 (pin
code: 3526090). Financial information and teleconference replay facility are
available at www.rapalavmc.com.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME II II I-II I-II I-IV
MEUR 2014 2013 2014 2013 2013
Net sales 77.7 81.4 143.9 156.7 286.6
Other operating income 0.2 0.2 0.3 0.3 0.8
Materials and services 35.8 36.0 64.3 71.2 134.4
Personnel expenses 17.1 16.7 34.0 32.9 64.0
Other costs and expenses 14.8 13.7 26.7 27.3 54.9
Share of results in associates and joint 0.2 0.0 0.2 -0.2 -0.5
ventures
EBITDA 10.4 15.2 19.5 25.4 33.6
Depreciation, amortization and impairments 1.8 1.7 3.5 3.4 7.5
Operating profit (EBIT) 8.6 13.4 16.0 22.0 26.1
Financial income and expenses 1.6 1.9 3.5 2.2 5.5
Profit before taxes 7.0 11.6 12.5 19.8 20.6
Income taxes 2.9 3.8 4.1 5.4 4.6
Net profit for the period 4.1 7.8 8.4 14.4 16.1
Attributable to:
Equity holders of the company 3.1 6.2 7.5 11.9 12.5
Non-controlling interests 1.0 1.6 0.9 2.5 3.6
Earnings per share for profit attributable
to the equity holders of the company:
Earnings per share, EUR (diluted = 0.08 0.16 0.19 0.31 0.32
non-diluted)
STATEMENT OF COMPREHENSIVE INCOME II II I-II I-II I-IV
MEUR 2014 2013 2014 2013 2013
Net profit for the period 4.1 7.8 8.4 14.4 16.1
Other comprehensive income, net of tax
Change in translation differences* 2.2 -4.9 1.0 -2.9 -7.1
Gains and losses on cash flow hedges* 0.0 0.4 0.1 0.7 0.9
Gains and losses on hedges of net -0.5 0.2 0.1 -0.1 -2.3
investments*
Actuarial gains (losses) on defined - - - - 0.1
benefit plan
---------------
Total other comprehensive income, net 1.6 -4.4 1.2 -2.3 -8.4
of tax
---------------
Total comprehensive income for the 5.8 3.4 9.6 12.1 7.7
period
Total comprehensive income attributable to:
Equity holders of the Company 4.5 2.3 8.8 10.1 5.1
Non-controlling interests 1.3 1.1 0.9 2.0 2.6
* Item that may be reclassified subsequently to the statement of income
STATEMENT OF FINANCIAL POSITION June 30 June 30 Dec 31
MEUR 2014 2013 2013
ASSETS
Non-current assets
Intangible assets 70.7 71.8 70.0
Property, plant and equipment 30.9 29.6 30.6
Non-current assets
Interest-bearing 3.8 3.4 3.0
Non-interest-bearing 9.6 10.3 10.1
115.0 115.0 113.7
Current assets
Inventories 113.9 112.5 110.3
Current assets
Interest-bearing 1.0 2.3 1.0
Non-interest-bearing 64.2 70.8 62.1
Cash and cash equivalents 15.6 28.1 16.9
194.7 213.7 190.3
Total assets 309.7 328.7 304.1
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the
company 122.4 129.1 123.1
Non-controlling interests 9.3 11.4 12.0
131.7 140.5 135.1
Non-current liabilities
Interest-bearing 40.1 70.1 39.4
Non-interest-bearing 12.3 13.8 12.8
52.4 83.9 52.2
Current liabilities
Interest-bearing 76.6 59.5 77.8
Non-interest-bearing 49.0 44.9 38.9
125.6 104.3 116.7
Total equity and liabilities 309.7 328.7 304.1
II II I-II I-II I-IV
KEY FIGURES 2014 2013 2014 2013 2013
EBITDA margin, % 13.4% 18.6% 13.5% 16.2% 11.7%
Operating profit margin, % 11.1% 16.5% 11.1% 14.1% 9.1%
Return on capital employed, % 14.6% 22.3% 13.9% 19.0% 11.4%
Capital employed at end of period, MEUR 228.1 236.2 228.1 236.2 231.4
Net interest-bearing debt at end of 96.4 95.7 96.4 95.7 96.3
period, MEUR
Equity-to-assets ratio at end of period, 42.6% 42.8% 42.6% 42.8% 44.5%
%
Debt-to-equity ratio at end of period, % 73.2% 68.1% 73.2% 68.1% 71.2%
Earnings per share, EUR (diluted = non- 0.08 0.16 0.19 0.31 0.32
diluted)
Equity per share at end of period, EUR 3.18 3.34 3.18 3.34 3.19
Average personnel for the period 2 672 2 183 2 666 2 235 2 428
Definitions of key figures are consistent with those in the financial
statement 2013.
STATEMENT OF CASH FLOWS II II I-II I-II I-IV
MEUR 2014 2013 2014 2013 2013
Net profit for the period 4.1 7.8 8.4 14.4 16.1
Adjustments to net profit for the period
* 6.8 7.5 10.7 10.8 18.6
Financial items and taxes paid and
received -2.2 -1.2 -2.8 -4.1 -8.6
Change in working capital 13.6 2.1 -2.4 -13.0 -10.8
Net cash generated from operating
activities 22.3 16.2 14.0 8.1 15.3
Investments -1.8 -1.9 -3.8 -3.9 -10.7
Proceeds from sales of assets 0.1 0.1 0.2 0.1 0.2
Sufix brand acquisition -0.7 -0.7 -0.7 -0.7 -0.7
Acquisition of other subsidiaries, net of
cash - - -0.2 0.0 0.0
Proceeds from disposal of subsidiaries,
net of cash - - - - 0.5
Change in interest-bearing receivables 0.0 0.0 0.0 0.0 -0.1
Net cash used in investing activities -2.4 -2.4 -4.5 -4.5 -10.8
Dividends paid to parent company's
shareholders -9.2 -8.9 -9.2 -8.9 -8.9
Dividends paid to non-controlling
interest - - - - -
Net funding -5.5 -7.1 -1.6 -4.5 -16.0
Purchase of own shares -0.1 -0.2 -0.3 -0.5 -1.0
Net cash generated from financing
activities -14.9 -16.3 -11.1 -14.0 -25.9
Adjustments -0.6 1.0 0.1 1.1 1.5
Change in cash and cash equivalents 4.3 -1.5 -1.4 -9.3 -19.8
Cash & cash equivalents at the beginning
of the period 11.0 30.8 16.9 38.2 38.2
Foreign exchange rate effect 0.2 -1.2 0.1 -0.8 -1.4
Cash and cash equivalents at the end of
the period 15.6 28.1 15.6 28.1 16.9
* 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-
non-
pre- value lation rest- Own tained olling
Share mium re- diffe- ricted sha- earn- inte- Total
MEUR capital fund serve rences equity res ings rests equity
---------------------------------------------------------------
Equity on Jan
1, 2013 3.6 16.7 -2.3 -4.1 4.9 -3.4 112.8 9.4 137.7
---------------------------------------------------------------
Comprehensive
income * - - 0.7 -2.5 - - 11.9 2.0 12.1
Purchase of
own shares - - - - - -0.5 - - -0.5
Dividends - - - - - - -8.9 - -8.9
Share based
payment - - - - - - 0.2 - 0.2
Other changes - - - - - - 0.0 0.0 0.0
-----------------------------------------------------------------------------
Equity on Jun
30, 2013 3.6 16.7 -1.5 -6.6 4.9 -3.9 116.0 11.4 140.5
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Equity on Jan
1, 2014 3.6 16.7 -1.4 -12.5 4.9 -4.4 116.2 12.0 135.1
-----------------------------------------------------------------------------
Comprehensive
income * - - 0.1 1.2 - - 7.5 0.9 9.6
Purchase of
own shares - - - - - -0.3 - - -0.3
Dividends - - - - - - -9.2 -3.6 -12.8
-----------------------------------------------------------------------------
Equity on Jun
30, 2014 3.6 16.7 -1.3 -11.3 4.9 -4.6 114.5 9.3 131.7
-----------------------------------------------------------------------------
* For the period, (net
of tax)
SEGMENT INFORMATION*
MEUR II II I-II I-II I-IV
Net Sales by Operating Segment 2014 2013 2014 2013 2013
Group Products 47.0 49.4 90.3 96.6 176.3
Third Party Products 30.7 32.1 53.6 60.2 110.5
Eliminations 0.0 -0.1 0.0 -0.1 -0.1
Total 77.7 81.4 143.9 156.7 286.6
Operating Profit by Operating Segment
Group Products 4.7 9.1 9.7 15.3 19.4
Third Party Products 3.9 4.3 6.4 6.7 6.7
Total 8.6 13.4 16.0 22.0 26.1
Jun 30 Jun 30 Dec 31
Assets by Operating Segment 2014 2013 2013
Group Products 218.3 217.8 215.7
Third Party Products 71.1 77.1 67.4
Non-interest-bearing assets total 289.4 294.9 283.1
Unallocated interest-bearing assets 20.4 33.8 21.0
Total assets 309.7 328.7 304.1
* Segments are consistent with those in the financial statements 2013.
Segments are described in detail in note 2 of the financial statements 2013.
External Net Sales by Area II II I-II I-II I-IV
MEUR 2014 2013 2014 2013 2013
North America 19.8 21.9 39.2 43.7 88.4
Nordic 19.5 19.8 32.7 34.9 60.8
Rest of Europe 30.7 31.9 57.3 61.4 103.6
Rest of the world 7.6 7.8 14.7 16.6 33.8
Total 77.7 81.4 143.9 156.7 286.6
KEY FIGURES BY QUARTERS I II III IV I-IV I II
MEUR 2013 2013 2013 2013 2013 2014 2014
Net sales 75.3 81.4 66.6 63.3 286.6 66.2 77.7
EBITDA 10.3 15.2 4.5 3.7 33.6 9.1 10.4
Operating profit 8.6 13.4 2.6 1.5 26.1 7.4 8.6
Profit before taxes 8.3 11.6 -0.4 1.2 20.6 5.5 7.0
Net profit for the period 6.6 7.8 -1.2 2.9 16.1 4.3 4.1
NOTES TO THE INCOME STATEMENT AND FINANCIAL POSITION
The financial statement figures included in this release are unaudited.
This report has been prepared in accordance with IAS 34. Accounting principles
adopted in the preparation of this report are consistent with those used in the
preparation of the Financial Statements 2013, except for the adoption of the new
or amended standards and interpretations.
Adoption of the revised standards IFRS 10, IFRS 11, IFRS 12, IAS 27, IAS 28 as
well as the amended standards IAS 36 and IAS 39 did not result in any changes in
the accounting principles that would have affected the information presented in
this interim report.
Use of estimates and rounding of figures
Complying with IFRS in preparing financial statements requires the management to
make estimates and assumptions. Such estimates affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the amounts of revenues and expenses. Although these estimates are based on the
management's best knowledge of current events and actions, actual results may
differ from these estimates.
All figures in these accounts have been rounded. Consequently, the sum of
individual figures can deviate from the presented sum figure. Key figures have
been calculated using exact figures.
Events after the end of the interim period
The Group has no knowledge of any significant events after the end of the
interim period that would have a material impact on the financial statements for
January-June 2014. Material events after the end of the interim period, if any,
have been discussed in the interim review by the Board of Directors.
Inventories
On June 30, 2014, the book value of inventories included a provision for net
realizable value of 5.0 MEUR (4.7 MEUR at June 30, 2013 and 4.5 MEUR at December
31, 2013).
Impact of business acquisitions on the consolidated financial statements
In January 2014, the Group acquired 100% of the shares and voting rights of a
French coarse fishing attractant manufacturer Mystic s.a.r.l.. The consideration
amounted to 0.2 MEUR. The closing accounts were finalized during the first
quarter and goodwill of 0.3 MEUR was recognized. The acquisition does not have
material impact on the result or financial position of the Group.
Non-recurring income and expenses included in
operating profit II II I-II I-II I-IV
MEUR 2014 2013 2014 2013 2013
Closure of Chinese lure manufacturing * -0.5 - -0.5 - -0.8
Other restructuring costs - -0.1 0.1 -0.1 -0.2
Other non-recurring items - - - 0.0 -0.1
Total included in EBITDA and operating profit -0.5 -0.1 -0.4 -0.1 -1.1
Other non-recurring impairments - - - - -0.2
-------------------------------------------------------------------------------
Total included in operating profit -0.5 -0.1 -0.4 -0.1 -1.3
-------------------------------------------------------------------------------
* The Group classifies all exceptional income and expenses related to the
closure of China manufacturing that are not related to normal business operation
as non-recurring, primarily consisting of write-offs and one-off costs related
to restructuring.
Commitments June 30 June 30 Dec 31
MEUR 2014 2013 2013
On own behalf
Guarantees - 0.1 -
Minimum future lease payments on operating leases 16.5 14.2 16.8
Sales Other
Related party transactions and other Pur- Rents expen- Recei- Paya-
MEUR income chases paid ses vables bles
I-II 2014
Joint venture Shimano Normark 1.6 - - 0.0 0.5 -
UK Ltd
Associated company Lanimo Oü - - - - 0.0 -
Entity with significant - - 0.1 0.1 0.0 -
influence over the Group*
Management - - 0.1 - 0.0 0.0
I-II 2013
Joint venture Shimano Normark 1.5 - - - 0.5 -
UK Ltd
Associated company Lanimo Oü 0.0 0.1 - - - -
Entity with significant - - 0.1 0.1 0.0 0.0
influence over the Group*
Management - - 0.1 - - 0.0
I-IV 2013
Joint venture Shimano Normark 3.0 - - - 0.1 -
UK Ltd
Associated company Lanimo Oü 0.0 0.1 - - 0.0 -
Entity with significant - - 0.2 0.1 0.0 -
influence over the Group*
Management - - 0.3 - - 0.0
* Lease agreement for the real estate for the consolidated operations in
France and a service fee.
Jun 30 Jun 30 Dec 31
Open derivatives 2014 2013 2013
Nominal Fair Nominal Fair Nominal Fair
MEUR Value Value Value Value Value Value
Operative hedges
Foreign currency
derivatives 45.1 0.1 44.1 0.6 49.4 0.0
Monetary hedges
Foreign currency
derivatives 39.7 -0.8 20.7 0.0 24.6 0.1
Interest rate
derivatives* 69.6 -1.2 80.0 -3.1 69.5 -2.0
* Includes also two cross-
currency swaps.
The changes in the fair values of derivatives that are designated as hedging
instruments but do not qualify for hedge accounting are recognized based on
their nature either in operative costs, if the hedged item is an operative
transaction, or in financial income and expenses if the hedged item is a
monetary transaction. Some derivatives designated to hedge monetary items are
accounted for according to hedge accounting. Financial risks and hedging
principles are described in detail in the financial statements 2013.
Changes in unrealized mark-to-market valuations for operative foreign currency
derivatives
II II I-II I-II I-IV
2014 2013 2014 2013 2013
------------------------------
Included in operating profit -0.6 0.5 0.1 0.9 0.3
------------------------------
Operative foreign currency derivatives that are marked-to-market on reporting
date cause timing differences between the changes in derivative's fair values
and hedged operative transactions. Changes in fair values for derivatives
designated to hedge future cash flow but are not accounted for according to
the principles of hedge accounting impact the Group's operating profit for the
accounting period. The underlying foreign currency transactions will realize
in future periods.
Fair values of Jun 30 Jun 30 Dec 31
financial
instruments
2014 2013 2013
MEUR Carrying Fair Carrying Fair Carrying Fair
value value value value value value
Financial
assets
Loans and 79.7 79.7 97.4 97.4 77.8 77.8
receivables
Available-for- 0.3 0.3 0.3 0.3 0.3 0.3
sale financial
assets (level
3)
Derivatives 1.2 1.2 1.1 1.1 0.8 0.8
(level 2)
Financial
liabilities
Financial 140.6 141.0 152.1 152.7 138.1 138.7
liabilities at
amortized cost
Derivatives 3.1 3.1 3.7 3.7 2.8 2.8
(level 2)
Shares and share capital
On April 10, 2014 The Annual General Meeting (AGM) updated Board's authorization
on repurchase of shares. A separate stock exchange release on the decisions of
the AGM was given, and up to date information on the board's authorizations and
other decision of the AGM are available also on the corporate website.
At the end of the reporting period the share capital fully paid and reported in
the Trade Register was 3.6 MEUR and the total number of shares was 39 000 000.
The average number of shares during the reporting period was 39 303 720. During
the reporting period, company bought back a total of 51 427 own shares. At the
end of the reporting period the company held 491 826 own shares, representing
1.3% 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 5.16 EUR.
On April 10, 2014 the Board decided to cancel 468 449 treasury shares. The
cancellation did not have an effect on the share capital. The cancellation was
registered with the Trade Register on April 28, 2014. After the cancellation,
the number of Rapala VMC Corporation's shares is 39 000 000.
During the reporting period, 425 993 shares (2 052 824) were traded at a high of
6.00 EUR and a low of 5.00 EUR. The closing share price at the end of the period
was 5.73 EUR.
Short term risks and uncertainties
The objective of Rapala VMC Corporation's risk management is to support the
implementation of the Group's strategy and execution of business targets. The
importance of risk management has increased as Rapala VMC Corporation has
continued to expand its operations. Accordingly, Group management continuously
develops it's risk management practices and internal controls. Detailed
descriptions of the Group's strategic, operative and financial risks as well as
risk management principles are included in the Financial Statements 2013.
Due to the nature of the fishing tackle business and the geographical scope of
the Group's operations, the business has traditionally been seasonally stronger
in the first half of the year compared to the second half, although this
seasonality pattern may partly change as the Group has increased its role in
winter fishing business. Weathers impact consumer demand and may have impact on
the Group's sales for current and following seasons. The Group is more affected
by winter weathers after the expansion into winter fishing business, while the
impacts on summer and winter seasons are partly offsetting each other.
The biggest deliveries for both summer and winter seasons are concentrated into
relatively short time periods, and hence a well functioning supply chain is
required. The uncertainties in future demand as well as the length of the
Group's supply chain increases the challenges in supply chain management. Delays
in shipments from internal or external suppliers or unexpected changes in
customer demand upwards or downwards may lead to shortages and lost sales or
excess inventories and subsequent clearance sales with lower margins.
The transfer of lure manufacturing operations from China to Batam have increased
certain production cost and supply chain risks temporarily, while this risk
starts to reduce as Chinese operations have practically ceased.
The Group refinanced its main credit facilities in 2012. These credit facilities
include some financial covenants, which are actively monitored. The Group's
liquidity and refinancing risks are well under control.
The fishing tackle business has not traditionally been strongly influenced by
increased uncertainties and downturns in the general economic climate. They may
however influence, at least for a short while, the sales of fishing tackle, when
retailers reduce their inventory levels and face financial challenges. Also
quick and strong increases in living expenses, such as gasoline price,
uncertainties concerning employment, sudden fluctuations in foreign exchange
rates and governmental austerity measures may temporarily affect consumer
spending. Additionally political tensions, such as the conflict between Russia
and Ukraine, may have effects on the Group's business. However, the underlying
consumer demand has historically proven to be fairly solid.
The truly global nature of the Group's sales and operations spreads the market
risks caused by the current uncertainties in the global economy. The Group is
cautiously monitoring the development both in the global macro economy as well
as in the various local markets it operates in.
Cash collection and credit risk management is high on the agenda of local
management and this may affect sales to some customers. Quality of the accounts
receivables is monitored closely and write-downs are initiated if needed.
The Group's sales and profitability are impacted by the changes in foreign
exchange rates and the risks are monitored actively. To fix the exchange rates
of future foreign exchange denominated sales and purchases, the Group has
entered into several currency hedging agreements according to the foreign
exchange risk management policy set by the Board of Directors. As the Group is
not applying hedge accounting in accordance to IAS 39, the unrealized mark-to-
market valuations of currency hedging agreements have an impact on the Group's
reported operating profit. The Group is closely monitoring market development as
well as its cost structure and considering possibility and feasibility of price
increases, hedging actions and cost rationalization.
No significant changes are identified in the Group's strategic risks or business
environment.
[HUG#1832051]
RAPALA VMC CORPORATION'S JANUARY TO JUNE 2014: SALES AND PROFITS UNDER PRESSURE, CASH FLOW AT RECORD LEVEL
| Source: Rapala VMC
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