Rapala VMC Corporation
Interim report
October 21, 2014 at 8:30 a.m.
RAPALA VMC CORPORATION'S JANUARY TO SEPTEMBER 2014: THIRD QUARTER SALES AND
PROFITABILITY IMPROVED FROM LAST YEAR
July-September in brief:
* Net sales were 67.8 MEUR, up 2% from previous year (66.6). With comparable
exchange rates sales grew 5%.
* Comparable operating profit was 4.7 MEUR (3.2).
* Cash flow from operations was 3.0 MEUR (6.7).
* Earnings per share was 0.05 EUR (-0.06).
* Guidance unchanged.
January-September in brief:
* Net sales were 211.7 MEUR, down 5% from previous year (223.3). With
comparable exchange rates sales were at last year level.
* Comparable operating profit was 21.1 MEUR (24.4).
* Cash flow from operations was 17.0 MEUR (14.8).
* Earnings per share was 0.25 EUR (0.25).
* Own lure manufacturing operations in China ceased.
President and CEO Jorma Kasslin: "While year 2014 is overall challenging, in the
third quarter we managed to recover some of the business we lost previously and
reached our third quarter sales and operating profit record. In USA sales
developed well after a difficult beginning of the summer season and sales were
strong also in many European and Rest of the World countries. Shipments of ice
fishing products started well supporting the third quarter. However, the
political turbulence is disturbing our business in Russia, as well as the major
movements in currencies, which are impacting many of our units. Transfer of
production from China to Batam has badly burdened our profitability throughout
the year, but now we expect the worst to be behind and this unit to have
positive impact on our profitability in fourth quarter."
Key figures
-------------------------------------------------------------------------------
III III change I-III I-III change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
-------------------------------------------------------------------------------
Net sales 67.8 66.6 +2% 211.7 223.3 -5% 286.6
Operating profit 5.7 2.6 +119% 21.7 24.6 -12% 26.1
% of net sales 8.5% 3.9% 10.3% 11.0% 9.1%
Comparable operating
profit * 4.7 3.2 +47% 21.1 24.4 -14% 27.1
% of net sales 7.0% 4.8% 9.9% 10.9% 9.5%
Cash flow from
operations 3.0 6.7 -55% 17.0 14.8 +15% 15.3
Gearing % 71.7% 67.7% 71.7% 67.7% 71.2%
EPS, EUR 0.05 -0.06 +183% 0.25 0.25 0% 0.32
-------------------------------------------------------------------------------
* Excluding non-recurring items and mark-to-market valuations of operative
currency derivatives.
Market environment
Market conditions continue to be challenging with ongoing economical and
political uncertainties affecting several markets. This together with
devaluation of some currencies have hurt the economies and impacted consumer
demand and retailers' purchasing behaviour. On the other hand, market is showing
positive signs in several regions. Sales developed positively in USA and several
European and Rest of the World countries and pre-sales of ice fishing products
for the coming winter season in the North America have been good. Weather
conditions improved in many areas, while still in some regions extraordinary
weather conditions have hurt sales.
Business Review July-September 2014
The Group's net sales for the third quarter were up 2%. Changes in translation
exchange rates decreased sales by approximately 2.0 MEUR. With comparable
translation exchange rates quarterly net sales grew 5% from last year.
North America
General economy and consumer sentiment continued gradual improvement. North
American sales with comparable rates were up 16% supported by good start of ice
fishing sales and recovery of business from second quarter. Weather conditions
improved since the beginning of summer shifting sales of fishing tackle products
to third quarter.
Nordic
With comparable translation rates Nordic net sales were 1% above last year
level, including positive impact from currency nominated accounts receivable.
Quarterly sales were negatively impacted by decline in winter sports sales,
suppliers' delivery problems and some slow down of fishing tackle product sales.
Hunting sales improved in Denmark, while in Sweden sales were lower due to loss
of a hunting dealership.
Rest of Europe
With comparable rates net sales of Rest of Europe were down 2%. Sales in Russia
and Ukraine continued to suffer from the political and economical unrest and
trade sanctions, which also limits the future visibility. Russian Ruble and
Ukrainian Hryvnia remain weak and continue to have major negative impact on
sales in the Rest of Europe. Excluding Russian and Ukrainian sales the Rest of
Europe sales increased 7% from last year, assuming comparable rates. Sales
continue to develop well in France as well as in Hungary and Spain where
economies show cautious recovery.
Rest of the World
Despite volume growth, net sales declined due to currency impact, most of all
South African Rand. With comparable rates sales were 4% above last year's level.
Business developed well in most Asian and Latin countries as well as South
Africa, while the business conditions were tough in Australia. Economic
instability and extreme weathers disturbed the business in Japan.
External Net Sales by Area
-------------------------------------------
III III change I-IV
MEUR 2014 2013 % 2013
-------------------------------------------
North America 22.2 19.4 +14% 88.4
Nordic 12.5 12.5 0% 60.8
Rest of Europe 24.1 25.7 -6% 103.6
Rest of the World 9.1 9.0 +1% 33.8
Total 67.8 66.6 +2% 286.6
-------------------------------------------
Business Review January-September 2014
The Group's net sales for the nine-months were down 5%. Changes in translation
exchange rates explain approximately 10.9 MEUR of the decline in net sales. With
comparable translation exchange rates nine-month net sales were at last year's
level.
North America
Currencies reduced North American sales compared to last year as with comparable
rates net sales were up 1%. Extreme winter weather, late start of spring and
rainy summer delayed sales of summer fishing products, but conversely supported
the sales of ice fishing products in 2013/2014 winter season as well as pre-
sales for 2014/2015 winter season.
Nordic
Nordic sales were down 2% with comparable rates. Nordic countries suffered from
late and exceptionally mild and snowless winter 2013/2014, which impacted the
sales of winter sports and ice fishing products especially in Finland and has a
knock-on impact on sales for coming winter season 2014/2015. Sales in Norway
have developed positively whereas fishing tackle sales in other Scandinavian
countries have been more difficult. Sales were positively impacted by Marttiini
kitchen knife sales in Finland and foreign exchange impact from currency
nominated accounts receivable.
Rest of Europe
Political and economical turbulence in Russia and Ukraine had adverse impact on
sales in these countries. Currencies, mainly Rouble and Hryvnia, had a clear
negative impact on sales in the Rest of Europe compared to last year and with
comparable rates net sales were 1% behind last year. Excluding Russian and
Ukrainian sales the local currency sales of Rest of Europe improved 3 % from
last year supported by growth in France, Poland, Hungary, Spain and UK.
Rest of the World
Despite volume growth, net sales declined due to currency impact, most of all
South African Rand and Australian dollar. Local currency sales increased 2% and
developed well in several Asian and Latin American countries, while suffered in
Australia and Japan. Sales improved also in South Africa despite challenging
economical and political situation.
External Net Sales by Area
-------------------------------------------
I-III I-III change I-IV
MEUR 2014 2013 % 2013
-------------------------------------------
North America 61.4 63.1 -3% 88.4
Nordic 45.2 47.4 -5% 60.8
Rest of Europe 81.4 87.2 -7% 103.6
Rest of the World 23.8 25.6 -7% 33.8
Total 211.7 223.3 -5% 286.6
-------------------------------------------
Financial Results and Profitability
Comparable (excluding non-recurring items and mark-to-market valuations of
operative currency derivatives) and reported operating profit increased from
last year for the third quarter reaching all time quarter high, but remained
behind last year for the nine-months. Changes in translation exchange rates
decreased quarterly operating profit by approximately 0.1 MEUR and nine-month
operating profit by approximately 0.7 MEUR. With comparable translation exchange
rates comparable operating profit was 1.6 MEUR ahead last year's level for the
quarter and 2.6 MEUR behind last year for the nine-months.
Comparable operating profit margin was 7.0% (4.8) for the quarter and 9.9%
(10.9) for the nine-month period. Quarterly profitability was supported by
increased sales and stable gross margin, which remained healthy despite some
clearance sales campaigns. Quarterly profitability was further supported by
stable fixed costs and positive impact of the UK joint venture, while hurt by
decline in profitability in Russia, strongly impacted by exchange rates.
Additionally nine-months profitability was hurt by lower sales in the first half
of the year, while supported by recovery of some previously underperforming
units. Ramp-up of the new factory in Batam had a significant negative
contribution in the Group's profitability throughout the nine-month period.
Respectively reported operating profit margin was 8.5% (3.9) for the quarter and
10.3% (11.0) for the nine-month period. Reported operating profit included net
loss of non-recurring items of 0.4 MEUR (0.2) for the quarter and 0.9 MEUR (0.4)
for the nine-months related to direct one-off costs on closing down of the
manufacturing operations in China. Mark-to-market valuation of operative
currency derivatives included in the reported operating profit was 1.5 MEUR gain
(0.4 loss) for the quarter, driven by movements in US Dollar, Russian Rouble and
Indonesian Rupiah, and 1.6 MEUR gain (0.6 gain) for the nine-months.
Total financial (net) expenses were 2.3 MEUR (3.0) for the quarter and 5.7 MEUR
(5.2) for the nine-months. Financial items were negatively impacted by the (net)
foreign exchange expenses of 1.2 MEUR (1.9) for the quarter and 2.7 MEUR (2.3)
for the nine-months. Net interest and other financing expenses were at last
year's level at 1.1 MEUR (1.0) for the quarter and 3.0 MEUR (2.8) for the nine-
months.
Net profit increased from last year for the quarter but was behind last year for
the nine-month period. Earnings per share were 0.05 EUR (-0.06) for the quarter
and 0.25 EUR (0.25) for the nine-months. Nine-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 0.7
MEUR (1.1) for the quarter and 1.6 MEUR (3.6) for the nine-months, impacted by
the development in Russia and Ukraine.
Key figures
-------------------------------------------------------------------------------
III III change I-III I-III change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
-------------------------------------------------------------------------------
Net sales 67.8 66.6 +2% 211.7 223.3 -5% 286.6
Operating profit 5.7 2.6 +119% 21.7 24.6 -12% 26.1
Comparable operating
profit * 4.7 3.2 +47% 21.1 24.4 -14% 27.1
Net profit 2.7 -1.2 +325% 11.1 13.2 -16% 16.1
-------------------------------------------------------------------------------
* Excluding non-recurring items and mark-to-market valuations of operative
currency derivatives.
Segment Review
Group Products
Third quarter sales of Group Products increased 9% from last year with
comparable rates following improved summer fishing tackle and ice fishing
product sales. Nine-month sales were burdened by foreign exchange rates and with
comparable rates net sales were 2% above last year's level. Unfavourable weather
conditions had an adverse impact to nine-month summer fishing tackle sales in
some markets, especially US. Nine-month sales were also impacted by lower sales
of winter fishing and winter sports products in Europe due to mild winter
2013/2014.
Operating profit for Group Products was above last year for the quarter
supported by increased sales. Profitability decreased from last year for the
nine-month period. Nine-month profitability was impacted by lower sales both at
distribution and manufacturing level and costs and interruptions related to
closing down of the manufacturing unit in China and ramp-up of the Batam unit.
Third Party Products
Third quarter and nine-month sales of Third Party Products decreased from last
year. With comparable rates net sales were down 1% for the quarter and 3% for
the nine-month period. Quarterly sales decrease resulted from decline in winter
sports and hunting sales, mainly due to loss of a hunting dealership in Sweden.
Nine-month sales were challenging due to suppliers' delivery problems,
economical instabilities and weather conditions.
Operating profit for Third Party Products was above last year for the quarter
and nine-month period supported by favourable exchange rates on purchases and
joint venture result while reduced sales burdened profitability.
Reported profitability of both Group and Third Party Products are positively
impacted by the mark-to-market valuation of operative currency derivatives.
Net Sales by Segment
-----------------------------------------------------------------
III III change I-III I-III change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
-----------------------------------------------------------------
Group Products 41.0 38.2 +7% 131.3 134.7 -3% 176.3
Third Party Products 26.9 28.5 -6% 80.5 88.7 -9% 110.5
Eliminations 0.0 0.0 0.0 -0.1 -0.1
Total 67.8 66.6 +2% 211.7 223.3 -5% 286.6
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Operating profit by Segment
-----------------------------------------------------------------
III III change I-III I-III change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
-----------------------------------------------------------------
Group Products 3.7 2.1 +76% 13.3 17.4 -24% 19.4
Third Party Products 2.1 0.5 +320% 8.4 7.2 +17% 6.7
Total 5.7 2.6 +119% 21.7 24.6 -12% 26.1
-----------------------------------------------------------------
Financial position
Cash flow from operations was down from last year for the quarter at 3.0 MEUR
(6.7). Following record cash flow in the first half of the year, nine-month cash
flow was ahead of last year at 17.0 MEUR (14.8). Year to date improvement was
driven by positive development in the net working capital as especially
receivables released more cash in second quarter, simultaneously having negative
timing impact on third quarter cash flow. Net change in working capital amounted
to 1.4 MEUR (5.1) for the quarter and -1.0 MEUR (-8.0) for the nine-month
period. Inventories increased by 4.4 MEUR from last September amounting to
117.2 MEUR (112.8). Currency impact decreased inventories by some 0.9
MEUR. Increase in inventories was driven primarily by lower than expected sales
and transfer of production from China to Batam.
Net cash used in investing activities was 2.0 MEUR (3.0) for the quarter and
6.4 MEUR (7.4) for the nine-months, 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 12.8 MEUR (24.4) and undrawn
committed long-term credit facilities amounted to 78.4 MEUR at the end of the
period. Net interest-bearing debt and gearing increased from last year. Equity-
to-assets ratio was slightly above last year's level. The Group fulfils all
financial covenants related to its credit facilities.
Key figures
-------------------------------------------------------------------------------
III III change I-III I-III change I-IV
MEUR 2014 2013 % 2014 2013 % 2013
-------------------------------------------------------------------------------
Cash flow from operations 3.0 6.7 -55% 17.0 14.8 +15% 15.3
Net interest-bearing debt at end
of period 99.7 93.1 +7% 99.7 93.1 +7% 96.3
Gearing % 71.7% 67.7% 71.7% 67.7% 71.2%
Equity-to-assets ratio at end of
period, % 44.1% 43.9% 44.1% 43.9% 44.5%
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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 third 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 producing and shipping Mora Ice and Rapala UR
branded ice drills and related accessories.
The operations of the Group's own lure manufacturing unit in China ceased during
the second quarter. Remaining assets were transferred out and premises handed
over during the third quarter. In the future the Group's presence in China is
limited to sourcing raw materials, components and finished goods from third
party vendors as well as distribution activities. The new lure manufacturing
unit in Batam, employing more than 1000 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 strengthened by appointing Group Supply Chain
and Sourcing Director. The Group is taking further actions to reduce the
inventory levels increased as a result of lower than expected sales.
In September, the Group rearranged its loan and credit facilities in order to
decrease interest rate margins, diversify the maturity profile and strengthen
the Group's capabilities to finance its strategy of profitable growth.
During third quarter the Group appointed management resources to develop the
distribution business in hunting and outdoor distribution categories as the
Group is putting more focus on seeking growth in these areas.
Discussions and negotiations regarding acquisitions and business combinations
continued during the third 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.
Manufacturing of new products introduced last summer proceeded during the third
quarter, with main shipments in the next two quarters. Development process of
next season's product is proceeding according to plans. In addition to product
development the Group has put focus on developing the manufacturing processes,
in order to further improve efficiency and quality.
Organization and Personnel
Average number of personnel for the third quarter was 2 669 (2 291) and 2 672
(2 347) for the nine-months, majority of the increase relating to expansion of
lure manufacturing operations in Batam and reduction of outsourcing in China. At
the end of September, the number of personnel was 2 714 (2 511).
Short-term Outlook and Risks
The Group's sales and profitability improved during the third quarter, but the
short-term outlook is still cautious and visibility limited.
The deliveries of winter fishing pre-sales have started well and the order book
is good especially in North America, but due to nature of this business the
final volume and timing will partly depend on the weathers. In Finland winter
sports equipment sales is expected to be significantly lower than last year
during the last quarter.
The continuing political turbulence between Russia and Ukraine is still a
concern for these markets and escalation of the crisis may have negative impacts
on customer consumption even more widely in Europe. Drastic changes in foreign
exchange rates may continue to impact negatively the profit margins and consumer
demand in some countries.
The transfer of own manufacturing operations from China to Batam is now
operatively finalized, which will support improvement of the Group's
profitability going forward and create solid platform for future development.
The transfer project is still subject to final financial assessments, which may
trigger some non-recurring items in the year-end.
The Group will intensify actions to bring down the inventory levels increased as
a result of lower than expected sales. This should support the cash flow, but
may put pressure on the margins next year.
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.
Short term risks and uncertainties and seasonality of the business are described
in more detail in the end of this interim report.
Fourth quarter interim report and annual accounts 2014 will be published on
February 13, 2015.
Helsinki, October 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 12:00 p.m.
Finnish time (11:00 p.m. CET). Please dial +44 (0)20 3364 5719 or
+1 917 286 8056 or +358 (0)9 2310 1675 (pin code: 409028#) 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: 3762970). 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 2014 2013 2014 2013 2013
-------------------------------------------------------------------------------
Net sales 67.8 66.6 211.7 223.3 286.6
Other operating income 0.3 0.1 0.6 0.4 0.8
Materials and services 33.6 33.1 97.9 104.3 134.4
Personnel expenses 15.6 15.6 49.6 48.5 64.0
Other costs and expenses 11.6 13.4 38.3 40.7 54.9
Share of results in associates and joint 0.2 -0.1 0.4 -0.2 -0.5
ventures
------------------------------
EBITDA 7.5 4.5 27.0 29.9 33.6
Depreciation, amortization and impairments 1.8 1.9 5.2 5.3 7.5
------------------------------
Operating profit (EBIT) 5.7 2.6 21.7 24.6 26.1
Financial income and expenses 2.3 3.0 5.7 5.2 5.5
------------------------------
Profit before taxes 3.5 -0.4 16.0 19.4 20.6
Income taxes 0.8 0.8 4.9 6.3 4.6
------------------------------
Net profit for the period 2.7 -1.2 11.1 13.2 16.1
------------------------------
Attributable to:
Equity holders of the company 2.0 -2.4 9.5 9.5 12.5
Non-controlling interests 0.7 1.1 1.6 3.6 3.6
Earnings per share for profit attributable
to the equity holders of the company:
Earnings per share, EUR (diluted = non- 0.05 -0.06 0.25 0.25 0.32
diluted)
STATEMENT OF COMPREHENSIVE INCOME III III I-III I-III I-IV
MEUR 2014 2013 2014 2013 2013
------------------------------------------------------------------------------
Net profit for the period 2.7 -1.2 11.1 13.2 16.1
----------------------------+
Other comprehensive income, net of tax |
|
Change in translation differences* 4.7 -1.7 5.7 -4.6 -7.1
Gains and losses on cash flow hedges* 0.0 0.1 0.1 0.8 0.9
Gains and losses on hedges of net investments* 0.0 0.0 0.1 -0.1 -2.3
Actuarial gains (losses) on defined benefit plan - - - - 0.1
-----------------------------
Total other comprehensive income, net of tax 4.7 -1.6 5.9 -3.9 -8.4
-----------------------------
Total comprehensive income for the period 7.3 -2.8 16.9 9.3 7.7
-----------------------------
|
Total comprehensive income attributable to: |
|
Equity holders of the Company 6.9 -3.8 15.6 6.3 5.1
Non-controlling interests 0.4 0.9 1.3 2.9 2.6
|
* Item that may be reclassified subsequently to the statement of income |
|
STATEMENT OF FINANCIAL POSITION Sept 30 Sept 30 Dec 31
MEUR 2014 2013 2013
-------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 73.5 70.6 70.0
Property, plant and equipment 31.5 30.1 30.6
Non-current assets
Interest-bearing 4.6 3.4 3.0
Non-interest-bearing 10.4 10.3 10.1
-----------------------
120.0 114.4 113.7
Current assets
Inventories 117.2 112.8 110.3
Current assets
Interest-bearing 1.0 1.1 1.0
Non-interest-bearing 64.3 60.9 62.1
Cash and cash equivalents 12.8 24.4 16.9
-----------------------
195.3 199.2 190.3
Total assets 315.3 313.6 304.1
-----------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the
company 129.2 125.3 123.1
Non-controlling interests 9.8 12.3 12.0
-----------------------
138.9 137.6 135.1
Non-current liabilities
Interest-bearing 81.8 52.6 39.4
Non-interest-bearing 12.8 13.8 12.8
-----------------------
94.6 66.4 52.2
Current liabilities
Interest-bearing 36.2 69.4 77.8
Non-interest-bearing 45.5 40.1 38.9
-----------------------
81.8 109.6 116.7
Total equity and liabilities 315.3 313.6 304.1
-----------------------
III III I-III I-III I-IV
KEY FIGURES 2014 2013 2014 2013 2013
-------------------------------------------------------------------------------
EBITDA margin, % 11.1% 6.8% 12.7% 13.4% 11.7%
Operating profit margin, % 8.5% 3.9% 10.3% 11.0% 9.1%
Return on capital employed, % 9.8% 4.4% 12.3% 14.3% 11.4%
Capital employed at end of period, MEUR 238.6 230.8 238.6 230.8 231.4
Net interest-bearing debt at end of 99.7 93.1 99.7 93.1 96.3
period, MEUR
Equity-to-assets ratio at end of period, 44.1% 43.9% 44.1% 43.9% 44.5%
%
Debt-to-equity ratio at end of period, % 71.7% 67.7% 71.7% 67.7% 71.2%
Earnings per share, EUR (diluted = non- 0.05 -0.06 0.25 0.25 0.32
diluted)
Equity per share at end of period, EUR 3.36 3.25 3.36 3.25 3.19
Average personnel for the period 2 669 2 291 2 672 2 347 2 428
-------------------------------------------------------------------------------
Definitions of key figures are consistent with those in the financial
statement 2013.
STATEMENT OF CASH FLOWS III III I-III I-III I-IV
MEUR 2014 2013 2014 2013 2013
------------------------------------------------------------------------------
Net profit for the period 2.7 -1.2 11.1 13.2 16.1
Adjustments to net profit for the period * 3.3 7.0 14.0 17.9 18.6
Financial items and taxes paid and received -4.3 -4.2 -7.1 -8.3 -8.6
Change in working capital 1.4 5.1 -1.0 -8.0 -10.8
------------------------------------------------------------------------------
Net cash generated from operating activities 3.0 6.7 17.0 14.8 15.3
Investments -2.1 -3.0 -5.8 -6.9 -10.7
Proceeds from sales of assets 0.1 - 0.3 0.2 0.2
Sufix brand acquisition 0.0 - -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 - - - - 0.5
cash
Change in interest-bearing receivables 0.0 0.0 0.0 0.0 -0.1
------------------------------------------------------------------------------
Net cash used in investing activities -2.0 -3.0 -6.4 -7.4 -10.8
Dividends paid to parent company's - - -9.2 -8.9 -8.9
shareholders
Dividends paid to non-controlling interest -3.6 - -3.6 - -
Net funding -0.6 -7.0 -2.2 -11.5 -16.0
Purchase of own shares -0.1 -0.3 -0.4 -0.8 -1.0
------------------------------------------------------------------------------
Net cash generated from financing activities -4.3 -7.3 -15.4 -21.2 -25.9
Adjustments 0.2 0.3 0.3 1.4 1.5
Change in cash and cash equivalents -3.0 -3.3 -4.4 -12.6 -19.8
Cash & cash equivalents at the beginning of 15.6 28.1 16.9 38.2 38.2
the period
Foreign exchange rate effect 0.2 -0.4 0.3 -1.2 -1.4
------------------------------------------------------------------------------
Cash and cash equivalents at the end of the 12.8 24.4 12.8 24.4 16.9
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-
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 * - - 0.8 -4.0 - - 9.5 2.9 9.3
Purchase of
own shares - - - - - -0.8 - - -0.8
Dividends - - - - - - -8.9 - -8.9
Share based
payment - - - - - - 0.4 - 0.4
Other changes - - - - - - 0.0 0.0 0.0
-----------------------------------------------------------------------------
Equity on Sep
30, 2013 3.6 16.7 -1.4 -8.1 4.9 -4.2 113.9 12.3 137.6
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
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 6.1 - - 9.5 1.3 16.9
Purchase of
own shares - - - - - -0.4 - - -0.4
Dividends - - - - - - -9.2 -3.6 -12.8
-----------------------------------------------------------------------------
Equity on Sep
30, 2014 3.6 16.7 -1.2 -6.5 4.9 -4.7 116.4 9.8 138.9
-------------------------------------------------------------------------------
* For the period,
(net of tax)
SEGMENT INFORMATION*
MEUR III III I-III I-III I-IV
Net Sales by Operating Segment 2014 2013 2014 2013 2013
-------------------------------------------------------------
Group Products 41.0 38.2 131.3 134.7 176.3
Third Party Products 26.9 28.5 80.5 88.7 110.5
Eliminations 0.0 0.0 0.0 -0.1 -0.1
-------------------------------------------------------------
Total 67.8 66.6 211.7 223.3 286.6
Operating Profit by Operating Segment
-------------------------------------------------------------
Group Products 3.7 2.1 13.3 17.4 19.4
Third Party Products 2.1 0.5 8.4 7.2 6.7
-------------------------------------------------------------
Total 5.7 2.6 21.7 24.6 26.1
Sept 30 Sept 30 Dec 31
Assets by Operating Segment 2014 2013 2013
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Group Products 228.7 214.4 215.7
Third Party Products 68.2 70.2 67.4
------------------------------------------------------------------
Non-interest-bearing assets total 296.9 284.7 283.1
Unallocated interest-bearing assets 18.4 28.9 21.0
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Total assets 315.3 313.6 304.1
* 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 III III I-III I-III I-IV
MEUR 2014 2013 2014 2013 2013
---------------------------------------------------------
North America 22.2 19.4 61.4 63.1 88.4
Nordic 12.5 12.5 45.2 47.4 60.8
Rest of Europe 24.1 25.7 81.4 87.2 103.6
Rest of the world 9.1 9.0 23.8 25.6 33.8
---------------------------------------------------------
Total 67.8 66.6 211.7 223.3 286.6
KEY FIGURES BY QUARTERS I II III IV I-IV I II III
MEUR 2013 2013 2013 2013 2013 2014 2014 2014
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Net sales 75.3 81.4 66.6 63.3 286.6 66.2 77.7 67.8
EBITDA 10.3 15.2 4.5 3.7 33.6 9.1 10.4 7.5
Operating profit 8.6 13.4 2.6 1.5 26.1 7.4 8.6 5.7
Profit before taxes 8.3 11.6 -0.4 1.2 20.6 5.5 7.0 3.5
Net profit for the period 6.6 7.8 -1.2 2.9 16.1 4.3 4.1 2.7
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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-September 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 September 30, 2014, the book value of inventories included a provision for
net realizable value of 4.6 MEUR (4.4 MEUR at September 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 III III I-III I-III I-IV
MEUR 2014 2013 2014 2013 2013
-------------------------------------------------------------------------------
Closure of Chinese lure manufacturing * -0.4 - -0.9 - -0.8
Other restructuring costs 0.0 0.0 0.0 -0.1 -0.2
Other non-recurring items 0.0 - 0.0 0.0 -0.1
-------------------------------------------------------------------------------
Total included in EBITDA and operating profit -0.4 0.0 -0.9 -0.2 -1.1
-------------------------------------------------------------------------------
Other non-recurring impairments - -0.2 - -0.2 -0.2
-------------------------------------------------------------------------------
Total included in operating profit -0.4 -0.2 -0.9 -0.4 -1.3
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* 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 Sept 30 Sept 30 Dec 31
MEUR 2014 2013 2013
----------------------------------------------------------------------------
Minimum future lease payments on operating leases 16.1 15.1 16.8
Sales Other
Related party transactions and other Pur- Rents expen- Recei- Paya-
MEUR income chases paid ses vables bles
-------------------------------------------------------------------------------
I-III 2014
Joint venture Shimano Normark 2.8 - - 0.0 0.4 -
UK Ltd
Associated company Lanimo Oü - 0.1 - - 0.0 -
Entity with significant - - 0.1 0.1 0.0 -
influence over the Group*
Management - - 0.2 - 0.0 0.0
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-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.
Sep 30 Sep 30 Dec 31
Open derivatives 2014 2013 2013
----------------------------------------------------------
Nominal Fair Nominal Fair Nominal Fair
MEUR Value Value Value Value Value Value
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Operative hedges
Foreign currency
derivatives 44.8 1.5 55.1 0.2 49.4 0.0
Monetary hedges
Foreign currency
derivatives 49.2 -1.1 13.9 -0.1 24.6 0.1
Interest rate
derivatives* 110.7 -0.4 79.7 -2.3 69.5 -2.0
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* 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
III III I-III I-III I-IV
2014 2013 2014 2013 2013
-------------------------------------------------------------------------------
Included in operating profit 1.5 -0.4 1.6 0.6 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 Sep 30 Sep 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 receivables 74.5 74.5 82.4 82.4 77.8 77.8
Available-for-sale 0.3 0.3 0.3 0.3 0.3 0.3
financial assets (level
3)
Derivatives (level 2) 3.4 3.4 0.6 0.6 0.8 0.8
Financial liabilities
Financial 142.3 142.7 142.3 142.9 138.1 138.7
liabilities at
amortized cost
Derivatives (level 2) 3.4 3.4 2.9 2.9 2.8 2.8
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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 39 201 741. During
the reporting period, company bought back a total of 15 521 own shares. At the
end of the reporting period the company held 506 807 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 5.15 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, 617 698 shares (2 400 379) were traded at a high of
6.00 EUR and a low of 4.95 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 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 is
now significantly reduced as Chinese operations have ceased and transfer project
is practically finalized .
The Group rearranged its main credit facilities in September 2014. 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, 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#1864221]
RAPALA VMC CORPORATION'S JANUARY TO SEPTEMBER 2014: THIRD QUARTER SALES AND PROFITABILITY IMPROVED FROM LAST YEAR
| Source: Rapala VMC
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