Rapala VMC Corporation
Stock Exchange Release
April 24, 2013 at 9:30 a.m.
* Net sales for the first quarter increased from last year by 2% to 75.3 (73.5
MEUR) reaching record sales for the first quarter. Sales were strong in
Russia, North America and Finland. Sales were supported by the new ice
fishing business. Conversely, late spring delayed the start of the sales of
more profitable summer fishing products.
* Comparable operating profit, excluding non-recurring items and mark-to-
market valuation of operative currency derivatives, decreased from last year
to 8.1 MEUR (10.6 MEUR) for the first quarter. Profitability was affected by
late spring impacting the product mix, ongoing production transfers to
Batam, inventory reduction initiatives and foreign exchange rates.
* Net profit for the quarter reduced to 6.6 MEUR (7.5 MEUR) and earnings per
share were 0.15 EUR (0.16 EUR). Net profit includes a positive tax impact of
0.6 MEUR relating to a court ruling and authority decision in Finland
concerning past year.
* Following continuing intense focus on working capital and inventory
management, cash flow from operating activities improved to -8.1 MEUR (-9.3
MEUR) for the quarter and inventories reduced to 116.4 MEUR (125.0 MEUR).
Strengthening of the Group's balance sheet continued, and gearing reached
first quarter record low level of 68.7% (75.7%).
* Implementation of the Rapala Group's strategy of profitable growth continued
by making a decision to establish own ice drill manufacturing operations in
Finland as well as introducing new Rapala Scatter Rap lure family and Angry
Birds co-operation to the market.
* 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
Year 2013 started with positive expectations. Sales continued to grow strongly
in Russia. Sales were growing also in North America, Finland, Baltic countries,
Latin America and most Asian distribution countries, while at the same time in
several countries, especially in Europe, retail sentiment has become more
cautious.
Weather conditions were opposite compared to last year. After a late start of
the new ice fishing business in the USA in the end of last year, the winter
weathers lasted long in all major markets in North America and Northern and
Eastern Europe, to certain extent giving positive support to sales of the new
ice fishing products as well as winter sports equipment, while the overall sales
of the season were still suffering from knock-on effects from previous season.
However, at the same time, late spring clearly delayed the start of the sales
of more profitable summer fishing products, which were also impacted by shortage
of products from external suppliers. Net sales for the first quarter increased
from last year by 2% to 75.3 (73.5 MEUR) reaching all time record sales for the
first quarter. New units contributed 0.3 MEUR to net sales. Change in foreign
exchange did not have any significant impact compared to last year.
Net sales of Group Products increased by 3% from last year to 47.1 MEUR (45.8
MEUR) supported by sales of the new ice fishing products as well as strong
performance of hooks and Rapala lures. Sales of Third Party Products were up 1%
to 28.1 MEUR (27.7 MEUR), with increased sales of winter sports, outdoor and
hunting. Sales of fishing electronics increased, while in total Third Party
Products' sales was down, impacted by late start of the summer fishing season.
Net sales in North America were up by 6% for the quarter, as long winter
supported the sales of ice fishing products both in USA and Canada. US dollar
had a slight negative impact on quarter sales compared to last year. With
comparable exchange rates quarterly sales were up 7%. In USA the improved
housing and stock markets have increased the general consumer confidence, while
the increasing fuel prices and payroll taxes have reduced discretionary spending
of lower income consumers. US retailers continued their increased focus on
sports categories other than fishing and put more emphasis on promoting their
own brands. The launch of new Scatter Rap lure family in USA in February has
been a success.
In Nordic counties, sales were at last year level, impacted by foreign exchange
rates, late spring and delayed sales of summer fishing products. Sales increased
in Finland while in Norway the proportion of presales decreased. Net sales in
Rest of Europe decreased by 1%. Sales were down in the UK and Central Europe
impacted by delayed spring. Sales growth continued strong in Russia, lead by
sales of ice fishing products and lures. Hungary and Spain continued to suffer
from macro-economic challenges and the restructuring of operations in
Switzerland continued.
In Rest of the world sales increased by 10% supported by new distribution
company in Chile and good sales in Latin America and most Asian distribution
markets, led by Japan. Sales were impacted by currency movements, and with
comparable exchange rates sales were up 18%.
Financial Results and Profitability
Comparable operating profit, excluding non-recurring items and mark-to-market
valuation of operative currency derivatives, decreased from last year to 8.1
MEUR (10.6 MEUR) for the first quarter. Comparable operating profit margin was
10.8% (14.4%) for the quarter. Decline in profitability was affected by late
spring impacting the product mix, ongoing production transfers from China to
Batam, margin and volume impacts of continuing inventory reduction initiatives
and foreign exchange rates impacting the purchases. Reported operating profit
for the first quarter was 8.6 MEUR (10.4 MEUR) and included net loss of non-
recurring items of 0.0 MEUR (0.0 MEUR) and mark-to-market valuation of operative
currency derivatives of 0.5 MEUR gain (0.2 MEUR loss).
Key figures I I I-IV
MEUR 2013 2012 2012
-------------------------------------------------------------------------------
Net sales 75.3 73.5 290.7
EBITDA as reported 10.3 12.0 32.7
Comparable EBITDA* 9.8 12.2 33.8
Operating profit (EBIT) 8.6 10.4 25.9
Comparable EBIT* 8.1 10.6 27.1
-------------------------------------------------------------------------------
* Excluding non-recurring items and mark-to-market valuations of operative
currency derivatives.
Operating profit for Group Products decreased compared to last year and amounted
to 6.2 MEUR (7.0 MEUR). Operating profit was negatively impacted by late spring
delaying the shipments of more profitable summer fishing products, inventory
clearance initiatives and setting up the second phase of lure production in
Batam. Operating profit of Third Party Products decreased to 2.4 MEUR (3.4
MEUR), with main contribution coming from fishing products impacted negatively
by currency exchange movements on purchases and inventory clearance sales.
Total financial (net) expenses for the quarter were 0.3 MEUR (0.0 MEUR),
including change in (net) currency exchange gains of 0.4 MEUR (1.0 MEUR). Net
interest and other financing expenses decreased slightly from last year to 0.8
MEUR (1.0 MEUR).
Net profit for the quarter reduced to 6.6 MEUR (7.5 MEUR) and earnings per share
were 0.15 EUR (0.16 EUR). Net profit includes a positive tax impact of 0.6 MEUR
relating to a court ruling and authority decisions in Finland concerning past
years. The share of non-controlling interest in net profit decreased from last
year.
Cash Flow and Financial Position
In line with the Group's intense focus on working capital and inventory
management, the positive development in this area continued. Cash flow from
operations improved to -8.1 MEUR (-9.3 MEUR). During the first quarter
inventories and trade receivables developed more positively compared to last
year and net change in working capital amounted to -15.0 MEUR (-18.9 MEUR).
Working capital was up from December as inventories and trade receivable
increased seasonally.
Also the Group's inventory levels continued to develop positively. Inventories
increased seasonally by 5.8 MEUR from December 2012, but decreased by 8.6 MEUR
from last March amounting to 116.4 MEUR (125.0 MEUR). Thus compared to last
year, inventories decreased 7%, while same time sales increased 2%. New business
units and impact of currency movements increased inventories by 1.5 MEUR
compared to last year, consequently on comparable basis inventories reduced
10.1 MEUR from last year.
Net cash used in investing activities was 2.0 MEUR (8.3 MEUR) for the quarter.
Normal operative capital expenditure was 2.0 MEUR (2.3 MEUR). 2012 first quarter
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.
Net interest bearing debt increased seasonally from December, but was down from
March last year at 100.4 MEUR (107.3 MEUR). Strengthening of the Group's balance
sheet continued and gearing reached first quarter record low level of 68.7 %
(75.7 %). In the end of March equity-to-assets ratio increased to 42.3 (40.8%).
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. In 2013 strategy implementation will continue in various
areas.
The Group has made a decision to establish own ice drill manufacturing
operations in Finland to strengthen its position in ice drill business, which
was entered in early 2012 by acquiring assets of Strike Master Corporation as
well as the brand and intellectual property rights relating to Mora Ice
products. Preparations to start the operations by the end of the year are
ongoing.
The establishment the Group's new hook manufacturing unit on Batam Island in
Indonesia was finalized during the first quarter, while the first phase of the
new lure manufacturing unit will be finalized in April. The units are
technically capable to manufacture products cost efficiently as the volumes pick
up. Construction and installation work for tripling the size of lure
manufacturing operations in Batam are proceeding and certain new production
phases were already started in the end of last year. New products and production
phases will be added gradually during the next 12-15 months.
The Group increased its ownership in Peltonen cross country ski factory to
100%. Previously Group's ownership was 90%.
Special performance improvement initiative continued in the Group's distribution
company in Switzerland.
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 and
develop the Group's internal supply chain as well as its purchasing processes.
Capability to constantly create new innovative products is one significant
strategic asset for the Group. In February 2013 the Group made an early launch
of a new Rapala Scatter Rap lure family, with distinctive evasive swimming
action, into the markets in USA and Japan and the reception was exceptionally
good. In April 2013 the Group published its cooperation agreement with Rovio
Entertainment Ltd on utilizing Rovio's Angry Bird characters in selling lures
and other fishing equipment in Finland and five other countries in Europe as
well as in China. Additionally in April 2013 Rapala Eco Wear® Reflection jacket
was honored with the Red Dot award, one of the most recognized design awards in
the world.
Discussions and negotiations regarding acquisitions and business combinations
continued during first quarter of 2013.
Short-term Outlook
In the first quarter sales grew in major markets in North America and Russia and
this is expected to continue. In several markets late arrival of spring has
postponed sales to second quarter, while the total impact of weathers on whole
season's sales is still uncertain. Where applicable, presales have generally
been on or above last year's levels.
The successful launch of the new Rapala Scatter Rap lure family is expected to
support the sales in the USA and Japan.
After a long winter in North America, the retail pipeline of winter fishing
products is expected to be rather empty. The Rapala Group's winter fishing
program "The Ice Force" is well established among retailers in the USA for
coming season, which will secure improved sales volumes during the year. For
coming season the US distribution range will be further complemented with Otter
winter fishing products.
New manufacturing units as well as a few other underperforming units have
burdened the Group's profitability, but the situation is expected to improve
gradually during the year. The continuing actions to reduce the Group's
inventory levels may have some negative impact on profitability, but support the
cash flow generation.
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%.
Second quarter interim report will be published on July 19.
Helsinki, April 24, 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: 804610#) 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: 804610#). Financial information and teleconference replay facility are
available at www.rapalavmc.com.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME I I I-IV
MEUR 2013 2012 2012
------------------------------------------------------------------------
Net sales 75.3 73.5 290.7
Other operating income 0.2 0.3 1.3
Materials and services 35.2 32.2 140.7
Personnel expenses 16.2 15.7 62.6
Other costs and expenses 13.6 13.8 55.8
Share of results in associates and joint ventures -0.2 -0.1 -0.3
----------------------
EBITDA 10.3 12.0 32.7
Depreciation, amortization and impairments 1.7 1.6 6.8
----------------------
Operating profit (EBIT) 8.6 10.4 25.9
Financial income and expenses 0.3 0.0 4.9
----------------------
Profit before taxes 8.3 10.4 21.0
Income taxes 1.7 2.9 7.1
----------------------
Net profit for the period 6.6 7.5 14.0
----------------------
Attributable to:
Equity holders of the company 5.7 6.2 10.1
Non-controlling interests 0.9 1.3 3.8
Earnings per share for profit attributable
to the equity holders of the company:
Earnings per share, EUR (diluted = non-diluted) 0.15 0.16 0.26
STATEMENT OF COMPREHENSIVE INCOME I I I-IV
MEUR 2013 2012 2012
-------------------------------------------------------------------
Net profit for the period 6.6 7.5 14.0
------------------
Other comprehensive income, net of tax
Change in translation differences* 2.0 -1.8 -0.3
Gains and losses on cash flow hedges* 0.3 0.1 -0.6
Gains and losses on hedges of net investments* -0.3 0.3 0.2
Actuarial gains (losses) on defined benefit plan - - -0.3
------------------
Total other comprehensive income, net of tax 2.1 -1.4 -1.0
------------------
Total comprehensive income for the period 8.7 6.1 12.9
------------------
Total comprehensive income attributable to:
Equity holders of the Company 7.8 4.6 9.2
Non-controlling interests 0.9 1.5 3.7
* Item that may be reclassified subsequently to the statement of income
STATEMENT OF FINANCIAL POSITION Mar 31 Mar 31 Dec 31
MEUR 2013 2012 2012
-------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 73.2 71.8 72.6
Property, plant and equipment 30.1 28.9 29.3
Non-current assets
Interest-bearing 3.4 5.8 3.7
Non-interest-bearing 11.4 11.2 11.4
-------------------------------------------
118.1 117.7 117.1
Current assets
Inventories 116.4 125.0 110.6
Current assets
Interest-bearing 2.4 1.1 2.5
Non-interest-bearing 77.7 74.3 58.5
Cash and cash equivalents 30.8 29.3 38.2
-------------------------------------------
227.2 229.8 209.7
Assets classified as held-for-sale - 0.3 -
Total assets 345.3 347.8 326.8
-------------------------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity 135.9 133.1 128.3
holders of the company
Non-controlling interests 10.2 8.6 9.4
-------------------------------------------
146.1 141.7 137.7
Non-current liabilities
Interest-bearing* 77.0 10.1 78.7
Non-interest-bearing 15.4 16.4 15.6
-------------------------------------------
92.3 26.5 94.3
Current liabilities
Interest-bearing* 60.0 133.5 55.5
Non-interest-bearing 46.9 46.1 39.3
-------------------------------------------
106.9 179.6 94.8
Total equity and liabilities 345.3 347.8 326.8
-------------------------------------------
* As of April 2012 the new revolving credit facilities of the new bank loan
agreements were classified as non-current liabilities to the extent banks'
commitment is valid for longer than 12 months.
I I I-IV
KEY FIGURES 2013 2012 2012
-------------------------------------------------------------------------------
EBITDA margin, % 13.6% 16.4% 11.2%
Operating profit margin, % 11.4% 14.1% 8.9%
Return on capital employed, % 14.5% 17.4% 11.4%
Capital employed at end of period, MEUR 246.5 249.0 227.5
Net interest-bearing debt at end of 100.4 107.3 89.9
period, MEUR
Equity-to-assets ratio at end of period, 42.3% 40.8% 42.2%
%
Debt-to-equity ratio at end of period, % 68.7% 75.7% 65.3%
Earnings per share, EUR (diluted = non- 0.15 0.16 0.26
diluted)
Equity per share at end of period, EUR 3.51 3.42 3.31
Average personnel for the period 2 130 1 991 2 127
-------------------------------------------------------------------------------
Definitions of key figures are consistent with those in the financial
statement 2012.
STATEMENT OF CASH FLOWS I I I-IV
MEUR 2013 2012 2012
-------------------------------------------------------------------------------
Net profit for the period 6.6 7.5 13.9
Adjustments to net profit for the period 3.3 4.6 20.6
*
Financial items and taxes paid and -2.9 -2.5 -13.6
received
Change in working capital -15.1 -18.9 4.2
-------------------------------------------------------------------------------
Net cash generated from operating -8.1 -9.3 25.2
activities
Investments -2.0 -2.3 -7.7
Proceeds from sales of assets 0.0 0.4 0.8
Sufix brand acquisition - - -0.8
Strikemaster and Mora Ice acquisitions - -6.4 -6.7
Acquisition of other subsidiaries, net 0.0 - 0.0
of cash
Proceeds from disposal of subsidiaries, - - 0.8
net of cash
Change in interest-bearing receivables 0.0 0.0 0.0
-------------------------------------------------------------------------------
Net cash used in investing activities -2.0 -8.3 -13.6
Dividends paid to parent company's - - -8.9
shareholders
Dividends paid to non-controlling - - -1.6
interest
Net funding 2.6 18.3 9.1
Purchase of own shares -0.3 -0.1 -0.7
-------------------------------------------------------------------------------
Net cash generated from financing 2.3 18.3 -2.2
activities
Adjustments 0.1 0.2 0.2
Change in cash and cash equivalents -7.8 0.9 9.6
Cash & cash equivalents at the beginning 38.2 28.9 28.9
of the period
Foreign exchange rate effect 0.4 -0.6 -0.4
-------------------------------------------------------------------------------
Cash and cash equivalents at the end of 30.8 29.3 38.2
the 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 - - 0.1 -1.7 - - 6.2 1.5 6.1
income *
Purchase of - - - - - -0.1 - - -0.1
own shares
-------------------------------------------------------------------------------
Equity on Mar 3.6 16.7 -1.5 -5.8 4.9 -2.7 117.9 8.6 141.7
31, 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 - - 0.3 1.7 - - 5.7 0.9 8.7
income *
Purchase of - - - - - -0.3 - - -0.3
own shares
Share based - - - - - - 0.1 - 0.1
payments
Other changes - - - - - - 0.0 0.0 0.0
-------------------------------------------------------------------------------
Equity on Mar 3.6 16.7 -1.9 -2.3 4.9 -3.7 118.6 10.2 146.1
31, 2013
-------------------------------------------------------------------------------
* For the period, (net
of tax)
SEGMENT INFORMATION*
MEUR I I I-IV
Net Sales by Operating Segment 2013 2012 2012
-----------------------------------------------------
Group Products 47.1 45.8 176.4
Third Party Products 28.1 27.7 114.3
-----------------------------------------------------
Total 75.3 73.5 290.7
Operating Profit by Operating Segment
-----------------------------------------------------
Group Products 6.2 7.0 18.9
Third Party Products 2.4 3.4 7.0
-----------------------------------------------------
Total 8.6 10.4 25.9
Mar 31 Mar 31 Dec 31
Assets by Operating Segment 2013 2012 2012
------------------------------------------------------------
Group Products 226.7 227.6 214.0
Third Party Products 82.1 84.0 68.5
------------------------------------------------------------
Non-interest bearing assets total 308.7 311.5 282.5
Unallocated interest-bearing assets 36.6 36.3 44.3
------------------------------------------------------------
Total assets 345.3 347.8 326.8
Net Sales by Area** I I I-IV
MEUR 2013 2012 2012
-----------------------------------------
North America 21.7 20.5 83.6
Nordic 15.2 15.2 62.7
Rest of Europe 29.5 29.7 108.2
Rest of the world 8.9 8.1 36.2
-----------------------------------------
Total 75.3 73.5 290.7
* Segments are consistent with those in the
financial statements 2012. Segments
are described in detail in note 2 of the financial statements 2012.
KEY FIGURES BY QUARTERS I II III IV I-IV I
MEUR 2012 2012 2012 2012 2012 2013
--------------------------------------------------------------
Net sales 73.5 83.7 65.6 67.9 290.7 75.3
EBITDA 12.0 13.3 5.4 1.9 32.7 10.3
Operating profit 10.4 11.6 3.7 0.2 25.9 8.6
Profit before taxes 10.4 10.5 1.9 -1.7 21.0 8.3
Net profit for the period 7.5 7.2 1.3 -2.1 14.0 6.6
--------------------------------------------------------------
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
shown in the table below. 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.
Impact from retrospective application of revised
IAS 19 on consolidated financial statements
2012, MEUR Reported Adjustment Adjusted
-------------------------------------------------------------------------------
Impact on consolidated statement of income
Personnel expenses 62.6 0.0 62.6
Operating profit 25.9 0.0 25.9
Income taxes 7.1 0.0 7.1
Net profit for the period 13.9 0.0 14.0
Impact on statement of financial position
Deferred tax assets Jan 1, 2012 9.3 0.0 9.3
Change in deferred tax assets, income statement -0.8 0.0 -0.8
Change in deferred tax assets, other
comprehensive income 0.2 0.1 0.3
-------------------------------------------------------------------------------
Deferred tax assets, Dec 31, 2012* 8.7 0.2 8.9
*) Included in non-current non-interest bearing
assets
Retained earnings Jan 1, 2012 111.8 -0.1 111.7
Net profit for the period 10.1 0.0 10.1
Other comprehensive income for the period - -0.3 -0.3
Other changes -8.7 - -8.7
-------------------------------------------------------------------------------
Retained earnings Dec 31, 2012 113.2 -0.3 112.8
Employee benefit obligations, Jan 1, 2012 1.3 0.1 1.4
Period change, income statement 0.1 0.0 0.1
Period change, other comprehensive income - 0.4 0.4
Effect of any curtailments or settlements -0.1 - -0.1
-------------------------------------------------------------------------------
Employee benefit obligations Dec 31, 2012* 1.4 0.5 1.9
*) Included in non-current non-interest bearing
liabilities
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-March 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 March 31, 2013, the book value of inventories included a provision for net
realizable value of 4.5 MEUR (3.1 MEUR at March 31, 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.
Non-recurring income and expenses included in I I I-IV
operating profit
MEUR 2013 2012 2012
-------------------------------------------------------------------------------
Costs related to business acquisitions - 0.0 0.0
Net gain from sale of gift manufacturing unit in - 0.0 -0.7
China*
Gain on disposal of real estate in Finland - 0.1 0.1
Other non-recurring items 0.0 0.0 0.0
-------------------------------------------------------------------------------
Total included in EBITDA and operating profit 0.0 0.0 -0.6
-------------------------------------------------------------------------------
* Including an adjustment to sales price and costs related to the
disposed business.
Commitments Mar 31 Mar 31 Dec 31
MEUR 2013 2012 2012
-------------------------------------------------------------------------------
On own behalf
Business mortgage* - 16.1 -
Guarantees 0.1 0.1 0.1
Minimum future lease payments on 15.2 14.2 16.6
operating leases
-------------------------------------------------------------------------------
* The Group refinanced its loan facilities in April 2012, and the business
mortgage related to the previous facility was released. The new loan
facilities are unsecured and include normal financial covenants.
Sales Other
Related party and other Pur- Rents expen- Recei- Paya-
transactions
MEUR income chases paid ses vables bles
--------------------------------------------------------------------
I 2013
Joint venture 0.4 - - - 0.3 -
Shimano Normark
UK Ltd
Associated 0.0 0.0 - - - -
company Lanimo Oü
Entity with - - 0.0 0.0 0.0 -
significant
influence over
the Group*
Management - - 0.1 - - 0.0
I 2012
Joint venture 0.7 - - - 0.4 0.0
Shimano Normark
UK Ltd
Associated - 0.0 - - 0.0 -
company Lanimo Oü
Entity with - - 0.0 0.0 0.0 -
significant
influence over
the Group*
Management - - 0.1 - 0.0 0.0
I-IV 2012
Joint venture 3.9 - - - 0.1 0.0
Shimano Normark
UK Ltd
Associated - 0.0 - - 0.0 -
company Lanimo Oü
Entity with - - 0.2 0.1 0.0 -
significant
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.
Open derivatives Mar 31 Mar 31 Dec 31
2013 2012 2012
-------------------------------------------------------
Nominal Fair Nominal Fair Nominal Fair
MEUR Value Value Value Value Value Value
-------------------------------------------------------------------------------
Operative hedges
Foreign currency 47.5 0.1 4.5 0.1 35.1 -0.4
derivatives
Monetary hedges
Foreign currency 16.6 0.0 - - 27.2 0.0
derivatives
Interest rate 85.3 -3.5 67.2 -2.0 85.0 -3.0
derivatives
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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
I I I-IV
2013 2012 2012
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Included in operating profit 0.5 -0.2 -0.6
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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 Mar 31
2013
MEUR Carrying value Fair value
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Financial assets
Loans and receivables 106.7 106.7
Available-for-sale financial assets (level 3) 0.3 0.3
Derivatives (level 2) 0.5 0.5
Financial liabilities
Financial liabilities at amortized cost 166.5 167.1
Derivatives (level 2) 3.9 3.9
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Share based incentive plan
The Group has one share based incentive plan for the Group's key personnel. The
plan includes one earning period which commenced on April 1, 2012 and will end
on June 30, 2013. The potential reward from the plan will be based on
development of Rapala Group's inventory levels and EBITDA. The potential reward
will be paid primarily as Rapala VMC Corporation's shares in August 2013. 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 63 337 own shares. At the
end of the reporting period the company held 764 737 own shares, representing
1.9% 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 4.78 EUR.
During the reporting period, 1 000 860 shares (1 848 949) were traded at a high
of 5.20 EUR and a low of 4.56 EUR. The closing share price at the end of the
period was 4.73 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 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. 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 Group's sales are to some extent
affected by weather as it impacts consumer demand and the timing and length of
the seasons. Late beginning of 2013 summer fishing season may reduce the total
sales volumes of the season. The Group is more affected by winter weathers after
the expansion into winter fishing business. On the other hand, unfavorable
winter weathers may lead to early summer fishing season and resulting in higher
summer fishing sales.
Working capital and inventory management is still a top priority for the Group
and initiatives to improve the Group's inventory turnovers and shorten the
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 Group's supply chain to meet the demand. Management balances
between risk of shortages and risk of excess production and purchasing, which
would lead to excess inventories in the Group.
The ramp-up phase of the new production facilities in Batam, Indonesia, as well
as production transfers from China to 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 during latter part of the year.
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
the 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 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. Declining oil
price may negatively impact the growing Russian market, while same time
supporting consumption in USA. 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. The disturbances in global economy may cause heavy and
unexpected fluctuations in foreign exchange rates. The Group monitors actively
its currency position and related risks. 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 operating
profit. Following the implementation of an updated risk policy in 2012 the
nominal value of hedging instruments were increased and thereby potentially
increasing the quarterly volatility of unrealized items in 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#1695421]
RAPALA VMC CORPORATION'S JANUARY TO MARCH 2013: SALES GROWTH CONTINUED DESPITE DELAYED SPRING. POSITIVE DEVELOPMENT IN WORKING CAPITAL AND CASH FLOW.
| Quelle: Rapala VMC
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