INTERIM REPORT JANUARY TO JUNE 2009
(Thomson Reuters ONE) - Rapala VMC CorporationStock Exchange ReleaseJuly 24, 2009 at 9.30 a.m.Turnaround in cash flow in a tough market situation with positivesigns in North America- Net sales for the second quarter were below last year levels at67.7 MEUR (II/08: 74.2 MEUR). Net sales for the first six monthsdecreased to 132.9 MEUR (I-II/08:139.4 MEUR).- Operating profit for April to June, excluding non-recurring items,was affected by the decrease in sales and negative currency movementsespecially in Scandinavia and East Europe and reached 10.2 MEUR (14.1MEUR). Comparable operating profit for the six-month period was 20.4MEUR (23.8 MEUR). Reported operating profit was 9.4 MEUR (13.8 MEUR)for the quarter and 19.5 MEUR (24.5 MEUR) for the first half of theyear.- Net profit for the second quarter was 7.4 MEUR (9.4 MEUR) and 13.6MEUR (16.2 MEUR) for the first half of the year. Earnings per sharewere 0.16 EUR (0.21 EUR) for April to June and 0.31 EUR (0.37 EUR)for January to June.- The major working capital initiative started last Novemberprogressed on plan and the results started to gradually materializeduring the second quarter. The general economic situation andsimultaneous working capital actions of several customers have sloweddown the speed of the change but the positive progress started in thesecond quarter is expected to continue until the end of the year withadditional improvement continuing in 2010. Accordingly, the cash flowfrom operating activities for the second quarter improved to 17.8MEUR (6.2 MEUR) and was -2.0 MEUR (-10.1 MEUR) for the first sixmonths.- In the second quarter, the Group continued to implement itsstrategy for profitable growth. The establishment of a distributioncompany in Romania was started and a performance improvement projectinitiated in Hungary. Integration of Sufix fishing line business anddevelopment of manufacturing operations in China proceeded on plan.Manufacturing volumes have been adjusted to support the ongoingworking capital initiative.- Since the beginning of the year, there has been no material changein the market situation and general outlook for 2009The attachment presents the interim review by the Board of Directorsas well as the accounts.A conference call on the second quarter result will be arranged todayat 4 p.m. Finnish time (3 p.m. CET). Please dial +44 (0)20 7784 1038or +1 347 366 9564 (pin code: 543443#) five minutes before thebeginning of the event and request to be connected to Rapalateleconference. A replay facility will be available for 14 daysfollowing the teleconference. The number (pin code: 543443#) to dialis +44 (0)20 7806 1970. Financial information and teleconferencereplay facility are available at www.rapala.com.For further information, please contact:Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540Jouni Grönroos, Chief Financial Officer, +358 9 7562 540Olli Aho, Investor Relations, +358 9 7562 540Distribution: NASDAQ OMX Helsinki and Main MediaMarket Situation and SalesContinuing weakness and uncertainty in global economy, as well asunfavorable foreign exchange movements affected the Group's net salesnegatively during the second quarter. In the Nordic countries, thenet sales were also affected by the late spring. In North America,the market conditions seem to have stabilized and show increasingnumber of positive signs although the sales volumes between differentretailers seem to change significantly. The general market conditionsin Australia, South Africa and in part of the Asia continued tightduring the second quarter but many of the Asian distribution unitsimproved their sales from last year. Market situation in manyEuropean countries like France and Spain as well as Eastern Europe isstill under pressure. Sales in Baltic countries have clearly sufferedfrom the bad economic situation in the area. Additional priceincreases introduced earlier in the year are compensating part of theweakness of local currencies and slower demand for higher pricecategory products.Net sales for April to June, which traditionally is the strongestquarter of the year due to seasonality, were below last year levelsat 67.7 MEUR (2008: 74.2 MEUR). Net sales for the first half of theyear were 132.9 MEUR (139.4 MEUR). The net effect of thestrengthening of the US dollar (USD) and weakening of many othercurrencies like Swedish and Norwegian crowns decreased the net salesfor the second quarter by 1.7 MEUR and 1.3 MEUR for the first sixmonths.Net sales of Group Fishing Products, supported by the sales of newSufix fishing lines and strengthening of USD, were up 4% for thesecond quarter and 7% for the first half of the year. Net sales ofOther Group Products decreased 32% for the quarter and 26% for thesix-month period as a result of reduced sales of gift products andsubcontracting services. Net sales of Third Party Products decreased19% for April to June and 15% for January to June mainly because ofthe weakening of many East European and Scandinavian currencies anddecreased sales of higher price category products like fishingelectronics and expensive reels.Net sales in North America increased 19% for the second quarter and16% for the first half of the year as a result of the strengtheningof the USD and increased business activity. In the Nordic countries,second quarter net sales decreased 25% as a result of weakening ofSwedish and Norwegian crowns, late spring and summer as well astiming of some deliveries between the first two quarters.Accordingly, the six-month net sales in Nordics were down only 5%.Net sales in Rest of Europe were down by 19% for the quarter and 17%for the six-month period due to relatively weak sales in East Europe,which was further reduced by weakening of local currencies. Net salesin Rest of the World were in April to June on last year level and up10% for January to June as a result of the new sales of Sufixproducts, good performance of many Asian distribution units andstrengthening of USD.Financial Results and ProfitabilityOperating profit for April to June, excluding non-recurring items,was affected by the decrease in sales and negative currency movementsespecially in Scandinavia and East Europe and reached 10.2 MEUR (14.1MEUR). Profitability was also affected by special low-margin salescampaigns to reduce inventories. Second quarter operating profitdecreased 0.4 MEUR from last year due to non-cash bookings related toshare based incentive plans. Operating margin, excludingnon-recurring items, was 15.1% (19.0%).Reported operating profit for the second quarter was at 9.4 MEUR(13.8 MEUR) and it included 0.7 MEUR of write downs on leaseimprovements in the Chinese factory, from where the operations werepartly moved to other locations and external outsourcing partners aswell as 0.1 MEUR other non-recurring costs. Operating profit forApril to June in 2008 included 0.3 MEUR (net) non-recurring expenses.Reported three-month operating margin was 13.9% (18.7%) and return oncapital employed 18.6% (29.3%).Key figures II II I-II I-II I-IVMEUR 2009 2008 2009 2008 2008Net sales 67.7 74.2 132.9 139.4 243.0EBITDA as reported 11.5 15.4 23.1 27.6 37.5EBITDA excl. one-off items 11.6 15.7 23.3 26.9 36.7Operating profit as reported 9.4 13.8 19.5 24.5 31.3Operating profit excl. one-offs 10.2 14.1 20.4 23.8 30.5Comparable operating profit for the first half of the year was downmainly as a result of decrease in sales, and reached 20.4 MEUR (23.8MEUR). Operating profit for the six-month period decreased 0.3 MEURfrom last year due to the non-cash bookings related to share basedincentive plans. Operating margin, excluding non-recurring items,decreased to 15.3% (17.1%).Reported operating profit for the first half of the year amounted to19.5 MEUR (24.5 MEUR) including 0.9 MEUR of non-recurring write-downsand costs. Operating profit for January to June in 2008 included 0.7MEUR (net) non-recurring gains. Reported six-month operating marginwas 14.6% (17.6%) and return on capital employed 19.2% (25.9%).Operating profit of Group Fishing Products decreased 24% for thesecond quarter as a result of non-recurring costs and write-downs aswell as weakening of many currencies but was still 4% above last yearlevel for the first half of the year as a result of strong sales.Operating profit of Other Group Products fell to a loss for both thequarter and for the six-month period as a result of the major drop insales of gift products and subcontracting services. Operating profitof Third Party Products decreased 40% for April to June and 40% forJanuary to June due to negative currency movements and reduced sales.Financial (net) income was 0.4 MEUR (expense of 1.1 MEUR) for thesecond quarter. Net interest expenses were down to 1.0 MEUR (1.5MEUR) and the (net) currency exchange gains booked in financial itemswere 1.4 MEUR (0.4 MEUR). For the first six months, financial (net)expenses were 1.2 MEUR (2.4 MEUR), net interest expenses 1.9 MEUR(2.9 MEUR) and (net) currency exchange gains 0.8 MEUR (0.5 MEUR).Net profit decreased for the second quarter to 7.4 MEUR (9.4 MEUR)and for the first half of the year to 13.6 MEUR (16.2 MEUR). Earningsper share were 0.16 EUR (0.21 EUR) for April to June and 0.31 EUR(0.37 EUR) for January to June.Cash Flow and Financial PositionCash flow from operating activities increased from last year as aresult of decrease in working capital and amounted to 17.8 MEUR (6.2MEUR) for the second quarter and -2.0 MEUR (-10.1 MEUR) for the first half of the year.The major working capital initiative started last November progressedon plan and the results started to gradually materialize during thesecond quarter. Inventories decreased 9.5 MEUR (decrease of 0.0MEUR). This initiative includes a wide variety of actions to developthe Group's internal and external supply chains, change ways ofworking in production planning and internal order management and, toimplement supporting IT systems to facilitate the new processes. Thegeneral financial situation and simultaneous working capital actionsof several customers have slowed down the speed of the change but thepositive progress started in the second quarter is expected tocontinue until the end of the year with additional improvementcontinuing in 2010.Cash used in investing activities amounted to 1.9 MEUR (1.4 MEUR) forthe second quarter. In addition to the normal capital expenditure of1.0 MEUR (1.4 MEUR) and 1.2 MEUR (0.1 MEUR) of acquisitions, itincluded 0.3 MEUR (0.0 MEUR) proceeds from sale of assets. Cash usedin investing activities for the six-month period, 2.4 MEUR (3.4MEUR), included capital expenditure of 2.5 MEUR (3.2 MEUR),acquisitions of 1.2 MEUR (0.4 MEUR) and 1.3 MEUR (0.1 MEUR) proceedsfrom sale of assets.Net interest-bearing debt was up from last June at 101.0 MEUR (Dec2008: 89.5 MEUR) due to higher level of working capital. Theliquidity of the Group remained good throughout the quarter.Equity-to-assets ratio remained at the levels of last June at 37.5%(Dec 2008: 38.0%). Gearing was seasonally up from the end of 2008(Dec 2008: 86.4%) but improved from last June from 96.1% to 91.4%.Strategy Implementation - GrowthDuring the second quarter, the management continued discussions andnegotiations regarding acquisitions and business combinations tofurther implement the Group's strategy for profitable growth.Development of organic growth also in terms of extensions of currentproduct categories as well as special marketing, sales and brandinitiatives continued.During the quarter, the Group started the needed procedures toestablish a distribution company in Romania to support the salesgrowth in South East Europe. Romanian population of almost 22 millionand fast developing economy provide a solid basis for a distributioncompany while being so far served from the Hungarian distributioncentre.Integration of the new Sufix business acquired in 2008 progressed onplan and sales of Sufix fishing lines have had a good start. Rapalaaims to expand its fishing line sales in the next 2-3 years to above20 MEUR. The strategic long-term target is to increase the fishingline sales to 30-40 MEUR and gain a significant market share of theglobal fishing line business.The sales of the new Trigger X products with fish pheromones havestarted with selected distribution channels. These new products willbe offered later on to a wider distribution in line with the ongoingincrease of production capacity. A big variety of new products for2010 season were introduced for the global fishing tackle market inJune and July and the new generation lure - Max Rap - has alreadystarted to gain rewards, e.g. in the world's biggest fishing tackleshow EFTTEX it was awarded in June as the most innovative lure of theyear.Strategy Implementation - ProfitabilityStrong emphasis on performance improvement initiatives continued inthe second quarter. New performance improvement initiatives werestarted while the benefits from the previous initiatives have startedto capitalize.A new performance improvement initiative was initiated in Hungary toensure continuous leadership in the fast growing South East Europeanmarket as well as improved financial performance and reduced workingcapital.In the USA, the custom paint shop for Luhr Jensen lures was closedand the previously outsourced production of Terminator lures wastransferred to the Group's Chinese factory.A major supply chain and logistics initiative was also started in thesecond quarter to shorten the lead times and further improve theservice levels to customers.The performance improvement initiatives at the Group's manufacturingfacilities in China continued. As a result of streamlining theoperations, increasing subcontracting and cutting the capacity tomore quickly adjust to and, more accurately meet the marketrequirements, the Group has reduced the headcount in China by some 2300 persons since June 2008. The selection and auditing of majorsubcontractors have been finalized and manufacturing agreements havebeen signed. With the most important subcontractors the Group enteredinto exclusive manufacturing agreements to secure and guarantee thehigh quality of products and agreed service levels. Despite theincreased use of outsourcing, key manufacturing processes will bekept in-house. Further development and fine-tuning of the newoperating model in the Chinese manufacturing operations will continueduring the second half of 2009.Total Group headcount at the end of June was 2 233, down 52% fromJune 2008. This major reduction results mainly from the changes inthe operating model in the Chinese manufacturing unit but theconsolidation of French operations, restructuring of European luremanufacturing and adjusting manufacturing volumes to support ongoingworking capital project have also resulted in a further reduction ofalmost 150 employees. At the same time, new personnel have beenrecruited to the new Sufix business and to support sales growth insome distribution units.Short-term OutlookSince the beginning of the year, there has been no material change inthe market situation and general outlook for 2009, which remainschallenging. There are some signs of stabilization in the NorthAmerican market but the slowdown and uncertainty in Europeaneconomies as well as in many Asian countries and the Southernhemisphere are expected to continue during the coming months.Despite this challenging market situation but affected by theweakening of many local currencies in countries where the Groupoperates, it is expected that the net sales for 2009 will be somewhatbelow the previous year level. Excluding non-recurring items, thetarget is to maintain the operating margin quite close to the goodlevels reached in 2008.While the Group continues to implement its strategy for profitablegrowth, reducing working capital and increasing cash flow fromoperating activities will be one of the key themes in the second halfof 2009 together with the finalization of the ongoing performanceimprovement initiatives and the integration of the new fishing linebusiness.At the end of June 2009, the Group's order backlog was down 8% fromlast June to 22.6 MEUR (Dec. 2008: 34.5 MEUR).Third quarter interim report will be published on October 23.Helsinki, July 24, 2009Board of Directors of Rapala VMC CorporationINTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)INCOME STATEMENT II II I-II I-II I-IVMEUR 2009 2008 2009 2008 2008Net sales 67.7 74.2 132.9 139.4 243.0Other operating income 0.3 0.3 0.4 1.8 3.1Cost of sales 38.0 39.9 73.5 74.6 135.3Other costs and expenses 18.4 19.2 36.7 38.9 73.2EBITDA 11.5 15.4 23.1 27.6 37.5Depreciation and amortization 2.1 1.5 3.6 3.1 6.2Operating profit 9.4 13.8 19.5 24.5 31.3Finance income and expenses -0.4 1.1 1.2 2.4 4.8Share of results in associates 0.0 0.0 0.0 0.0 0.0Profit before taxes 9.8 12.8 18.3 22.1 26.5Income taxes 2.4 3.4 4.7 5.8 7.3Net profit for the period 7.4 9.4 13.6 16.2 19.2Attributable to:Equity holders of the Company 6.2 8.2 12.1 14.5 17.7Minority interest 1.3 1.2 1.5 1.7 1.6Earnings per share for profitattributableto the equity holders of the Company:Earnings per share, EUR (diluted =non-diluted) 0.16 0.21 0.31 0.37 0.45STATEMENT OF COMPREHENSIVE INCOME II II I-II I-II I-IVMEUR 2009 2008 2009 2008 2008Net profit for the period 7.4 9.4 13.6 16.2 19.2Other comprehensive income, net of taxChange in translation differences -1.3 0.5 0.2 -3.0 -1.2Gains and losses on cash flow hedges 0.4 0.2 0.4 -0.1 -0.2Gains and losses on hedges of netinvestments 1.0 0.0 0.1 -0.1 -2.8Fair value gains on available-for-saleinvestments - - - - -0.1Total other comprehensive income, net oftax 0.2 0.7 0.7 -3.2 -4.3Total Comprehensive Income for theperiod 7.6 10.1 14.3 13.1 14.9Total comprehensive income attributableto:Equity holders of the Company 6.2 8.9 12.8 11.3 13.4Minority interest 1.4 1.2 1.5 1.7 1.6STATEMENT OF FINANCIAL POSITION June 30 June 30 Dec 31MEUR 2009 2008 2008ASSETSNon-current assetsIntangible assets 57.6 49.4 57.6Property, plant and equipment 26.8 27.9 28.7Non-current financial assets Interest-bearing 1.0 0.6 0.5 Non-interest-bearing 7.5 7.3 7.7 92.9 85.3 94.6Current assetsInventories 103.2 89.7 98.4Current financial assets Interest-bearing 0.1 0.0 0.4 Non-interest-bearing 58.2 74.9 49.5Cash and cash equivalents 40.6 23.8 30.6 202.0 188.5 178.9Assets classified as held-for-sale 0.3 0.5 -Total assets 295.2 274.2 273.4EQUITY AND LIABILITIESEquityEquity attributable to the equity holders ofthe Company 107.0 100.2 101.7Minority interest 3.5 2.4 1.9 110.5 102.7 103.7Non-current liabilitiesInterest-bearing 43.8 48.3 42.8Non-interest-bearing 10.0 6.3 10.5 53.8 54.6 53.3Current liabilitiesInterest-bearing 98.8 74.8 78.1Non-interest-bearing 32.1 42.1 38.3 130.9 116.9 116.4Total equity and liabilities 295.2 274.2 273.4KEY FIGURES II II I-II I-II I-IV 2009 2008 2009 2008 2008EBITDA margin, % 17.1% 20.7% 17.4% 19.8% 15.5%Operating profit margin, % 13.9% 18.7% 14.6% 17.6% 12.9%Return on capital employed, % 18.6% 29.3% 19.2% 25.9% 16.9%Capital employed at end of period, MEUR 211.5 201.4 211.5 201.4 193.2Net interest-bearing debt at end ofperiod, MEUR 101.0 98.7 101.0 98.7 89.5Equity-to-assets ratio at end ofperiod, % 37.5% 37.5% 37.5% 37.5% 38.0%Debt-to-equity ratio at end of period,% 91.4% 96.1% 91.4% 96.1% 86.4%Earnings per share, EUR 0.16 0.21 0.31 0.37 0.45Fully diluted earnings per share, EUR 0.16 0.21 0.31 0.37 0.45Equity per share at end of period, EUR 2.73 2.54 2.73 2.54 2.59Average personnel for the period 2 447 4 489 2 449 4 580 4 143STATEMENT OF CASH II I-IIFLOWS II 2008 2009 I-II I-IV MEUR 2009 2008 2008 Net profit for the period 7.4 9.4 13.6 16.2 19.2 Adjustments to net profit for the period * 4.9 3.7 10.1 8.7 13.0 Financial items and taxes paid and received -1.3 -3.5 -3.5 -6.3 -14.0 Change in working capital 6.7 -3.4 -22.3 -28.7 -12.7 Net cash generated from operating activities 17.8 6.2 -2.0 -10.1 5.4 Investments -1.0 -1.4 -2.5 -3.2 -7.1 Proceeds from sales of assets 0.3 0.0 1.3 0.1 2.2 Sufix brand acquisition -1.1 - -1.1 - -1.5 Acquisition of subsidiaries, net of cash -0.1 -0.1 -0.1 -0.4 -0.5 Change in interest-bearing receivables -0.1 0.1 -0.1 0.1 0.0 Net cash used in investing activities -1.9 -1.4 -2.4 -3.4 -6.8 Dividends paid -7.5 -6.9 -7.5 -6.9 -6.9 Net funding 1.9 1.6 22.0 18.3 11.9 Purchase of own shares - -0.3 0.0 -0.3 -0.9 Net cash generated from financing activities -5.6 -5.6 14.5 11.1 4.1 Adjustments -0.3 -0.4 -0.1 -0.6 0.9 Change in cash and cash equivalents 10.0 -1.3 10.0 -3.1 3.6 Cash & cash equivalents at the beginning of the period 30.8 24.9 30.6 27.3 27.3 Foreign exchange rate effect -0.3 0.2 0.0 -0.5 -0.4 Cash and cash equivalents at the end of the period 40.6 23.8 40.6 23.8 30.6* Includes reversal of non-cash items, income taxes and financialincome and expenses.STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the Company Cumul. Fund for Share Fair trans- invested Re- Mino- pre- value lation non-rest- Own tained rity Share mium re- diffe- ricted sha- earn- inte- Total capital fund serve rences equity res ings rest equityEquity on Jan1, 2008 3.6 16.7 0.0 -9.8 4.9 - 80.6 0.9 96.9Comprehensiveincome* - - -0.1 -3.1 - - 14.5 1.7 13.1Purchase ofown shares - - - - - -0.3 - - -0.3Dividendspaid - - - - - - -6.9 - -6.9Share basedpayment - - - - - - 0.1 - 0.1Other changes - - - - - - 0.0 -0.2 -0.2Equity onJune 30, 2008 3.6 16.7 -0.1 -12.9 4.9 -0.3 88.3 2.4 102.7Equity on Jan1, 2009 3.6 16.7 -0.3 -13.8 4.9 -0.9 91.5 1.9 103.7ComprehensiveIncome* - - 0.4 0.3 - - 12.1 1.5 14.3Purchase ofown shares - - - - - 0.0 - - 0.0Dividendspaid - - - - - - -7.5 - -7.5Equity onJune 30, 2009 3.6 16.7 0.1 -13.5 4.9 -0.9 96.2 3.5 110.5* For the period (net of tax)SEGMENT INFORMATION* II II I-II I-II III IV I-IVNet Sales by OperatingSegment 2009 2008 2009 2008 2008 2008 2008Group Fishing Products 38.0 36.7 75.4 70.4 23.4 26.7 120.4Other Group Products 3.8 5.6 7.7 10.4 5.8 6.5 22.7Third Party Products 26.1 32.1 50.1 59.0 23.8 17.9 100.7Intra-Group (Other GroupProducts) -0.2 -0.2 -0.3 -0.5 -0.2 -0.2 -0.9Total 67.7 74.2 132.9 139.4 52.7 50.9 243.0Operating Profit by OperatingSegmentGroup Fishing Products 6.1 8.0 13.9 13.4 1.7 4.0 19.1Other Group Products -0.1 0.2 0.0 1.7 0.4 0.2 2.2Third Party Products 3.4 5.7 5.6 9.4 1.6 -1.0 10.0Total 9.4 13.8 19.5 24.5 3.6 3.2 31.3 June 30 June 30 Sept 30 Dec. 31Assets by Operating Segment 2009 2008 2008 2008Group Fishing Products 163.8 158.5 165.2 167.5Other Group Products 9.9 11.4 12.4 9.3Third Party Products 80.0 80.0 65.0 65.3Intra-Group -0.1 -0.1 -0.1 -0.1Non-interest bearing assets total 253.6 249.8 242.5 242.0Unallocated interest-bearing assets 41.7 24.4 28.0 31.4Total assets 295.2 274.2 270.5 273.4Liabilities by Operating SegmentGroup Fishing Products 27.3 29.6 33.7 30.1Other Group Products 4.6 3.0 1.8 2.6Third Party Products 10.3 15.9 11.9 16.1Intra-Group (Other Group Products) -0.1 -0.1 -0.1 -0.1Non-interest bearing liabilitiestotal 42.0 48.4 47.2 48.8Unallocated interest-bearingliabilities 142.7 123.1 116.9 121.0Total liabilities 184.7 171.5 164.1 169.7Net Sales by Area** II II I-II I-II I-IVMEUR 2009 2008 2009 2008 2008North America 18.3 15.4 37.8 32.7 57.5Nordic 26.4 35.3 62.2 65.8 105.9Rest of Europe 25.9 31.9 51.4 61.6 101.3Rest of the world 12.7 12.9 29.0 26.3 54.3Intra-Group -15.6 -21.2 -47.6 -47.1 -76.0Total 67.7 74.2 132.9 139.4 243.0* The new operating segments (IFRS 8) include the following productlines: Group Fishing Products include Group Lures, Fishing Hooks,Fishing Lines and Fishing Accessories, Other Group Products includeGroup manufactured and/or branded products for winter sports and someother businesses and Third Party Products include non-Group brandedfishing products and third party products for hunting, outdoor andwinter sports.**Geographical sales information has been prepared on source basisi.e. based on the location of the business unit. Each area shows thesales generated in that area excluding intra-Group transaction withinthat area, which have been eliminated. Intra-Group line includes theeliminations of intra-Group transactions between geographical areas.KEY FIGURES BY QUARTERS I II III IV I-IV I IIMEUR 2008 2008 2008 2008 2008 2009 2009Net sales 65.1 74.2 52.7 50.9 243.0 65.2 67.7EBITDA 12.2 15.4 5.2 4.8 37.5 11.6 11.5Operating profit 10.6 13.8 3.6 3.2 31.3 10.0 9.4Profit before taxes 9.3 12.8 2.6 1.9 26.5 8.5 9.8Net profit for the period 6.8 9.4 2.0 1.0 19.2 6.2 7.4NOTES TO THE INCOME STATEMENT AND FINANCIAL POSITIONThe financial statement figures included in this release areunaudited.This report has been prepared in accordance with IAS 34. Accountingprinciples adopted in the preparation of this report are consistentwith those used in the preparation of the Annual Report 2008, exceptfor the adoption of the new or amended standards and interpretations.Adoption of the amended standard IAS 1 affected the presentation ofGroup's consolidated financial statements, especially theconsolidated income statement and the statement of changes in equity.Adoption of IFRS 8 changed the presentation of segment information.Adoption of IAS 23, IAS 32, IFRS 2 and IAS 39/IFRS 7 as well as thenew interpretation IFRIC 13 did not result in any changes in theaccounting principles that would have affected the informationpresented in this interim report.Definition of key figuresDefinitions of key figures used in the interim report are consistentwith those used in the Annual Report 2008.Use of estimates and rounding of figuresComplying with IFRS in preparing financial statements requires themanagement to make estimates and assumptions. Such estimates affectthe reported amounts of assets and liabilities, the disclosure ofcontingent assets and liabilities, and the amounts of revenues andexpenses. Although these estimates are based on the management's bestknowledge of current events and actions, actual results may differfrom these estimates.All figures in these accounts have been rounded. Consequently the sumof individual figures can deviate from the presented sum figure. Keyfigures have been calculated using exact figures.Events after the end of the interim periodThe Group has no knowledge of any significant events after the end ofthe interim period that would have a material impact on the financialstatements for January-June 2009. Material events after the end ofthe interim period, if any, have been discussed in the interim reviewby the Board of Directors.InventoriesAt June 30, 2009, the book value of inventories differed from its netrealizable value by 2.2 MEUR (2.2 MEUR at June 30, 2008 and 2.4 MEURat December 31, 2008).Assets held-for-sale and sale of assetsAs part of the consolidation of French operations, Rapala sold fewwarehouses and office buildings in France in 2008. This resulted in acapital gain of 1.4 MEUR in 2008. Rapala is in the process ofdisposing its old office premises in Hong Kong, which are recognizedas assets held-for-sale in June 2009.Non-recurring income and expenses includedin operating profit II II I-II I-II I-IVMEUR 2009 2008 2009 2008 2008Consolidation of French operations 0.0 - 0.0 -0.1 -0.1Closure of Irish lure factory 0.0 0.0 -0.1 0.0 0.0Sale of French warehouse and office building - -0.1 - 1.2 1.4Other restructuring costs -0.1 0.0 -0.1 -0.2 -0.3Other non-recurring items - -0.2 - -0.2 -0.2Total included in EBITDA -0.1 -0.3 -0.2 0.7 0.8Non-recurring impairment of tangible assetsin China -0.7 - -0.7 - -Total included in operating profit -0.8 -0.3 -0.9 0.7 0.8Commitments June 30 June 30 Dec 31MEUR 2009 2008 2008On own behalfBusiness mortgage 16.1 16.1 16.1Guarantees 0.7 0.6 0.3Minimum future lease payments on operatingleases 9.9 7.9 11.3Related partytransactions Rents OtherMEUR Purchases paid expenses Receivables PayablesI-II 2009Associated companyLanimo Oü 0.1 - - 0.0 -Entity withsignificant influenceover the Group* - 0.1 0.0 0.0 0.0Management - 0.1 0.0 - 0.0I-II 2008Associated companyLanimo Oü 0.1 - - 0.0 -Entity withsignificant influenceover the Group - 0.1 0.0 0.0 -Management 0.0 0.1 0.1 - 0.0I-IV 2008Associated companyLanimo Oü 0.1 - - 0.0 -Entity withsignificant influenceover the Group* - 0.2 0.1 0.0 0.0Management* - 0.2 0.0 0.0 0.0* Lease agreement for the real estate for the consolidated operationsin France and a service fee.Open derivatives Nominal Positive fair Negative fair Net fairMEUR amount values values valuesJune 30, 2009Foreign currencyforwards 2.6 0.1 0.0 0.0Interest rate swaps 140.4 0.4 0.3 0.1Total 143.1 0.5 0.3 0.1June 30, 2008Foreign currencyforwards 6.5 0.0 0.3 -0.3Interest rate swaps 14.3 0.0 0.1 -0.1Total 20.8 0.0 0.4 -0.4Dec 31, 2008Foreign currencyforwards 7.2 0.3 - 0.3Interest rate swaps 14.1 0.0 0.4 -0.4Total 21.3 0.3 0.4 -0.1Group's financial risks and hedging principles are described indetail in the Annual Report 2008.Share-based paymentsThe Group had two separate share-based payment programs in place onJune 30, 2009: one stock option program and one synthetic optionprogram settled in cash. Terms and conditions of the option programare described in detail in the Annual Report 2008. The options arevalued at fair value on the grant date by using the Black-Scholesoption-pricing model. The total estimated value of the programs inplace is 1.4 MEUR. Share-based payment programs are valued at fairvalue on the grant date and recognized as an expense in the incomestatement during the vesting period with a corresponding adjustmentto the equity or liability.Grant date is the date at which the entity and another party agree toa share-based payment arrangement, being when the entity and thecounterparty have a shared understanding of the terms and conditionsof the arrangement. Regarding the option programs in place, 454 750share options (2004B) were granted on June 8, 2004, 46 250 shareoptions (2004B) on February 14, 2006 and 978 500 synthetic options(2006A and 2006B) on December 14, 2006. On March 31, 2009, theexercise period for the 2004A stock option program expired. The 2004Bstock option program is exercisable between March 31, 2008 and March31, 2010 at an exercise price of 6.09 EUR, the 2006A synthetic optionprogram is exercisable between March 31, 2009 and March 31, 2011 atan exercise price of 6.14 EUR and the 2006B synthetic option programis exercisable between March 31, 2010 and March 31, 2012 at anexercise price of 5.95 EUR. The exercise prices have been reduced bythe amount of dividends distributed after the subscription period foroption rights has ended and before the commencement of thesubscription period. Applying of IFRS 2 increased operating profitwith 0.3 MEUR in January-December 2008 and 0.2 MEUR in January-June2008 and reduced operating profit 0.1 MEUR in January-June 2009mainly due to change in fair value of the synthetic option program.In March 2009, Rapala announced that its Board had approved a newshare-based incentive plan (Plan) for the Group's key personnel. Theaim of the Plan is to combine the objectives of the shareholders andthe key personnel in order to increase the value of the Company, tocommit the key personnel to the Company, and to offer them acompetitive reward plan based on holding the Company shares. The Planincludes one earning period, which commenced on January 1, 2009 andwill end on December 31, 2010. The potential reward from the Planwill be based on the Rapala's earnings per share (EPS) in 2010. Thepotential reward from the Plan will be paid as the Company's sharesin 2011. The target group of the Plan consists of some 50 keyemployees. The gross rewards to be paid on the basis of the Plan willcorrespond to the value of a maximum total of 200 000 Rapala shares.Since the grant date of the Plan was June 23, 2009 it had not amaterial impact on operating profit in January-June 2009.Shares and share capitalBased on authorization given by the Annual General Meeting in April2007, the Board can decide to issue shares through issuance ofshares, options or special rights entitling to shares in one or moreissues. The number of new shares to be issued including the shares tobe obtained under options or special rights shall be no more than 10000 000 shares. This authorization includes the right for the Boardto resolve on all terms and conditions of the issuance of new shares,options and special rights entitling to shares, including issuance indeviation from the shareholders' preemptive rights. Thisauthorization is in force for a period of 5 years from the resolutionby the Annual General Meeting. The Board is also authorized toresolve to repurchase a maximum of 2 000 000 shares by using funds inthe unrestricted equity. This amount of shares corresponds to lessthan 10% of all shares of the company. The shares will be repurchasedthrough public trading arranged by NASDAQ OMX Helsinki at the marketprice of the acquisition date. The shares will be acquired and paidin pursuance of the rules of NASDAQ OMX Helsinki and applicable rulesregarding the payment period and other terms of the payment. Thisauthorization is effective until the end of the next Annual GeneralMeeting.On June 30, 2009, the share capital fully paid and reported in theTrade Register was 3.6 MEUR and the total number of shares was 39468 449. The average number of shares in January-June 2009 was 39468 449. On February 6, 2009 the Board decided to continue buyingback own shares in accordance with the authorization granted by theAnnual General Meeting on April 3, 2008. The repurchasing of sharesended on March 30, 2009. At June 30, 2009 Rapala held 221 936 of itsown shares, representing 0.6% of the total number of Rapala sharesand the total voting rights. The average price for the repurchasedown shares in January-March 2009 was EUR 3.82. No Rapala shares werebought after March 2009.As a result of the share subscriptions with the 2004B stock optionprogram, and if all stock options are fully exercised, the Group'sshare capital may still be increased by a maximum of 38 970 EUR andthe number of shares by a maximum of 433 000 shares. The shares thatcan be subscribed with these stock options correspond to 1.1% of theCompany's shares and voting rights.During the first six months of 2009, 3 006 603 shares (2 184 117)were traded. The shares traded at a high of 4.46 EUR and a low of3.50 EUR during the period. The closing share price at the end of theperiod was 4.25 EUR.Short term risks and uncertaintiesThe objective of Rapala's risk management is to support theimplementation of the Group's strategy and execution of businesstargets. The importance of risk management has increased when Rapalahas continued to expand its operations fast. Accordingly, Groupmanagement has continued to develop risk management practices andthis work continues also in 2009. Detailed description of Group'sstrategic, operative and financial risks and risk managementprinciples are included in the Annual Report 2008, seewww.rapala.com.Due to the nature of the fishing tackle business and the geographicalscope of Group's operations, Group's deliveries and sales as well asoperating profit have traditionally been seasonally stronger in thefirst half of the financial year compared to the second half. In 2008even if more than 40% of the net sales were generated during thesecond half of the year, almost 80% of the operating profit was stillgenerated in the first six months. In the first half of 2009,deliveries to customers realized mostly according to plan. A majorsupply chain and logistics initiative was started in the secondquarter to shorten the lead times and further improve the servicelevels to customers.Group's sales are also to some extent affected by the weather. Inseveral areas, last winter season was longer than previously. Thissupported the sales of winter sports equipment but simultaneouslydelayed the beginning of the summer season sales, which led to higherthan anticipated inventory levels in the end of March. During thesecond quarter, inventory levels started to decrease mostly as aresult of the major working capital initiative started last November.Further reduction in inventory levels is expected for the second halfof the year. The Group also renegotiated its bank covenants duringthe second quarter and gained flexibility to its cash flow covenantfor the rest of the year together with some other benefits at theexpense of a moderate increase in interest margins and slighttightening of two less critical covenants. Further reduction ofinventory levels and improvement of cash flow remains a top priorityin the Group.Even if the fishing tackle business has traditionally not beenstrongly influenced by the increased uncertainties and downturns inthe general economic climate, this may influence, at least for ashort while, the sales of fishing tackle when retailers reduce theirinventory levels and face financial challenges. While continuing,these uncertainties may also affect the amount retailers invest inadvertising and promotions, which may affect consumer spending atleast temporarily. Also quick and strong increases in living expensesand uncertainties concerning employment may temporarily affectconsumer spending also in fishing tackle, even though historicallythe underlying consumer demand has proven to be fairly solid.The truly global nature of Group's sales and operations is spreadingthe market risks caused by the current uncertainties in the globaleconomy. Already in 2007, the Group started initiatives to improvethe performance of its own operations and actively monitors theperformance of its customers and other counterparties. Especially,the importance of cash collection and credit risk management hasincreased and this may affect sales to some customers.Group's sales and profitability are impacted by the changes inforeign exchange rates, especially US dollar. Group is activelymonitoring the currency position and risks and using e.g. foreigncurrency nominated loans to manage the natural hedging. In order tofix the exchange rate of some of the future USD-nominated purchases,the Group has entered into currency hedging agreements. As the Groupis not applying hedge accounting in accordance to IAS 39, also thechange in fair value of these unrealized currency hedging agreementshave an impact on the Group's operating profit. In some countries andespecially in Eastern Europe, the local currency weakeneddramatically during the second half of last year. This weakening wastaken into account in price setting, which has together with thegeneral economic downturn somewhat negatively impacted the number ofunits sold in these countries.The integration of the new Sufix-fishing line business to the Group'sdistribution network in 27 countries has progressed well but willstill require special attention of the management.No significant changes are identified in the Group's strategic risksor business environment.http://hugin.info/120091/R/1330686/314629.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 24.07.2009 - 08:30 Uhr
Sprache: Deutsch
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