RAPALA VMC CORPORATION'S HALF YEAR REPORT H1/2016: SALES DEPRESSED IN SEVERAL BIG MARKETS
(Thomson Reuters ONE) -
Rapala VMC Corporation
Half year financial report
July 22, 2016 at 1:00 p.m.
RAPALA VMC CORPORATION'S HALF YEAR REPORT H1/2016: SALES DEPRESSED IN SEVERAL
BIG MARKETS
January-June (H1) in brief:
* Net sales were 143.1 MEUR, down 7% from previous year (154.0). With
comparable exchange rates sales were 5% lower than last year.
* Operating profit was 14.2 MEUR (17.4), down 18%.
* Comparable operating profit* was 15.6 MEUR (20.6), down 24%.
* Cash flow from operations was 6.2 MEUR (10.7), down 42%.
* Earnings per share was 0.19 EUR (0.19).
* Full year (FY) guidance unchanged from July 11, 2016: Full year net sales
and comparable operating profit are expected to be below 2015 levels.
President and CEO Jorma Kasslin: "In first half of the year several big markets
had challenging trading conditions. First quarter was slower than last year and
we were not able to bridge the gap during second quarter as was expected. Market
conditions and consumer sentiment was depressed in our big markets in North
America and Europe. The challenging conditions have affected also our
competition and we don't see any loss in market share in our core categories.
Our profitability was also down from last year directly following the reduced
sales.
Outlook for the whole year is now more depressed than earlier. While the
slowdown in sales in western markets is considered to be temporary, we can't
reach last year's results and it is difficult to accurately estimate the future
developments in these big markets. This means that we will have to work
intensively on new innovations, inventory reduction initiatives and control our
fixed costs."
Key figures
--------------------------------------------------------
H1 H1 change FY
MEUR 2016 2015 % 2015
--------------------------------------------------------
Net sales 143.1 154.0 -7% 278.2
Operating profit 14.2 17.4 -18% 21.0
% of net sales 9.9% 11.3% 7.6%
Comparable operating profit * 15.6 20.6 -24% 25.3
% of net sales 10.9% 13.4% 9.1%
Cash flow from operations 6.2 10.7 -42% 15.6
Gearing % 82.9% 75.9% 77.3%
EPS, EUR 0.19 0.19 0% 0.17
--------------------------------------------------------
* Excluding mark-to-market valuations of operative currency derivatives and
other items affecting comparability. From 2016 onwards the Rapala Group has
relabeled the previously referenced "non-recurring items" with "other items
affecting comparability" including material restructuring costs, impairments,
gains and losses on business combinations and disposals, insurance
compensations and other non-operational items.
Rapala Group presents alternative performance measures to reflect the
underlying business performance and to enhance comparability between financial
periods. Alternative performance measures should not be considered in
isolation as a substitute for measures of performance in accordance with IFRS.
Definitions and reconciliation of key figures are presented in the financial
section of the release.
Market environment
Trading conditions during the first half of the year turned out to be more
challenging than expected and second quarter sales did not reach last year's
levels. Winter season was short in all main markets and summer sales started
early but did not continue as good as was expected due to various reasons. The
Group's second quarter and first half sales were down in big markets such as
North America and France. In Europe the competition has also tightened and the
overall market sentiment was somewhat reserved. In Russia conditions continue to
be challenging and the change in market demand seems to be permanent. Several
markets witnessed changes and uncertainties, causing retailers to be careful
with their purchasing.
Business Review January-June 2016
The Group's net sales for the first half were down 7%. Changes in translation
exchange rates decreased sales by approximately 3.3 MEUR for the half year.
Correspondingly with comparable translation exchange rates net sales were down
5% from last year for the half year.
North America
North American sales reduced from last year's strong levels. Short ice fishing
season affected sales negatively in the beginning of the year. Summer fishing
products sales started relatively early and strong, supported by new product
introductions. However while consumer demand for Group's products was good, US
retails scene witnessed some unexpected turmoil during first half of the year
impacting the Group, as well as the competition. Retailers' destocking and
changes in purchasing behavior caused slowdown in Group's first half year sales
especially on Group branded lures. Weak economic situation continued in Canada.
Nordic
In the Nordic countries the first half of the year's sales decreased from last
year despite the improved sales in the second quarter. Valuation of currency
nominated accounts receivable had a notable positive impact on last year's
sales. Excluding these valuations, this first half year and quarterly sales were
slightly above last year's level. In Finland summer sales season started earlier
but ended up slightly below last year level for the first half of the year.
Sales of hunting products were good in Finland. In Sweden sales were slightly
down from last year, largely relating to delays in incoming shipments on third
party products. In Norway the second quarter sales improved considerably from
last year due to better weather conditions, bringing the first six month's sales
above last year's level.
Rest of Europe
In comparable exchange rates the sales were below last year's level in the first
half of the year, following slowdown in sales in second quarter. The instability
and uncertainties in Russia and Ukraine continued to impact sales volumes in the
respective countries and also in Belarus and Kazakhstan. The weakening of the
Ruble had a notable negative impact on the sales. The second quarter sales in
France suffered from unfavorable summer fishing weathers, reserved market
sentiment and tightened price competition. Hungary and Romania showed
conservative growth. Expansion into hunting product distribution increased sales
in Spain and Baltic countries.
Rest of the World
Currency exchange rate changes had a notable negative impact on the region's
sales, while in comparable exchange rates the sales were just slightly behind
last year's level for the first half of the year. Market picture was mixed with
ups and downs around the region: South Africa and Chile had strongest sales
growth while several countries suffered from overall slow market situation
impacted by economic uncertainties. Restructuring of the Group's distribution
organization in Southeast Asia triggered aggressive sales campaigns in the
region.
External Net Sales by Area
------------------------------------------------------
H1 H1 change Comparable FY
MEUR 2016 2015 % change % 2015
------------------------------------------------------
North America 46.4 51.6 -10% -11% 99.2
Nordic 33.3 34.2 -3% -2% 56.2
Rest of Europe 48.0 51.4 -7% -3% 86.9
Rest of the World 15.3 16.8 -9% -1% 35.9
Total 143.1 154.0 -7% -5% 278.2
------------------------------------------------------
------------------------------------------------------
Q2 Q2 change Comparable FY
MEUR 2016 2015 % change % 2015
------------------------------------------------------
North America 22.9 26.6 -14% -13% 99.2
Nordic 18.4 17.7 +4% +5% 56.2
Rest of Europe 24.0 27.0 -11% -7% 86.9
Rest of the World 8.1 8.8 -8% 0% 35.9
Total 73.4 80.1 -8% -6% 278.2
------------------------------------------------------
Financial Results and Profitability
Comparable (excluding mark-to-market valuations of operative currency
derivatives and other items affecting comparability) and reported operating
profit decreased from last year for the first half of the year. Changes in
translation exchange rates decreased operating profit by approximately 0.3 MEUR.
With comparable translation exchange rates comparable operating profit was 4.7
MEUR behind last year's level.
Comparable operating profit margin was 10.9% (13.4) for the six months. The
decline in the half year profitability was primarily driven by the lower sales,
especially on higher margin Group branded products. Lower sales volumes impacted
profitability negatively both at distribution and manufacturing level.
Profitability was further hurt by lower result of the UK joint venture and more
aggressive sales campaigns reducing the margins. Group's fixed costs were stable
compared to last year.
Respectively reported operating profit margin was 9.9% (11.3). Reported
operating profit included loss of mark-to-market valuation of operative currency
derivatives of 0.9 MEUR (2.0). Net expenses of other items affecting
comparability included in the reported operating profit were 0.5 MEUR (1.2),
related to the restructurings in Southeast Asia distribution and France in the
first half of 2016. In 2015 restructuring costs related to closing down of the
manufacturing operations in China.
Total financial (net) expenses were 2.8 MEUR (4.1) for the first half. Net
interest and other financing expenses were slightly above last year's level at
1.7 MEUR (1.5). Compared to last year financial items were impacted less by
(net) foreign exchange expenses of 1.1 MEUR (2.7).
Net profit for the six-months was almost at last year level and earnings per
share were 0.19 EUR (0.19). The share of non-controlling interest in net profit
decreased from last year and totaled 0.8 MEUR (1.1).
Key figures
-------------------------------------------------------------------------------
H1 H1 change FY
MEUR 2016 2015 % 2015
-------------------------------------------------------------------------------
Net sales 143.1 154.0 -7% 278.2
Operating profit 14.2 17.4 -18% 21.0
Comparable operating profit * 15.6 20.6 -24% 25.3
Net profit 8.2 8.3 -1% 8.1
-------------------------------------------------------------------------------
* Excluding mark-to-market valuations of operative currency derivatives and
other items affecting comparability. Other items affecting comparability
include material restructuring costs, impairments, gains and losses on
business combinations and disposals, insurance compensations and other non-
operational items.
Bridge calculation of comparable operating profit
-------------------------------------------------------------------------------
H1 H1 change FY
MEUR 2016 2015 % 2015
-------------------------------------------------------------------------------
Operating profit 14.2 17.4 -18% 21.0
Mark-to-market valuations of 0.9 2.0 -55% 2.1
operative currency derivatives
Other items affecting 0.5 1.2 -58% 2.3
comparability
Comparable operating profit 15.6 20.6 -24% 25.3
-------------------------------------------------------------------------------
More detailed bridge of comparable operating profit and definitions and
reconciliation of key figures are presented in the financial section of the
release.
Segment Review
Group Products
Group Products six month and second quarter sales were down from last year's
strong levels, negatively impacted by lower sales of fishing lures, hooks and
lines especially in North America. Group fishing products half year sales were
supported by better sales of fishing accessories.
Compared to last year both Group Products and Third Party Products half year
sales were also negatively impacted by valuation of currency nominated accounts
receivable, which supported the sales last year.
Operating profit for Group Products declined compared to last year. Operating
profit was burdened by lower sales, which reduced profitability both at
distribution and manufacturing level. Profitability of Group Products was also
hurt by lower margins as a result of sales campaigns.
Third Party Products
The sales of Third Party Products on the first half of the year were at last
year's level in comparable exchange rates. The economic situation in Russia
continued to reduce the third party fishing products sales in the region. Also
the difficult market situation in France affected negatively the Third Party
Products sales. Third Party Hunting sales were up from last year in the Nordic
and Rest of Europe. Currency fluctuations had major negative impact especially
in Russia and South Africa.
Operating profit for Third Party Products was almost at last year's level
burdened by aggressive sales campaigns' negative impact on margins, but
supported by price increases issued to offset the unfavorable development in
purchase currencies.
Net Sales by Segment
--------------------------------------------------------
H1 H1 change Comparable FY
MEUR 2016 2015 % change % 2015
--------------------------------------------------------
Group Products 95.0 103.5 -8% -7% 184.7
Third Party Products 48.1 50.5 -5% 0% 93.5
Eliminations 0.0
Total 143.1 154.0 -7% -5% 278.2
--------------------------------------------------------
---------------------------------------------------------
Q2 Q2 change Comparable FY
MEUR 2016 2015 % change % 2015
---------------------------------------------------------
Group Products 47.8 52.7 -9% -8% 184.7
Third Party Products 25.7 27.3 -6% -1% 93.5
Eliminations 0.0
Total 73.4 80.1 -8% -6% 278.2
---------------------------------------------------------
Comparable operating profit by Segment
-------------------------------------------------------------------------------
H1 H1 change FY
MEUR 2016 2015 % 2015
-------------------------------------------------------------------------------
Group Products 12.0 16.9 -29% 22.2
Third Party Products 3.6 3.7 -3% 3.2
-------------------------------------------------------------------------------
Comparable operating profit 15.6 20.6 -24% 25.3
Items affecting comparability -1.4 -3.2 -56% -4.3
Operating profit 14.2 17.4 -18% 21.0
-------------------------------------------------------------------------------
Rapala Group has changed the measurements of segment performance by
excluding items affecting comparability from operating profit.
Comparative figures 2014-2015, definitions and reconciliations are
presented in the financial section of the release.
Financial position
Cash flow from operations decreased from last year being 6.2 MEUR (10.7) for the
six months burdened by lower sales and profitability as well as change in
working capital driven by earlier timing of payables. Net change in working
capital amounted to -7.3 MEUR (-6.7).
Inventories decreased by 3.7 MEUR from last June amounting to 118.1 MEUR
(121.8), of which 3.0 MEUR is related to change in translation exchange rates.
The slowdown in sales prevented the Group to achieve planned inventory reduction
targets.
Net cash used in investing activities was at last year's level and totaled 4.8
MEUR (4.1) for the first half of the year consisting mainly of normal operative
capital expenditure. Operative capital expenditure was higher compared to last
year in manufacturing operations in Indonesia and France where extension of the
hook factory and warehouse building was finalized. Last year investing
activities included the last installment of the acquisition of the Sufix brand
of 0.9 MEUR.
Liquidity position of the Group was good. Undrawn committed long-term credit
facilities amounted to 79.9 MEUR at the end of the period. Gearing and net
interest-bearing debt increased from last year and equity-to-assets was slightly
above last year's level. Following the higher ratio between net interest bearing
debt and reported EBITDA, the Group has agreed with its lenders on higher
covenant levels for the second and third quarter in 2016. The Group expects to
comply with these covenant levels.
Key figures
-------------------------------------------------------------------------------
H1 H1 change FY
MEUR 2016 2015 % 2015
-------------------------------------------------------------------------------
Cash flow from operations 6.2 10.7 -42% 15.6
Net interest-bearing debt at end 115.8 108.8 +6% 108.2
of period
Gearing % 82.9% 75.9% 77.3%
Equity-to-assets ratio at end of 43.6% 42.3% 44.7%
period, %
-------------------------------------------------------------------------------
Definitions and reconciliation of key figures are presented in the financial
section of the release.
Strategy Implementation
Execution of the Rapala Group's strategy is based on three cornerstones: brands,
manufacturing and distribution, supported by strong corporate culture. During
2016 strategy implementation continued in various areas.
Improving the performance, exploiting the strengths and capturing the benefits
of the Asian lure manufacturing unit in Batam, Indonesia is one of the key
priorities for the Group. The comparable and especially the reported operating
profit of the unit were better than last year during the first half year.
Improvements can be further expected in efficiency, quality and agility of
manufacturing as well as of product development, which is being reorganized.
Special projects to improve the operational efficiencies of manufacturing
operations have started in Indonesia and France.
Reducing inventory levels is another key priority for the Group. Planning and
implementation of various actions to improve Group's global supply chain
management are ongoing in order to achieve improvement in the capital
efficiency. During the first half of the year the warehousing operations in
Norway and Sweden were consolidated, scope of inventory buffering in Asia was
widened and IT project to facilitate global supply chain management proceeded.
Initiatives to leverage from global co-ordination of the Group's brands and
digital marketing are ongoing.
Following the declining profitability of the Group, some restructurings and cost
saving measures have already been implemented. Further turnaround planning and
strategic considerations relating to the low performing units will be initiated.
Discussions and negotiations regarding acquisitions and business combinations
continued during the first half 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 contributors to the value and commercial success of the
brands. The Group is reorganizing and boosting its lure product development
procedure by centralizing the product development know-how and key resources to
one location that will serve both the European and Asian lure manufacturing
units.
Product development cycles are getting shorter which allows faster reaction to
market needs and developing trends. Product launch schedules are more flexible
and can be better adjusted to target specific market's seasons.
The most important product launch in 2016 was the introduction of the new Rapala
Shadow Rap Shad lure launched in early spring. Other notable releases were new
series of fisherman's tools and accessories which received Best New Product
Awards in the European trade show.
Introductions of new hero lures are in the pipeline and they will be released to
the markets early 2017.
Organization and Personnel
Average number of personnel was 2 921 (2 943) for the first half of the year. At
the end of June, the number of personnel was 2 760 (3 156), decrease coming from
optimizing the capacity and streamlining the lure manufacturing operations in
Asia.
Short-term Outlook and Risks
Following the decline in sales during the first half of the year, the outlook
for the whole year is now more depressed.
In North American and Western European markets the slowdown in sales is expected
to be temporary. Especially in Europe but also in USA there are quite some
political and macroeconomic distractions that might affect the retail and
consumer behavior. In Russia the market is no longer falling, but is expected to
remain under pressure at a much lower levels than in the past years.
In order to react to the reduced demand and support the inventory reduction
targets the Group has temporarily adjusted the capacity of its manufacturing
operations and is following closely the fixed cost development.
Group is actively working on various product development, sales and marketing
initiatives to boost sales. However it is difficult to catch up the gap in sales
and profitability compared to last year during latter part of the year.
Therefore the Group expects full year net sales and comparable operating profit
(excluding mark-to-market valuations of operative currency derivatives and other
items affecting comparability) to be below 2015 levels. The guidance is
unchanged from July 11, 2016.
Short term risks and uncertainties and seasonality of the business are described
in more detail in the end of this half year report.
Third quarter Trading Report 2016 will be published on October 28, 2016.
Helsinki, July 22, 2016
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, Deputy CEO and CFO, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
A conference call on the first half year result will be arranged today at 4:00
p.m. Finnish time (3:00 p.m. CET). Please dial +44 (0)20 3147 4971 or
+1 917 286 8056 or +358 (0)9 2310 1675 (pin code: 927840) 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: 5989141). Financial information and teleconference replay facility are
available at www.rapalavmc.com.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
STATEMENT OF INCOME H1 H1 FY
MEUR 2016 2015 2015
--------------------------------------------------------------------
Net sales 143.1 154.0 278.2
Other operating income 0.2 0.3 1.0
Materials and services 63.6 70.6 130.9
Personnel expenses 35.1 35.3 68.4
Other costs and expenses 27.0 27.8 52.3
Share of results in associates and joint ventures 0.0 0.3 0.4
------------------
EBITDA 17.6 20.9 28.1
Depreciation, amortization and impairments 3.4 3.5 7.1
------------------
Operating profit (EBIT) 14.2 17.4 21.0
Financial income and expenses 2.8 4.1 6.8
------------------
Profit before taxes 11.4 13.3 14.2
Income taxes 3.1 5.0 6.1
------------------
Net profit for the period 8.2 8.3 8.1
------------------
Attributable to:
Equity holders of the company 7.5 7.2 6.7
Non-controlling interests 0.8 1.1 1.4
Earnings per share for profit attributable
to the equity holders of the company:
Earnings per share, EUR (diluted = non-diluted) 0.19 0.19 0.17
STATEMENT OF COMPREHENSIVE INCOME H1 H1 FY
MEUR 2016 2015 2015
------------------------------------------------------------------------
Net profit for the period 8.2 8.3 8.1
-----------------------
Other comprehensive income, net of tax
Change in translation differences* -2.0 7.8 5.5
Gains and losses on cash flow hedges* 0.1 0.2 0.4
Gains and losses on hedges of net investments* 0.8 -1.7 -2.9
Actuarial gains (losses) on defined benefit plan - - 0.1
-----------------------
Total other comprehensive income, net of tax -1.1 6.3 3.2
-----------------------
Total comprehensive income for the period 7.1 14.6 11.3
-----------------------
Total comprehensive income attributable to:
Equity holders of the Company 6.0 13.4 11.0
Non-controlling interests 1.1 1.3 0.3
* Item that may be reclassified subsequently to the statement of income
STATEMENT OF FINANCIAL POSITION Jun 30 Jun 30 Dec 31
MEUR 2016 2015 2015
------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 76.5 78.1 78.2
Property, plant and equipment 35.7 32.0 33.9
Non-current assets
Interest-bearing 0.9 5.1 2.8
Non-interest-bearing 11.2 12.0 11.8
---------------------
124.4 127.2 126.7
Current assets
Inventories 118.1 121.8 116.2
Current assets
Interest-bearing 1.0 1.1 1.0
Non-interest-bearing 66.7 74.0 58.1
Cash and cash equivalents 10.4 15.4 11.4
---------------------
196.2 212.4 186.7
Total assets 320.6 339.5 313.4
---------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the company 131.6 133.8 131.5
Non-controlling interests 8.1 9.5 8.5
---------------------
139.7 143.3 140.0
Non-current liabilities
Interest-bearing 56.3 73.7 58.6
Non-interest-bearing 12.5 14.5 13.4
---------------------
68.9 88.2 72.0
Current liabilities
Interest-bearing 71.8 56.6 64.8
Non-interest-bearing 40.2 51.3 36.6
---------------------
112.1 108.0 101.5
Total equity and liabilities 320.6 339.5 313.4
---------------------
STATEMENT OF CASH FLOWS H1 H1 FY
MEUR 2016 2015 2015
-------------------------------------------------------------------------------
Net profit for the period 8.2 8.3 8.1
Adjustments to net profit for the period 9.5 14.0 21.8
*
Financial items and taxes paid and -4.3 -4.9 -11.1
received
Change in working capital -7.3 -6.7 -3.3
-------------------------------------------------------------------------------
Net cash generated from operating 6.2 10.7 15.6
activities
Investments -5.0 -3.4 -9.1
Proceeds from sales of assets 0.2 0.1 0.2
Sufix brand acquisition - -0.9 -0.9
Proceeds from disposal of subsidiaries, - - 1.1
net of cash
Change in interest-bearing receivables 0.0 0.0 0.0
-------------------------------------------------------------------------------
Net cash used in investing activities -4.8 -4.1 -8.6
Dividends paid to parent company's -5.7 -7.7 -7.7
shareholders
Net funding 3.8 4.1 0.0
Purchase of own shares -0.2 -0.2 -0.2
-------------------------------------------------------------------------------
Net cash generated from financing -2.1 -3.8 -7.8
activities
Change in cash and cash equivalents -0.7 2.8 -0.9
Cash & cash equivalents at the beginning 11.4 12.2 12.2
of the period
Foreign exchange rate effect -0.3 0.5 0.1
-------------------------------------------------------------------------------
Cash and cash equivalents at the end of 10.4 15.4 11.4
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-
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, 2015 3.6 16.7 -1.1 -6.5 4.9 -5.2 116.0 8.2 136.5
-----------------------------------------------------------------------------
Comprehensive
income * - - 0.2 6.0 - - 7.2 1.3 14.6
Purchase of
own shares - - - - - -0.2 - - -0.2
Dividends - - - - - - -7.7 - -7.7
-----------------------------------------------------------------------------
Equity on Jun
30, 2015 3.6 16.7 -1.0 -0.5 4.9 -5.4 115.5 9.5 143.3
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Equity on Jan
1, 2016 3.6 16.7 -0.7 -2.6 4.9 -5.4 115.0 8.5 140.0
-----------------------------------------------------------------------------
Comprehensive
income * - - 0.1 -1.5 - - 7.5 1.1 7.1
Purchase of
own shares - - - - - -0.2 - - -0.2
Dividends - - - - - - -5.7 -1.5 -7.2
-----------------------------------------------------------------------------
Equity on Jun
30, 2016 3.6 16.7 -0.6 -4.2 4.9 -5.6 116.8 8.1 139.7
-----------------------------------------------------------------------------
* For the period,
(net of tax)
NOTES TO THE INCOME STATEMENT AND FINANCIAL POSITION
The financial information included in this half year financial report is
unaudited.
This half year financial 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 2015 except for
change in measurement of segment performance. Any new amendments to IFRS
standards or IFIRC interpretations did not have a material impact on the
information presented in this report. The Group has not applied any new
standards as of January 1, 2016.
Impact of new ESMA guidelines
New ESMA (European Securities and Markets Authority) guidelines on alternative
performance measures are effective for the financial year 2016. Rapala Group
presents alternative performance measures to reflect the underlying business
performance and to enhance comparability between financial periods. Alternative
performance measures presented in this report should not be considered as a
substitute for measures of performance in accordance with the IFRS and may not
be comparable to similarly titled amounts used by other companies.
Change in measurements of segment performance
The Group has changed the measurements of segment performance by excluding items
affecting comparability from operating profit. The Group measures segment
performance based on sales, comparable operating profit and assets. Definitions
and reconciliations to alternative performance measures are presented in the end
of the notes. Reportable segments are consistent with those in the financial
statements 2015. Segments are described in detail in note 2 of the financial
statements 2015.
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 half year period
The Group has no knowledge of any significant events after the end of the
reporting period that would have a material impact on the financial statements
for January-June 2016. Material events after the end of the half year period, if
any, have been discussed in the commentary section of the Board of Directors.
Inventories
On June 30, 2016, the book value of inventories included a provision for net
realizable value of 4.2 MEUR (5.4 MEUR at June 30, 2015 and 5.3 MEUR at December
31, 2015).
H1 H1 FY
Key figures 2016 2015 2015
-------------------------------------------------------------------------------
EBITDA, % of net sales 12.3% 13.6% 10.1%
Operating profit, % of net sales 9.9% 11.3% 7.6%
Return on capital employed, % 11.3% 14.3% 8.7%
Capital employed at end of period, 255.5 252.1 248.1
MEUR
Net interest-bearing debt at end of 115.8 108.8 108.2
period, MEUR
Equity-to-assets ratio at end of 43.6% 42.3% 44.7%
period, %
Debt-to-equity ratio at end of 82.9% 75.9% 77.3%
period, %
Earnings per share, EUR (diluted = 0.19 0.19 0.17
non-diluted)
Equity per share at end of period, 3.43 3.49 3.43
EUR
Average personnel for the period 2 921 2 943 3 078
-------------------------------------------------------------------------------
Definitions and reconciliation of key figures are presented in the end of the
financial section.
Key figures by half year H1 H2 H1 H2 H1
MEUR 2014 2014 2015 2015 2016
--------------------------------------------------------
Net sales 143.9 129.3 154.0 124.2 143.1
EBITDA 19.5 10.5 20.9 7.2 17.6
Operating profit 16.0 6.9 17.4 3.6 14.2
Profit before taxes 12.5 3.2 13.3 0.9 11.4
Net profit for the period 8.4 1.8 8.3 -0.2 8.2
--------------------------------------------------------
Bridge calculation of comparable operating profit H1 H1 change FY
MEUR 2016 2015 % 2015
-------------------------------------------------------------------------------
Operating profit 14.2 17.4 -18% 21.0
Items affecting comparability
Mark-to-market valuations of operative currency 0.9 2.0 -55% 2.1
derivatives
Other items affecting comparability
Restructurings
Closure of Chinese lure manufacturing 1.2 1.7
Closing down of Norwegian warehousing operations 0.5
Southeast Asian distribution restructuring 0.2
France restructuring 0.2
Impairments 0.1
Comparable operating profit 15.6 20.6 -24% 25.3
-------------------------------------------------------------------------------
Segment information*
MEUR H1 H1 FY
Net Sales by Operating Segment 2016 2015 2015
-------------------------------------------------------------------------------
Group Products 95.0 103.5 184.7
Third Party Products 48.1 50.5 93.5
Eliminations 0.0
-------------------------------------------------------------------------------
Total 143.1 154.0 278.2
Operating Profit by Operating Segment
-------------------------------------------------------------------------------
Group Products 12.0 16.9 22.2
Third Party Products 3.6 3.7 3.2
-------------------------------------------------------------------------------
Comparable operating profit 15.6 20.6 25.3
Items affecting comparability -1.4 -3.2 -4.3
-------------------------------------------------------------------------------
Operating Profit 14.2 17.4 21.0
* The Group has changed the measurements of segment performance by excluding
items affecting comparability from operating profit. The Group measures
segment performance based on sales, comparable operating profit and assets.
Reportable segments are consistent with those in the financial statements
2015. Segments are described in detail in note 2 of the financial statements
2015.
Comparative figures 2014-2015 for comparable operating profit by
operating segment
H1 H2 FY H1 H2 FY
MEUR 2014 2014 2014 2015 2015 2015
-----------------------------------------------------------------------------
Group Products 10.0 4.4 14.4 16.9 5.2 22.2
Third Party Products 6.3 0.2 6.5 3.7 -0.5 3.2
-----------------------------------------------------------------------------
Comparable operating profit 16.3 4.5 20.9 20.6 4.8 25.3
Items affecting -0.3 2.4 2.0 -3.2 -1.2 -4.3
comparability
-----------------------------------------------------------------------------
Operating profit 16.0 6.9 22.9 17.4 3.6 21.0
Assets by Operating Segment Jun 30 Jun 30 Dec 31
MEUR 2016 2015 2015
------------------------------------------------------------
Group Products 236.8 243.5 236.8
Third Party Products 71.5 74.5 61.3
------------------------------------------------------------
Non-interest-bearing assets total 308.3 317.9 298.2
Unallocated interest-bearing assets 12.4 21.6 15.2
------------------------------------------------------------
Total assets 320.6 339.5 313.4
External Net Sales by Area H1 H1 FY
MEUR 2016 2015 2015
---------------------------------------------
North America 46.4 51.6 99.2
Nordic 33.3 34.2 56.2
Rest of Europe 48.0 51.4 86.9
Rest of the world 15.3 16.8 35.9
---------------------------------------------
Total 143.1 154.0 278.2
Commitments Jun 30 Jun 30 Dec 31
MEUR 2016 2015 2015
---------------------------------------------------------------------
Minimum future lease payments on operating leases 14.2 15.5 14.4
---------------------------------------------------------------------
Sales Other
Related party transactions and other Pur- Rents expen- Recei- Paya-
MEUR income chases paid ses vables bles
-------------------------------------------------------------------------------
H1 2016
Joint venture Shimano Normark 1.7 - - - 0.6 -
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 0.1 0.0 - 0.1
H1 2015
Joint venture Shimano Normark 1.9 - - 0.0 - -
UK Ltd
Associated company Lanimo Oü 0.0 0.1 - - 0.0 -
Entity with significant - - 0.1 0.1 0.0 -
influence over the Group*
Management - - 0.1 0.0 - 0.0
FY 2015
Joint venture Shimano Normark 3.6 - - 0.0 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 - - 0.2 0.0 - 0.0
-------------------------------------------------------------------------------
* Lease agreement for the real estate for the consolidated operations in
France and a service fee.
H1 H1 FY
Open derivatives 2016 2015 2015
-----------------------------------------------
Nominal Fair Nominal Fair Nominal Fair
MEUR Value Value Value Value Value Value
---------------------------------------------------------------------
Derivative financial instruments
designed as
cash flow hedges
Interest rate swaps, 16.8 -0.1 - - - -
less than 12 months
Interest rate swaps, 41.6 -0.4 63.3 -0.4 58.9 -0.4
1 to 5 years
---------------------------------------------------------------------
Total 58.4 -0.5 63.3 -0.4 58.9 -0.4
---------------------------------------------------------------------
Derivative financial instruments designed as
cash flow and fair value hedges
Interest rate swaps, 15.0 -0.4 - - - -
less than 12 months
Cross currency swaps, - - 20.0 2.4 15.0 1.3
1 to 5 years
---------------------------------------------------------------------
Total 15.0 -0.4 20.0 2.4 15.0 1.3
---------------------------------------------------------------------
Non-hedge accounting derivative
financial instruments
Interest rate swaps, 20.0 -0.3 20.0 -0.4 20.0 -0.4
1 to 5 years
Currency derivatives, 73.7 0.2 89.8 2.6 70.9 1.6
less than 12 months
Currency derivatives, - - 3.0 0.5 - -
1 to 5 years
---------------------------------------------------------------------
Total 93.7 -0.1 112.8 2.7 90.9 1.2
---------------------------------------------------------------------
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 2015.
In the first half of 2016, the amount of the ineffective portion that was
recognized in the financial income and expenses of income statement was EUR
-0.0 (2015: EUR 0.0). Testing for effectiveness of the hedging relationship
is conducted on a monthly basis.
Changes in unrealized mark-to-market valuations for
operative foreign currency derivatives
H1 H1 FY
2016 2015 2015
-------------------------------------------------------------------------------
Included in operating -0.9 -2.0 -2.1
profit
-------------------------------------------------------------------------------
Operative foreign currency derivatives that are marked-to-market on reporting
date cause timing differences between the changes in derivatives' 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 changes in unrealized valuations include both
valuations of derivatives that will realize in the future periods as well as
reversal of previously accumulated value of derivatives that realized in the
accounting period.
Fair values of Jun 30 Jun 30 Dec 31
financial
instruments
2016 2015 2015
--------------------------------------------------------------------------
Carrying Fair Carrying Fair Carrying Fair
MEUR value value value value value value
--------------------------------------------------------------------------
Assets
Available-for- 0.3 0.3 0.3 0.3 0.3 0.3
sale financial
assets (level
3)
Derivatives 1.4 1.4 6.7 6.7 3.7 3.7
(level 2)
--------------------------------------------------------------------------
Total 1.6 1.6 7.0 7.0 4.0 4.0
Liabilities
Non-current 56.3 56.5 73.7 74.1 58.6 58.7
interest-
bearing
liabilities
(excl.
derivatives)
Derivatives 2.3 2.3 2.0 2.0 1.6 1.6
(level 2)
--------------------------------------------------------------------------
Total 58.7 58.8 75.7 76.1 60.1 60.3
Fair values of other financial instruments do not differ materially from
their carrying value.
Shares and share capital
On April 1, 2016 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.
Share related key figures Jun 30 Jun 30
2016 2015
-------------------------------------------------------------------
Number of shares 39 000 000 39 000 000
Number of shares, average 39 000 000 39 000 000
Number of treasury shares 677 208 639 671
Number of treasury shares, % 1.7% 1.6%
Number of outstanding shares 38 322 792 38 360 329
Number of shares traded, YTD 2 334 222 1 483 777
Share price 4.39 5.31
Highest share price, YTD 4.73 5.55
Lowest share price, YTD 3.90 4.72
Average price of treasury shares, all time 5.08 4.87
-------------------------------------------------------------------
Short term risks and uncertainties
The objective of Rapala VMC Corporation's risk management is to support
implementation of the Group's strategy and execution of business targets. Group
management continuously develops its 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 2015.
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. Weathers impact
consumer demand and may have impact on the Group's sales for current and
following seasons. However the weather risk is well diversified as the Group has
a wide geographical footprint as well as selling serving both summer and winter
season markets.
The biggest deliveries for peak 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 Group's credit facilities include some profitability, net debt and equity
related financial covenants, which are actively monitored. Following the lower
reported EBITDA and increased net interest bearing debt, the Group and its
lenders have agreed on a higher leverage covenant for second and third quarters
in 2016. The Group expects to decrease its leverage ratio back to lower levels
during the second half of 2016. Liquidity and refinancing risks are well under
control, but increased leverage level may put pressure on Group's financing
costs.
The fishing tackle business has traditionally not 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. However, the underlying consumer demand has historically
proven to be fairly solid. Political tensions may have negative effects on the
Group's business and the geopolitical situation is followed closely.
The truly global nature of the Group's sales and operations diversifies the
market risks caused by the current uncertainties in the global economy. The
Group is cautiously monitoring the development both in global macro economy as
well as in the various local markets it operates in. While Group's customer base
is generally diversified, changes in retail landscape may have impact on
purchase behavior of individual large customers.
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 as well as financial
assets and liabilities, 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 operative currency
hedging agreements have an impact on the Group's reported operating profit. Some
of Group's currency positions are not possible or feasible to be hedged, and
therefore may have impact on the Group's net result. 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, except in Russia where uncertainties have increased after 2014.
Definitions of key figures
Operating profit before depreciation Operating profit + depreciation and
and impairments (EBITDA) impairments
Items affecting comparability Change in mark-to-market valuations of
operative currency derivatives +/-
other items
Unternehmensinformation / Kurzprofil:
Datum: 22.07.2016 - 12:00 Uhr
Sprache: Deutsch
News-ID 484861
Anzahl Zeichen: 65596
contact information:
Town:
Helsinki
Kategorie:
Business News
Diese Pressemitteilung wurde bisher 222 mal aufgerufen.
Die Pressemitteilung mit dem Titel:
"RAPALA VMC CORPORATION'S HALF YEAR REPORT H1/2016: SALES DEPRESSED IN SEVERAL BIG MARKETS"
steht unter der journalistisch-redaktionellen Verantwortung von
Rapala VMC Oyj (Nachricht senden)
Beachten Sie bitte die weiteren Informationen zum Haftungsauschluß (gemäß TMG - TeleMedianGesetz) und dem Datenschutz (gemäß der DSGVO).
