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Rapala to cease production in China

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Rapala’s lure manufacturing facility on Batam Island is now the largest of its kind in the world.

The Rapala VMC Corporation, which has announced that it is to cease all manufacturing in China, says that its new operation in Indonesia is now the largest lure production facility in the world.

In its fourth quarter report to investors, Rapala, said that the expansion on Batam Island, which came on stream in 2011, accelerated towards the end of last year, making it the largest lure factory in the world as the number of employees have tripled in the last 12 months.

The group also said that a decision has been made to close down its entire manufacturing operations in China by the end of the second quarter of the current financial year.

It added that the establishment of a new VMC hook manufacturing unit in Batam was finalized during the first quarter and production volumes were increased during the year.

“Closing down our own manufacturing operations in China and ramping up the new production in Batam Island will lead to improved efficiency and performance, but will still have an adverse impact on profitability in 2014,” warned Rapala.

The announcements came as Rapala blamed fluctuations in exchange rates and pressure on the finances of retailers for a fourth quarter decrease in sales. It also added that full year sales were slightly down.

It reported that sales in 2013 started on a growth trend, but slowed in the latter part of the year, especially in Russia, some east European countries, South Africa and regions of the Asian Pacific as economic uncertainties increased.

Net sales in North America were down 1% in the quarter – impacted by negative currency rates – and up 6% for the full year. It added that with comparable exchange rates sales from the region were up 4% for Q4 and 10% for the year.

The growth came from strong ice fishing sales, new product launches and the ‘positive’ development in sales of group branded fishing products.

“In the US, consumer and retail sentiment is improving,” said Rapala.

In Nordic countries, sales were down 1% (Q4) and 3% (full year), impacted once again by currency declines, particularly the Swedish and Norwegian Kronas. It also said that the performance was impacted by a delayed start to the summer fishing season as well as suppliers’ delivery problems.

Fourth quarter sales in the Rest of Europe decreased by 14% and full year sales by 4%. The quarterly performance was affected by increasing economic uncertainties and therefore decreasing consumer demand in Russia as well as a delayed start to the winter season.

Full year sales in central and eastern Europe were hit by late spring, floods, weakening of currencies and increasing economical uncertainties. However, they were boosted by a good performance in France as well as Russia, despite a slowdown towards the year end.

In the Rest of the World sales decreased 15% (Q4) and 7% (year).

Despite a troubling end to the financial year, Rapala said that the outlook for 2014 is ‘stable while cautious’.

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