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Rapala reports ‘challenging’ start to 2014

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Rapala VMC says that the start to the year has been ‘challenging’ for the group.

Rapala VMC has reported a ‘challenging’ start to 2014, revealing that both net sales and operating profit were down in the first three months of the year.

The Finnish-based tackle giant has announced a 12% drop in net sales from €75.3m in the first quarter of 2013 to €66.2m and comparable operating profit of €6.7m (€8.1m).

President and CEO Jorma Kasslin said: “The beginning of the year was challenging in many respects. We witnessed abnormal weather conditions in many countries. Here in Finland, a lack of snow hurt our winter sports business, while in North America winter was partly so extreme that it clearly delayed the start of the summer fishing season.

“The political unrest in eastern Europe disturbed the business to some extent, especially through major changes in currency rates. All in all, the strengthening of the Euro explains nearly half of the total sales decline for the first quarter.

“Lower sales also had a direct impact on our profitability, even though we managed to improve our gross margins. The exit from China and ramp-up of the Batam factory is proceeding, but these still burden our results. We have put a lot of focus and resources into improving the Asian manufacturing situation and we expect to see clear results during the latter part of the year.

“Summer fishing sales are picking up as we speak in the US and we expect early spring to support the second quarter sales in Europe.”

Rapala across the world:

• North America

Rapala said currencies had a negative impact on sales, which were down 6% for the quarter with comparable exchange rates. Extreme winter weather and late spring delayed sales of summer fishing products, but at the same time it is supporting the replenishment sales of ice fishing products and cash flows for retailers.

• Nordic region

Sales down for the first quarter. Countries suffered from an exceptionally warm and snowless winter which hit ice fishing and winter sports, especially in Finland. An early and warm spring has supported the beginning of the summer fishing sales season.

• Rest of Europe

Political turbulence in Russia and Ukraine had some direct and indirect impact on sales. Currencies, mainly the Ruble, burdened sales compared to last year and with comparable exchange rates net sales were down 4%. Quarterly sales were also hit by the delivery problems of suppliers.

• Rest of the world

Again, impacted negatively by currencies, especially the South African Rand and Australian Dollar. With comparable exchange rates, sales were down 7%. Economic and political instability disturbed business in South Africa and Thailand.

Rapala: The way ahead

Rapala says that the outlook for the rest of the year is cautious and short-term ‘visibility’ is limited.

“In the US the general retail and consumer sentiment is gradually improving and summer fishing sales are picking up. After good winter sales, the cash position of retailers is good and the pipeline is clean for the next winter season.

“In Europe early spring should support sales and economic indicators show improvement in certain countries such as Spain. However, the financial position of retailers is weaker due to bad winter sales and this will have some knock-on impact on the next winter season.

“The continuing political turbulence between Russia and Ukraine is raising concerns on these markets. Further escalation of the crisis may have negative impacts on consumer consumption even more widely in Europe. Drastic changes in foreign exchange rates are affecting profit margins and consumer demand in some countries.

“The group expects sales to improve during the second quarter. Assuming a comparable translation of exchange rates, Rapala expects to maintain full year net sales and comparable operating profit at 2013 levels.”

Rapala also revealed that discussions on possible acquisitions were on-going during the first quarter of the year as the group ‘continues to seek non-organic growth opportunities’.

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