The Finnish manufacturer of fishing lures had a difficult start in 2020, ending the first six months with a net loss of €3.8 million due to the impact of lockdowns. But in the second half, business conditions picked up for Rapala VMC, as fishing gained popularity as an activity that is compatible with social distancing guidelines. Sales progressed by 7 percent in the last six months of the year from the year-ago period to €144.2 million or 13 percent in constant currencies.
The management also attributed the rebound to a restructuring program initiated in October 2019. Key highlights were the ramp-down of Asian lure manufacturing operations and the establishment of a new centralized distribution center to Estonia, which enabled a continued decrease in the warehouse footprint and led to a more centralized and simplified operating model. The management believes that the renewed organizational structure and fewer management layers will make the company more growth-oriented and drastically increase decision-making speed.
Revenues generated by the company’s own products gained 21 percent to €109.2 million in the second half, whereas the group’s revenues from the sale of third-party products lost 21 percent to €35.0 million.
In the last six months of this year, the North American market saw revenues progress by 33 percent to €69.8 million in constant currencies. Sales recovered after restrictions were softened, and e-commerce grew strongly.
In the Nordic countries, Rapala’s sales were down by 26 percent to €41.6 million in constant currencies. The termination of distribution operations for Shimano and certain other companies had a significant negative impact on the group’s sales in the region. In addition, poor winter conditions at the beginning of 2020 reduced winter sports sales. Despite the overall sales decrease, sales of fishing products were robust.
In the rest of Europe, revenues inched up by 1 percent to €79.6 million on a constant-currency basis. The demand for the group’s products was high, which converted to strong second-half sales, but the termination of Shimano’s distribution in some countries kept revenues at the 2019 level. In the rest of the world, sales declined by 3 percent in constant currencies to €29.7 million.
Overall, the gross margin soared by 6.5 percentage points to 8.0 percent in the second half, and the company ended with a net profit of €7.2 million, compared with a loss of €3.4 million for the same period in 2019.
For the full year 2020, sales were down by 5 percent to €261.3 million, the gross margin contracted by 0.8 percentage points to 4.1 percent and net income fell by 17.1 percent to €7.2 million.
A positive highlight from 2020 was a high double-digit growth in e-commerce. The group’s efforts to ramp down certain business areas with fast cuts in purchases and the implementation of “watchtowers” to monitor cash flow and account receivables contributed to a drop of €23.8 million in inventories between December 2019 and December 2020. The year-end inventory level of €68.8 million was the lowest in more than a decade.
The group’s key priorities in 2021 include the launch of the new Okuma rod and reel business in Europe. The exit of Shimano and the termination of certain other third-party products affect market visibility in 2021 for the region, but Rapala expects full-year comparable operating profit to be in line or above the previous year.