Shimano and Rapala VMC Corporation have set up a joint venture, based in Finland and controlled by Rapala, to handle sales of their fishing and bicycle products in Russia and the Ukraine. The two companies had until now worked together only in the area of fishing tackle. Consolidating the new relationship, Shimano (Singapore) has acquired a 2.3 percent shareholding in Rapala for €5 million.
The new joint venture, Rapala Shimano East Europe Oy, will use Rapala’s six existing distribution centers in Russia formerly run under the name Normark Russia, as well as those based in the Ukraine. All these centers will distribute Rapala’s fishing lures as well as Shimano’s reels, rods and other tackle products on an exclusive basis, but those in Russia will also distribute Shimano’s bicycle parts. The takeover of its distribution centers in the region by the new company will result in a capital gain of €4.8 million for the Finnish company, and it should raise its net sales by €10 million in 2008.
Rapala has already been distributing Shimano products in South Africa and in about 20 countries in Europe, while Shimano has been distributing Rapala products in four European countries. They work together in Italy, Germany, the Netherlands, Belgium, Luxembourg, Iceland, Norway, Sweden, Finland, Denmark, Poland, France, Spain, Portugal and South Africa.
Furthermore they both have shares in a distribution operation in Hungary, Rapala Eurohold, that sells their respective fishing tackle products in Hungary, Romania, Bulgaria, Slovenia, Croatia, Bosnia, Serbia, Macedonia and Albania. Last April, Rapala boosted its ownership in that company from 70 to 80 percent, but the next month it allowed Shimano to acquire a 33.4 percent stake. Rapala now owns 56.6 percent of Rapala Eurohold and the latter’s managing director, Agh Junior, 10 percent.
Shimano’s 2.3 percent investment in Rapala’s holding company is being made by issuing of new shares priced at €5.62, with a 12-month lock-up period, raising the total number of outstanding shares to 39,468,449. The price is the weighted average price of Rapala’s shares between last June 27 and Sept. 27.
A big increase in sales and profits in the 2nd quarter ended last June 30 led Rapala to book net earnings of €14.4 million for the first half of this year, sharply up from €10.1 million in the same period a year ago. Sales increased by 7 percent to €136.8 million, with a 12 percent increase in local currencies. They rose by 16 percent in the Nordic countries and by 14 percent in the rest of Europe. The operating profit margin (EBIT) increased to 16.8 percent from 14.2 percent.
The company is expecting a double-digit increase in operating profit for the full year on a sales increase of 7-12 percent, which would have been higher if the dollar had been stronger.
Meanwhile Rapala, which and employs more than 4,000 people worldwide, is going ahead with the planned consolidation of its French production units on a single site. Its Ragot unit in Brittany, with a €13 million turnover and 50 employees, will be closed and its operations will be transferred to a new leased 5,000-square-meter location next to the group’s VMC Pêche factory at Bourogne, south of Paris. Another French Rapala subsidiary employing 50 people at Châlon-sur-Saône, Water Queen, will also be moved to the same location by early next year. The two sites being closed were reportedly delivering an operating margin of only 3 percent.
