Rapala VMC released weak results for 2017, with lower revenues and profitability. This did not come as a surprised to investors, as the company had issued last month a warning saying that its results for the year would show a sales decline instead of coming out flat as previously expected.
The Finnish company said that 2017 was a challenging year, partly due to ongoing structural changes in the U.S. retail market, with customers increasingly going online, placing some of the group's biggest customers in financial distress. It also blamed the cold spring and tighter competition in Europe for this performance, as well as operational challenges at its Indonesian manufacturing facility.
Revenues for the full year were off by 3 percent from the previous year to €253.3 million. On a constant-currency basis, they also declined by 3 percent.
In the U.S., two major customers entered Chapter 11 bankruptcy due to the retail market turmoil, which had a negative impact on sales, although the group said it was able to shift some lost business to other U.S. clients. In constant currencies, sales remained at last year's level, but the weakened dollar pulled sales 2 percent below last year's to €89.4 million.
In Europe, the cold and late start of the summer, coupled with tightened market conditions in certain product categories, impacted sales. They were below last year's level in the Nordic countries, affected by lower sales of hunting products in Denmark and a cold spring and late start of the summer in Finland. Sales in the Nordic countries dropped by 2 percent to €54.3 million, or by 1 percent in constant currencies. The group's knife factory, Marttiini, showed strong growth, boosted by sales of a special knife launched to celebrate the 100th anniversary of Finland.
In the rest of Europe, revenues fell by 5 percent to €81.3 million, or by 6 percent in constant currencies, hurt by the continuing challenges in the region's biggest markets for the group, Russia and France.
While the ruble strengthened, the company said this has not yet materialized into higher consumer demand. In France, sales were below last year's level, impacted by generally weak demand for fishing tackle products and tightened competition in the industry. On the other hand, sales exceeded last year's levels in Spain and Portugal.
In the rest of the world, Rapala's sales dipped by 2 percent to €31.9 million, or by 3 percent in constant currencies, with good results in South Africa offset by reduced sales in Thailand and Australia.
Revenues generated by the company's own products decreased by 2 percent to €168.8 million. Fishing tackle sales were below last year's level in North America, while sales of other group products were up. Meanwhile, sales of third-party products decreased by 5 percent to €84.5 million, affected by the loss of a product category in Poland and challenging market conditions in Russia and France.
Overall, the company's comparable operating margin dropped by 2.7 percentage points to 4.5 percent, weighed down by lower sales, operational challenges at the factory in Indonesia and write-downs of account receivables in North America.