Rapala VMC Corporation finished the fourth quarter with a 1 percent rise in sales to €60.8 million, underpinned by the North American market, which was up by 12 percent to €18.7 million. Market expectations were for a quarterly turnover of €62.0 million.
Sales fell by 13 percent to €21.7 million in the Nordic countries. Revenues in the region were affected by a late start of the winter season and the restructuring of the Norwegian winter sports business. Turnover in the rest of Europe was unchanged during the quarter at €19.2 million. The group said that it performed well in the Russian and French markets during the full year and last quarter. Sales in the rest of the world were up by 3 percent to €15.3 million, supported by the Brazilian, Japanese, Malaysian, Thai and Australian markets. South Africa was the only country to show weakness. Overall revenues have to be adjusted to intra-group sales, which reached €14.1 million in the fourth quarter.
Sales of fishing products rose by 12 percent to €33.0 million driven by North America, which is the business's largest market. The turnover of other group products fell by 30 percent to €7.3 million following a decline in winter sport sales. Sales of third-party products were down by 2 percent to €20.6 million.
Excluding non-recurring items, the Ebit margin slipped to 4.0 percent in the quarter from 7.1 percent a year earlier. The reported margin also slumped to 5.8 percent from 6.9 percent, despite a €1.1 million gain from the disposal of the company's gift business.
The reported Ebit margin for fishing products narrowed to 5.5 percent from 13.8 percent a year earlier, because of a weakening of the dollar against the euro as well as higher sales in bait, a business that carries lower margins. Other group products registered a margin of 25.1 percent against 3.2 percent, lifted by the divestment in December of the gift business Willtech Gift. The unit had margins below the group's average. The quarterly negative margin for third-party products improved to 0.7 percent from a negative 0.9 percent. Group net profit shrank to €0.2 million from €1.4 million.
For the full year, Rapala increased sales by 4 percent to a record €279.5 million. The adjusted Ebit margin fell to 10.9 percent from 11.8 percent a year earlier and the reported margin was 11.0 percent against 11.6 percent. The net profit slipped to €17.2 million from €20.7 million but the board proposed leaving the dividend unchanged at €0.23 per share.
The company expects 2012 sales to increase compared with 2011 and sees its comparable Ebit improving. The management stressed that uncertainty has increased regarding consumer and retail demand. The situation is uneven, with presales rising in some markets and declining in others. The signs of an economic recovery in North America that registered in the fourth quarter continued in the opening weeks of the new year. Rapala said it is well prepared to address the North American market, which is characterized by large and demanding clients, thanks to the improved delivery performance of its Chinese factory. It added that the French market is also dominated by large retailers such as Décathlon.
Sales of winter products will be affected by the late start of the winter season and the restructuring of the Norwegian ski business. Current cold weather conditions in Finland will help the company recover part of the lost sales. The group reiterated that the top line will be handicapped by the sale of the gift business, which represented 3-4 percent of its revenues.
Rapala finished 2011 with an inventory of €115.5 million. It said that the inventories were at unsatisfactory levels throughout the year, but the trend improved in the last quarter. Efforts to clean up inventories will continue, but the group stressed that it is important to have products available to address some markets such as the U.S. and Russia.
The group's net debt was cut to €91.2 million at the end of December from €92.0 million a year earlier, lowering the debt-to-equity ratio to an all-time low of 67.2 percent from 71.2 percent and giving the company leeway to carry out acquisitions.
At the end of 2011, the group has distribution units in 34 countries after having extended its network in Mexico, Indonesia and Kazakhstan. In the fourth quarter, Rapala's American unit opened a web shop for the local market offering a full range of products.
At the beginning of January, the group's lure and hook facility on Batam Island, Indonesia, started shipments. The company added that it is planning to expand lure manufacturing in Batam and reducing the activity in China, but the process is likely to be gradual. The group will continue to outsource a substantial part of the production of accessories, knives, rods, reels and other fishing tackle in China.
