Rapala VMC significantly improved its earnings in the first half of 2018, driven by strong sales in North America and successful performance improvement initiatives in France and Southeast Asia. The Finnish-based company's comparable operating margin rose by 2.9 percentage points to 10.7 percent, and its net income jumped by 62 percent from the year-ago period, reaching a level of €9.7 million.
According to the management, higher production efficiencies and footprint optimization at Rapala's European lure manufacturing units contributed positively to the improvement, partly offset by an ongoing negative impact from the company's Indonesian lure manufacturing operations.
The group's revenues improved by just 1.1 percent to €142.5 million, but on a constant-currency basis, they advanced by 6.5 percent. The management said that trading conditions showed positive signs in many of the group's markets. Despite the structural changes in the North American retail market, the demand for Rapala's products was strong in the area. In Europe, trading conditions continued to be very competitive. The company continued its strategic gradual shift from traditional marketing to digital marketing channels. It opened successfully a content-driven Rapala e-commerce site in Europe in May to enhance brand experience and boost customer service.
In North America, where the U.S. and Canadian dollars depreciated in value compared with the first half of 2017, sales increased by 4.1 percent in euros to €49.6 million, with a gain of 14.7 percent in local currencies. The challenges that the group had faced last year in the region, with two major customers entering Chapter 11 bankruptcy proceedings, were largely overcome as the sales were successfully channeled to other retail customers. Rapala lures were the single biggest driver for the growth.
Sales in the Nordic markets grew by 2 percent to €32.3 million, or by 4.1 percent in constant currencies. Supported by good winter weather, higher hunting sales in Sweden and winter product sales in Finland contributed positively to the growth. On the other hand, sales of Marttiini knives were below last year's record-high figures, which had been boosted by the launch of a special anniversary line.
In the rest of Europe, the group's revenues declined by 2 percent to €44.9 million, due to the declining Russian ruble, but they improved by 4 percent in constant currencies. Difficult market conditions in Russia reduced purchasing power and increased cross-border internet trade, changing consumer behavior. France, the biggest market for the group in the area, performed well. Poland and Romania also witnessed strong sales growth.
In the rest of the world, sales remained stable at €15.7 million, but grew by 6.1 percent in constant currencies. The hunting business in South Africa contributed to the increase. Thailand, Malaysia and Indonesia also witnessed strong growth during the first half of the year.
Overall, revenues generated by the company's own products remained stable at €94.5 million, but they were negatively impacted by exchange rates. Rapala lures performed well, along with fishing lines, hooks and winter sports products. Meanwhile, the group's revenues from the sale of third-party products increased by 5 percent to €48.0 million, driven by an expanded hunting distribution business.
