Salomon recorded an operating loss of €16.7 million in the 4th quarter of 2005, due to a restructuring charge of €52.8 million related to its acquisition by Amer Sports last Oct. 1, and its sales were up by only 0.9 percent to €255.2 million for the period. For the full year, Salomon saw its operating margin decline to 2.9 percent of sales from 3.5 percent in 2004. Annual sales were down by 1 percent to €623.5 million, as increases of 12 percent in clothing and footwear, including Arc’teryx, and 10 percent for Mavic were offset by a 6 percent drop in sales of winter sports equipment. Salomon’s sales of cross-country ski equipment rose by 8 percent, but its snowboard sales fell by 10 percent, due primarily to large inventories of unsold boards in the USA.
Cautioning that Salomon is in a transition phase, Amer indicates that the group’s net profit will be stable or decline in 2006 on a total turnover of about €1.8 billion. Excluding operations discontinued in 2004, Amer’s net profit went up by 10 percent to €75.2 million last year in spite of Salomon’s negative contribution during the last quarter. The group’s operating profit (EBIT) dropped by 18 percent to €82.3 million. Net financial expenses tripled because of Salomon’s acquisitions.
Amer’s consolidated turnover for the year grew by 32 percent to €1,363.7 million, with 25 percentage points attributed to Salomon and the remaining 7 percent to organic growth. Sales of Atomic and other winter sports operations grew by 4 percent to €214.0 million in 2005, but the operating income (EBIT) in this segment fell by 25 percent to €22.2 million. While its sales of alpine skis fell by 4 percent, those of ski boots jumped by 42 percent. Geographically, Atomic’s sales were up by 6 percent in Europe, the Middle East and Africa (EMEA) and by 26 percent in the Asia-Pacific region, but they dropped by 9 percent in the Americas because of poor snow conditions in the 2004/05 season.
The best performance was recorded in the fitness equipment sector, and while the Americas still represent 79 percent of the revenues, those in Japan shot up by 64 percent. Precor and other fitness equipment lines contributed 30 percent higher profit of €31.1 million on 20 percent higher turnover of €252.1 million, with direct sales to major commercial customers fuelling the growth because of a “total product” offering.
Wilson’s racquet sports division had 7 percent higher sales of €225.4 million and 22 percent higher profit of €32.7 million. An increase of 9 percent was recorded in tennis racquets, while badminton equipment grew by 40 percent. Geographically, sales were up by 6 percent in the Americas, by 6 percent in Europe, the Middle East and Africa (EMEA) and by 9 percent in the Asia-Pacific region.
Wilson’s team sports sales expanded by 10 percent to €203.8 million, delivering 8 percent higher EBIT of €26.5 million. Wilson Golf and Suunto instead contributed lower sales and profits. Wilson Golf had a loss of €7.1 million on 4 percent lower sales of €141.2 million, while Suunto had a much lower EBIT of €3.4 million on 7 percent lower sales of €72.0 million, with stable sales of diving equipment and a decline of 8 percent for wristop computers, due primarily to a supply problem. Reorganization programs have been launched in both of these divisions.
These results include those of operations discontinued in 2004. In addition to its direct sales, the Wilson brand generated additional revenues of €112 million under license.
At €558.5 million, Amer’s sales in the 4th quarter were 114 percent above those of the same period a year earlier. Excluding Salomon and the impact of foreign currencies, the rest of the group still enjoyed a strong 16.2 percent sales increase for the period, with currency-neutral increases of 6.9 percent for the racquet sports division, 11.8 percent in team sports, 6.7 percent in winter sports and 26.3 percent in fitness. These scores were partly offset by declines of 1.3 percent decline in golf and 12.8 percent for Suunto’s sports instruments.
Amer claims a 37 percent share of the world tennis racquet market, which grew slightly last year according to the group. The golf market grew slightly and the winter sports market remained stable during the year, Amer says, adding that average prices fell in both product segments. The group claims that Atomic was the global brand leader in alpine skis in 2005, with deliveries of 873,000 pairs and a market share of 19 percent in this product category.
The group, which is now the global leader in sports equipment overall, has established a sourcing initiative in Asia for all of its brands. By the end of last year it employed a total of 6,667 persons, including 2,607 belonging to Salomon’s staff. Amer’s nomination committee is proposing to reduce the number of directors from seven to six as Pekka Kainulainen, who has served on the board since 12985, doesn’t want to be considered for re-election.
