RAPALA VMC CORPORATION'S ANNUAL ACCOUNTS 2016: CAS
Post# of 301275
Rapala VMC Corporation Financial Statement Release February 16, 2017 at 9:00 a.m.
RAPALA VMC CORPORATION'S ANNUAL ACCOUNTS 2016: CASH FLOW AT RECORD LEVEL BUT SALES AND PROFITABILITY DOWN FROM LAST YEAR
January-December (FY) in brief:
- Net sales were 260.6 MEUR, down 6% from previous year (278.2). With comparable exchange rates sales were 5% lower than last year.
- Operating profit was 7.2 MEUR (21.0), heavily impacted by items affecting comparability.
- Comparable operating profit* was 18.8 MEUR (25.3).
- Cash flow from operations was 26.7 MEUR (15.6).
- Earnings per share was -0.08 EUR (0.17), heavily impacted by one-off items included in items affecting comparability.
- 2017 guidance: Full year net sales are expected to be above last year's level and comparable operating profit in the same range as in 2016.
- Separate stock exchange release issued summarizing Group's updated strategy.
- Dividend proposal 0.10 EUR (0.15 EUR) per share that is distributed in two equal installments.
July-December (H2) in brief:
- Net sales were 117.5 MEUR, down 5% from previous year (124.2).
- Operating profit was -7.0 MEUR (3.6).
- Comparable operating profit* was 3.2 MEUR (4.8).
- Cash flow from operations was 20.5 MEUR (4.9).
- Earnings per share was -0.27 EUR (-0.01).
President and CEO Jussi Ristimäki: "Our 2016 sales were behind last year's levels in many of our big markets. North America was impacted by slow start of the year in the USA and difficult trading conditions in Canada. In Europe, France was hurt by unfavorable weathers and overall depressed market sentiment. The Russian situation continued to be challenging throughout the year, although small positive signs are now in the air. In Nordic our hunting business is recovering nicely.
Reduced sales had a direct negative impact on our comparable profitability. Cost savings accelerated during latter part of the year, but were not sufficient to offset the lost gross profits. However, despite lower than expected topline, we managed to reduce our inventories and generate record high annual operative cash flow.
After changes in the management during the third quarter, we initiated a strategy update project to crystallize our future priorities. In short to mid-term, utilizing the Group's existing assets and capabilities, the focus will be on capturing organic growth opportunities in fishing tackle business. We will also take determined actions to improve profitability, lighten balance sheet and improve operational performance. In longer term the target is to return to more aggressive growth track and actively seek synergistic growth opportunities also outside the fishing tackle business."
| * Excluding mark-to-market valuations of operative currency derivatives and other items affecting comparability. From 2016 onwards the Rapala Group has relabeled the previously referenced "non-recurring items" with "other items affecting comparability" including material restructuring costs, impairments, gains and losses on business combinations and disposals, insurance compensations and other non-operational items. Rapala Group presents alternative performance measures to reflect the underlying business performance and to enhance comparability between financial periods. Alternative performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS. Definitions and reconciliation of key figures are presented in the financial section of the release. |
Key figures
| H2 | H2 | Change | FY | FY | Change | ||||
| MEUR | 2016 | 2015 | % | 2016 | 2015 | % | |||
| Net sales | 117.5 | 124.2 | -5% | 260.6 | 278.2 | -6% | |||
| Operating profit/loss | -7.0 | 3.6 | -294% | 7.2 | 21.0 | -66% | |||
| % of net sales | -6.0% | 2.9% | 2.8% | 7.6% | |||||
| Comparable operating profit * | 3.2 | 4.8 | -33% | 18.8 | 25.3 | -26% | |||
| % of net sales | 2.7% | 3.8% | 7.2% | 9.1% | |||||
| Cash flow from operations | 20.5 | 4.9 | +318% | 26.7 | 15.6 | +71% | |||
| Gearing % | 70.6% | 77.3% | 70.6% | 77.3% | |||||
| EPS, EUR | -0.27 | -0.01 | -0.08 | 0.17 | -147% | ||||
| * Excluding mark-to-market valuations of operative currency derivatives and other items affecting comparability. From 2016 onwards the Rapala Group has relabeled the previously referenced "non-recurring items" with "other items affecting comparability" including material restructuring costs, impairments, gains and losses on business combinations and disposals, insurance compensations and other non-operational items. Rapala Group presents alternative performance measures to reflect the underlying business performance and to enhance comparability between financial periods. Alternative performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS. Definitions and reconciliation of key figures are presented in the financial section of the release. | |||||||||
Market environment
Year 2016 sales were behind last year as trading conditions were challenging throughout the year, especially in big markets the US, Russia and France. In the Group's biggest market, the US, slow start of the year impacted the whole year, even if the second half sales were above last year's levels. The struggling market situation in Russia continued to strongly affect the sales, but in the fourth quarter the sales strengthened in Russia and more stable Ruble slightly improved the market situation. The sales in France were also down, burdened by tightened competition and reserved market sentiment. Several markets witnessed changes and uncertainties, causing retailers to be careful with their purchasing.
Favorable late summer and early fall weathers were good for the summer fishing tackle sales, but not enough to offset the slower sales in early summer. Group's sales of winter fishing and winter sports equipment were negatively impacted by unfavorable winter weathers.
Business Review January-December 2016
The Group's net sales for the full year were down 6%. Changes in translation exchange rates decreased sales by approximately 3.3 MEUR for the full year. Correspondingly in local currency terms net sales were down 5% from last year.
North America
The sales in North America were below last year's levels throughout the year. The US retail scene was under some turmoil which impacted the sales. The second half sales in the US were above last year's level, supported by strong sales of group branded lures. The retailers' purchases started to reflect better the consumer demand after retailers' destocking earlier in the year. Late beginning of winter combined with carryover of winter fishing stock at retail level from last year's short winter slowed down the winter fishing tackle sales. In Canada, economic situation and trading conditions were weak throughout the year, burdening the region's sales.
Nordic
In the Nordic countries the sales for the full year were slightly below last year, but growing towards the end of the year. Excluding impacts of valuation of currency nominated accounts receivables, Nordic full year sales were slightly above last year's level. Full year as well as last quarter sales were supported by stronger hunting sales, especially in Sweden and Denmark. In Norway full year sales improved from last year supported by better weather conditions. The winter fishing sales in the region also improved slightly from last year's low levels. Export sales from the Group's manufacturing units to non-Group distribution channels were down compared to last year.
Rest of Europe
The sales were below last year's level for the full year and the second half of the year, following slowdown in sales especially in big markets Russia and France. The fourth quarter sales for the region were above last year's level supported by improved sales in Spain, Baltics and Russia, where ice fishing sales picked up. Currency exchange rate changes, especially Russian Ruble, had a negative impact on the regions full year sales. During fourth quarter the Ruble started to strengthen. The instability and uncertainties in Russia and Ukraine impacted sales volumes in the respective countries, but the market sentiment slightly improved towards the end of the year in Russia. In France the poor summer weathers affected the summer fishing tackle sales and tightened price competition and overall reserved market sentiment continued to burden the sales. In Poland the strong sales for the second half of the year were boosted by closeout sales of a third party category, while in Spain and Baltics sales were supported by increasing third party hunting sales.
Rest of the World
The region's sales were behind last year throughout the year. Currency exchange rate changes, especially South African Rand, had a negative impact on the regions full year sales. The sales were burdened by struggling Asian markets, especially in Southeast Asia where the Group's distribution organization is being restructured. After a strong start of the year the sales slowed down on the fourth quarter in South Africa. The full year sales in China, South Korea, Chile and Mexico were stronger than last year. The region's sales were supported by new group distribution operation handling markets in Middle East and North Africa. Export sales from the Group's manufacturing units to non-Group distribution channels and sales in Australia were down compared to last year. Valuation of currency nominated accounts receivables had a positive impact on last year's full year sales.
External Net Sales by Area*
| FY | FY | Change | Comparable | |
| MEUR | 2016 | 2015 | % | change % |
| North America | 91.3 | 99.2 | -8% | -8% |
| Nordic | 55.3 | 56.2 | -2% | -1% |
| Rest of Europe | 81.3 | 86.9 | -6% | -4% |
| Rest of the World | 32.7 | 35.9 | -9% | -6% |
| Total | 260.6 | 278.2 | -6% | -5% |
| H2 | H2 | Change | Comparable | |
| MEUR | 2016 | 2015 | % | change % |
| North America | 44.9 | 47.6 | -6% | -6% |
| Nordic | 21.9 | 22.0 | 0% | 0% |
| Rest of Europe | 33.3 | 35.5 | -6% | -5% |
| Rest of the World | 17.4 | 19.1 | -9% | -9% |
| Total | 117.5 | 124.2 | -5% | -5% |
| Q4 | Q4 | Change | Comparable | |
| MEUR | 2016 | 2015 | % | change % |
| North America | 23.6 | 25.8 | -9% | -10% |
| Nordic | 11.0 | 10.5 | +5% | +5% |
| Rest of Europe | 14.6 | 13.8 | +6% | +3% |
| Rest of the World | 8.9 | 9.4 | -5% | -7% |
| Total | 58.1 | 59.7 | -3% | -4% |
*Geographical areas are presented based on unit location. Rest of Europe includes France, Russia, Eastern Europe, Spain, Portugal, Great Britain, the Baltic countries, Switzerland and Kazakhstan. Rest of the World includes Asia, Latin America, Australia and South-Africa.
Financial Results and Profitability
Comparable (excluding mark-to-market valuations of operative currency derivatives and other items affecting comparability) and reported operating profit decreased from last year for the full year and second half of the year. With comparable translation exchange rates, comparable operating profit was 6.4 MEUR behind last year's level for the year and 1.7 MEUR behind for the second half year.
Comparable operating profit margin was 7.2% (9.1) for the full year and 2.7% (3.8) for the second half year. The decline in the full year and second half year profitability was directly driven by the lower sales, especially of higher margin Group Branded Products. Lower sales volumes impacted profitability negatively both at distribution and manufacturing level. Profit was also burdened by lower result of joint venture in the UK that was sold in September 2016. The Group did realize cost savings during the year but fixed costs' decrease did not offset the reduced gross profit caused by lower sales.
Respectively reported operating profit margin was for the full year 2.8% (7.6) and for the second half of the year -6.0% (2.9). Reported operating profit included loss of mark-to-market valuation of operative currency derivatives of 1.6 MEUR (2.1) for the year and loss of 0.7 MEUR (0.1) for the second half. Net expenses of other items affecting comparability included in the reported operating profit were 10.0 MEUR (2.3) for the full year and 9.5 MEUR (1.1) for the second half year of which 9.2 MEUR relates to redefined inventory valuations recognized in conjunction with the Group's strategy update initiated during fourth quarter. Items affecting comparability also include costs related to restructurings in Southeast Asia distribution and France, as well as in various other units.
Total financial (net) expenses were 5.0 MEUR (6.8) for the full year and 2.2 MEUR (2.7) for the second half year. Net interest and other financing expenses were slightly above last year's level at 3.7 MEUR (3.5) for the full year and 2.0 MEUR (2.0) for the second half. Compared to last year financial items were impacted less by (net) foreign exchange expenses of 1.3 MEUR (3.3) for the full year and 0.2 MEUR (0.6) for the second half of the year.
Driven by items affecting comparability, net profit and earnings per share for the full year and second half of the year fell below zero and under last year's levels. Excluding inventory allowance, net of tax impact, the net profit for the full year would have been about 5.7 MEUR and earnings per share about 0.12 EUR. Income taxes were impacted by loss making units and included a positive 0.7 MEUR tax adjustment on income taxes related to past years. The share of non-controlling interest in net profit decreased from last year and totaled 1.0 MEUR (1.4) for the year and 0.2 MEUR (0.3) for the second half of the year.
Key figures
| H2 | H2 | Change | FY | FY | Change | |
| MEUR | 2016 | 2015 | % | 2016 | 2015 | % |
| Net sales | 117.5 | 124.2 | -5% | 260.6 | 278.2 | -6% |
| Operating profit/loss | -7.0 | 3.6 | -294% | 7.2 | 21.0 | -66% |
| Comparable operating profit * | 3.2 | 4.8 | -33% | 18.8 | 25.3 | -26% |
| Net profit | -10.2 | -0.2 | -4647% | -2.0 | 8.1 | -125% |
| * Excluding mark-to-market valuations of operative currency derivatives and other items affecting comparability. Other items affecting comparability include material restructuring costs, impairments, gains and losses on business combinations and disposals, insurance compensations and other non-operational items. | ||||||
Bridge calculation of comparable operating profit
| H2 | H2 | Change | FY | FY | Change | |
| MEUR | 2016 | 2015 | % | 2016 | 2015 | % |
| Operating profit/loss | -7.0 | 3.6 | -294% | 7.2 | 21.0 | -66% |
| Mark-to-market valuations of operative currency derivatives | 0.7 | 0.1 | +600% | 1.6 | 2.1 | -24% |
| Other items affecting comparability | 9.5 | 1.1 | +764% | 10.0 | 2.3 | +335% |
| Comparable operating profit | 3.2 | 4.8 | -33% | 18.8 | 25.3 | -26% |
| More detailed bridge of comparable operating profit and definitions and reconciliation of key figures are presented in the financial section of the release. | ||||||
Segment Review
Group Products
Group Fishing Products full year sales were down from last year's levels, negatively impacted by lower sales of fishing lures, lines and accessories especially in North America. Challenges in Rest of Europe market drove reduction of the Group's hook sales, while in North America VMC hook sales were growing. Group Fishing Products fourth quarter and second half year sales were supported by better sales of fishing lures in the US, but burdened by lower sales of winter fishing tackle.
The full year and second half year sales of Other Group Products were at last year's level and the fourth quarter sales slightly above last year's level.
Compared to last year both Group Products and Third Party Products full year sales were also negatively impacted by valuation of currency nominated accounts receivable, which supported the sales last year.
Comparable operating profit for Group Fishing Products declined compared to last year for the full year and the second half of the year. Full year comparable operating profit was burdened by lower sales, which reduced profitability both at distribution and manufacturing level. Fixed costs were below last year levels driven by cost saving measures, but not sufficient to offset the reduced gross profit. Comparable operating profit in Other Group Products was above last year, raising Group Products' comparable operating profit for the second half of the year slightly above last year.
Third Party Products
The sales of Third Party Products were below last year's level, burdened by lower sales of Third Party Fishing Products. The challenging trading conditions in Russia continued to reduce the Third Party Fishing products sales in the region. Also the difficult market situation in France affected negatively the Third Party Fishing Products sales. Third Party Hunting sales were up from last year in Nordic and new hunting markets in Europe and Rest of the World. Currency fluctuations had negative impact on full year sales in Russia and South Africa.
Comparable operating profit for Third Party Products was behind last year's level burdened by lower sales and aggressive sales campaigns' negative impact on margins, but supported by price increases issued to offset the unfavorable development in purchase currencies last year.
Net Sales by Segment
| FY | FY | Change | Comparable | ||
| MEUR | 2016 | 2015 | % | change % | |
| Group Products | 172.1 | 184.7 | -7% | -6% | |
| Third Party Products | 88.5 | 93.5 | -5% | -3% | |
| Eliminations | 0.0 | ||||
| Total | 260.6 | 278.2 | -6% | -5% | |
| H2 | H2 | Change | Comparable | |
| MEUR | 2016 | 2015 | % | change % |
| Group Products | 77.1 | 81.2 | -5% | -5% |
| Third Party Products | 40.3 | 43.1 | -6% | -6% |
| Eliminations | 0.0 | |||
| Total | 117.5 | 124.2 | -5% | -5% |
| Q4 | Q4 | Change | Comparable | ||
| MEUR | 2016 | 2015 | % | change % | |
| Group Products | 39.2 | 40.2 | -2% | -3% | |
| Third Party Products | 18.9 | 19.5 | -3% | -5% | |
| Eliminations | 0.0 | ||||
| Total | 58.1 | 59.7 | -3% | -4% | |
Comparable operating profit by Segment
| H2 | H2 | Change | FY | FY | Change | |
| MEUR | 2016 | 2015 | % | 2016 | 2015 | % |
| Group Products | 5.4 | 5.2 | +4% | 17.4 | 22.2 | -22% |
| Third Party Products | -2.2 | -0.5 | -349% | 1.4 | 3.2 | -56% |
| Comparable operating profit | 3.2 | 4.8 | -33% | 18.8 | 25.3 | -26% |
| Items affecting comparability | -10.2 | -1.2 | -777% | -11.6 | -4.3 | -168% |
| Operating profit / loss | -7.0 | 3.6 | -294% | 7.2 | 21.0 | -66% |
| Rapala Group has changed the measurements of segment performance by excluding items affecting comparability from operating profit. Comparative figures 2014-2015, definitions and reconciliations are presented in the financial section of the release. | ||||||
Financial position
Following the Group's intense focus on cash flow and inventories, cash flow from operating activities reached all time annual record of 26.7 MEUR (15.6) for the full year and 20.5 MEUR (4.9 MEUR) for the second half of the year despite challenging trading conditions and lower sales. Change in working capital amounted to 10.5 MEUR (-3.3) for the full year and 17.8 MEUR (3.5 MEUR) for the second half of the year.
Inventories were in the end of December 102.2 MEUR (116.2) decreasing by 14.0 MEUR from last year, of which 9.5 MEUR (9.2 MEUR with average FX rates) results from non-cash allowances relating to redefined inventory valuation. On comparable basis, the Group's inventories decreased by 8.1 MEUR from last December despite slowdown in sales. Change in translation exchange rates increased inventory value by 3.7 MEUR.
Net cash used in investing activities was below last year's level and totaled 6.0 MEUR (8.6) for the full year and 1.2 MEUR (4.5 MEUR) for the second half of the year. Operative capital expenditure was notably lower compared to last year in the second half of the year at 3.4 MEUR (5.7), while full year operative capital expenditure was 8.4 MEUR (9.1). Investments in manufacturing operations in Indonesia and extension of the hook factory and warehouse building in France were finalized already in the first half of the year. Full year and second half year net investing activities included 1.0 MEUR (1.1 MEUR) annual installment received related to the 2011 disposal of the gift business and sale of UK joint venture shares of 1.2 MEUR in second half of 2016. Last year's investing activities included the last installment of the acquisition of the Sufix brand of 0.9 MEUR.
Liquidity position of the Group was good. Undrawn committed long-term credit facilities amounted to 59.9 MEUR at the end of the period. Driven by strong cash flow, gearing and net interest-bearing debt decreased from last year and equity-to-assets was slightly below last year's level. Following the higher ratio between net interest bearing debt and reported EBITDA, the Group has during the year agreed with its lenders on higher covenant levels covering also the last quarter of 2016. The Group expects to fulfill the requirements of the lenders also at the end of the first quarter of 2017.
Key figures
| H2 | H2 | Change | FY | FY | Change | |
| MEUR | 2016 | 2015 | % | 2016 | 2015 | % |
| Cash flow from operations | 20.5 | 4.9 | +318% | 26.7 | 15.6 | +71% |
| Net interest-bearing debt at end of period | 96.1 | 108.2 | -11% | 96.1 | 108.2 | -11% |
| Gearing % | 70.6% | 77.3% | 70.6% | 77.3% | ||
| Equity-to-assets ratio at end of period, % | 43.1% | 44.7% | 43.1% | 44.7% | ||
| Definitions and reconciliation of key figures are presented in the financial section of the release. | ||||||
Strategy Implementation
After changes in the Group's management in the third quarter of 2016, the Group initiated during fourth quarter a process to update its future strategies. Following the conclusions of this strategy update, in order to build solid financial and operational platform for long term growth, the Group's primary focus in coming three years will be on capturing organic growth opportunities in fishing tackle business. The Group will also take determined actions to improve its profitability, lighten balance sheet and improve operational performance. In longer term the target is to return to more aggressive growth track and actively seek synergistic growth opportunities also outside the fishing tackle business.
The Group's existing assets and capabilities form the foundation for the future strategies, both in short and long term. Future strategies are built upon utilizing and capitalizing the brand portfolio, own manufacturing platform, research and development knowledge, as well as the broad distribution network and strong local presence all around the world supporting the sales of Group's own and selected synergistic third party products.
In 2016 the Group's key priorities included improving the performance and capturing the benefits of the lure factory in Batam, Indonesia, improving operational efficiencies of manufacturing operations and developing global supply chain management. New global product launch initiatives, Asian distribution restructuring as well as improving the cost efficiency were also high on the management agenda. These topics will continue to be on the Group's focus and be further accelerated together with various new strategic initiatives.
Product Development
In line with the Group's updated strategy, strengthening and further leveraging the Group's global innovation power is one of the key success factors in the future and key requirement for enhancing the organic growth. By utilizing its unique global market knowledge combined with R&D, manufacturing and sourcing capabilities, the Group will address target markets with new innovative products and concepts and will swiftly respond to market needs.
The Group is reorganizing and boosting its lure product development procedure by centralizing the product development know-how and key resources to one location in Vääksy, Finland. The R&D center will serve both the European and Asian lure manufacturing units. This will also increase the agility of the product development procedures.
The most important product launch in 2016 was the introduction of the new Rapala Shadow Rap Shad lure launched in early spring. Other notable releases were new series of Rapala fisherman's tools and accessories which received Best New Product Awards in the European trade show EFTTEX and the Australian trade show AFTA.
Introductions of new Storm hero lures were prepared during the second half of the year, and the Storm 360GT soft plastic lure was launched globally to the markets in January 2017, supported with coordinated global marketing campaigns.
Organization and Personnel
Average number of personnel was 2 829 (3 078) for the full year and 2 740 (3 206) for the last six months. At the end of December, the number of personnel was 2 751 (3 159), decrease coming from optimizing the capacity and streamlining the lure manufacturing operations in Asia as well as restructuring in South East Asia, France and various other units.
The Group made the following appointments and changes in the Group's Board and Executive Committee effective September 1, 2016: Jorma Kasslin was appointed as Executive Chairman of the Board. Jussi Ristimäki was appointed as President and Chief Executive Officer. Cyrille Viellard was appointed to be in charge of Group's distribution in Europe (excluding Russia) and Latin America. Lars Ollberg was appointed, in addition to his current role as Head of Accessory and Outdoor Business and Distribution in Asia, Pacific and Middle East, to be responsible for global coordination of Group's innovations as well as distribution in South Africa. Stanislas de Castelnau was appointed as Head of Manufacturing Operations and Global Supply Chain Development. He also maintained the role as Head of Hook and Carp business unit.
Arto Nygren was appointed as Executive Vice President, Lure Manufacturing and member of the Executive Committee as of January 1, 2017.
Short-term Outlook and Risks
In 2016 the Group's sales decreased in many big markets and the outlook for 2017 is still somewhat cautious. In many countries changes in political regimes are causing uncertainties on the future development of the economic activity.
In North America sales picked up during latter part of 2016 and this development is expected to continue. New product introductions, including the new Storm 360GT soft bait manufactured in the Batam factory, are expected to support the sales. In Russia the market continues to be challenging, although the strengthening of Ruble has slightly improved the sentiment. In Central Europe the markets continue to be competitive. Sales in Rest of the World markets are expected to improve.
Following the updated strategy, the Group will launch various initiatives to boost the organic growth and improve the cost and capital efficiency as well as operational performance in the future. These initiatives will trigger some additional expenses and investments in 2017.
The Group expects full year net sales to be above last year's level and comparable operating profit (excluding mark-to-market valuations of operative currency derivatives and other items affecting comparability) to be in the same range as in 2016.
Proposal for profit distribution
Taking into consideration the Group's reduced net result (impacted by the non-cash inventory allowance) and strong cash flow the Board of Directors proposes to the Annual General Meeting that a dividend of 0.10 EUR for 2016 (0.15 EUR) per share is distributed from the Group's distributable equity and remaining distributable funds are carried forward to retained earnings. It is proposed that the dividend is distributed in two equal installments. At December 31, 2016 the distributable equity totaled to 25.1 MEUR.
No material changes have taken place in the Group's financial position after the end of the financial year. The Group's liquidity is good and the view of the Board of Directors is that the distribution of the proposed dividend will not undermine this liquidity.
Financial Statements and Annual General Meeting
Financial Statements for 2016 and Corporate Governance Statement will be published in the beginning of week 10 commencing on March 6, 2017. Annual General Meeting is planned to be held on March 30, 2017.
First quarter Trading Report 2017 will be published on April 28, 2017.
Helsinki, February 16, 2017
Board of Directors of Rapala VMC Corporation
For further information, please contact:
Jussi Ristimäki, President and Chief Executive Officer, +358 9 7562 540 Olli Aho, Investor Relations, +358 9 7562 540
A conference call on the financial year result will be arranged today at 10:30 a.m. Finnish time (9:30 p.m. CET). Please dial +44 (0)330 336 9104 or +1 719 325 2340 or +358 (0)9 7479 0360 (pin code: 831981) five minutes before the beginning of the event. A replay facility will be available for 14 days following the teleconference. The number to dial +44 (0) 207 984 7568 (pin code: 1095716). Financial information and teleconference replay facility are available at www.rapalavmc.com.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
| STATEMENT OF INCOME | H2 | H2 | FY | FY | |
| MEUR | 2016 | 2015 | 2016 | 2015 | |
| Net sales | 117.5 | 124.2 | 260.6 | 278.2 | |
| Other operating income | 1.1 | 0.7 | 1.3 | 1.0 | |
| Materials and services | 65.3 | 60.2 | 129.0 | 130.9 | |
| Employee benefit expenses | 32.5 | 33.1 | 67.6 | 68.4 | |
| Other operating expenses | 24.1 | 24.5 | 51.1 | 52.3 | |
| Share of results in associates and joint ventures | -0.1 | 0.1 | -0.1 | 0.4 | |
| EBITDA | -3.5 | 7.2 | 14.1 | 28.1 | |
| Depreciation, amortization and impairments | 3.5 | 3.6 | 6.9 | 7.1 | |
| Operating profit/loss (EBIT) | -7.0 | 3.6 | 7.2 | 21.0 | |
| Financial income and expenses | 2.2 | 2.7 | 5.0 | 6.8 | |
| Profit/loss before taxes | -9.2 | 0.9 | 2.2 | 14.2 | |
| Income taxes | 1.1 | 1.2 | 4.2 | 6.1 | |
| Net profit/loss for the period | -10.2 | -0.2 | -2.0 | 8.1 | |
| Attributable to: | |||||
| Equity holders of the company | -10.4 | -0.5 | -3.0 | 6.7 | |
| Non-controlling interests | 0.2 | 0.3 | 1.0 | 1.4 | |
| Earnings per share for profit attributable to the equity holders of the parent company: | |||||
| Earnings per share, EUR (diluted = non-diluted) | -0.27 | -0.01 | -0.08 | 0.17 | |
| STATEMENT OF COMPREHENSIVE INCOME | H2 | H2 | FY | FY |
| MEUR | 2016 | 2015 | 2016 | 2015 |
| Net profit/loss for the period | -10.2 | -0.2 | -2.0 | 8.1 |
| Other comprehensive income, net of tax | ||||
| Change in translation differences* | 6.2 | -2.3 | 4.2 | 5.5 |
| Gains and losses on cash flow hedges* | 0.4 | 0.3 | 0.5 | 0.4 |
| Gains and losses on net investment hedges* | 0.0 | -1.2 | 0.8 | -2.9 |
| Remeasurements of defined benefit liabilities | 0.1 | 0.1 | 0.1 | 0.1 |
| Total other comprehensive income, net of tax | 6.7 | -3.2 | 5.6 | 3.2 |
| Total comprehensive income for the period | -3.6 | -3.4 | 3.6 | 11.3 |
| Total comprehensive income attributable to: | ||||
| Equity holders of the parent company | -4.1 | -2.4 | 1.9 | 11.0 |
| Non-controlling interests | 0.5 | -1.0 | 1.6 | 0.3 |
| * Item that may be reclassified subsequently to the statement of income | ||||
| STATEMENT OF FINANCIAL POSITION | Dec 31 | Dec 31 |
| MEUR | 2016 | 2015 |
| ASSETS | ||
| Non-current assets | ||
| Intangible assets | 78.2 | 78.2 |
| Property, plant and equipment | 36.2 | 33.9 |
| Non-current assets | ||
| Interest-bearing | 0.0 | 2.8 |
| Non-interest-bearing | 9.1 | 11.8 |
| 123.5 | 126.7 | |
| Current assets | ||
| Inventories | 102.2 | 116.2 |
| Current assets | ||
| Interest-bearing | 0.9 | 1.0 |
| Non-interest-bearing | 55.8 | 58.1 |
| Cash and cash equivalents | 33.8 | 11.4 |
| 192.7 | 186.7 | |
| Total assets | 316.1 | 313.4 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Equity attributable to the equity holders of the parent company | 127.5 | 131.5 |
| Non-controlling interests | 8.6 | 8.5 |
| 136.1 | 140.0 | |
| Non-current liabilities | ||
| Interest-bearing | 41.5 | 58.6 |
| Non-interest-bearing | 11.6 | 13.4 |
| 53.1 | 72.0 | |
| Current liabilities | ||
| Interest-bearing | 89.3 | 64.8 |
| Non-interest-bearing | 37.6 | 36.6 |
| 126.9 | 101.5 | |
| Total equity and liabilities | 316.1 | 313.4 |
| STATEMENT OF CASH FLOWS | H2 | H2 | FY | FY |
| MEUR | 2016 | 2015 | 2016 | 2015 |
| Net profit/loss for the period | -10.2 | -0.2 | -2.0 | 8.1 |
| Adjustments to net profit/loss for the period * | 16.9 | 7.8 | 26.4 | 21.8 |
| Financial items and taxes paid and received | -3.9 | -6.2 | -8.2 | -11.1 |
| Change in working capital | 17.8 | 3.5 | 10.5 | -3.3 |
| Net cash generated from operating activities | 20.5 | 4.9 | 26.7 | 15.6 |
| Investments | -3.4 | -5.7 | -8.4 | -9.1 |
| Proceeds from sales of assets | 0.0 | 0.1 | 0.2 | 0.2 |
| Sufix brand acquisition | - | 0.0 | - | -0.9 |
| Proceeds from disposal of subsidiaries, net of cash | 1.0 | 1.1 | 1.0 | 1.1 |
| Proceeds from disposal of joint ventures | 1.2 | - | 1.2 | - |
| Change in interest-bearing receivables | 0.0 | 0.0 | 0.0 | 0.0 |
| Net cash used in investing activities | -1.2 | -4.5 | -6.0 | -8.6 |
| Dividends paid to parent company's shareholders | - | - | -5.7 | -7.7 |
| Net funding | 1.9 | -4.1 | 5.7 | 0.0 |
| Purchase of own shares | - | - | -0.2 | -0.2 |
| Net cash generated from financing activities | 1.9 | -4.1 | -0.2 | -7.8 |
| Change in cash and cash equivalents | 21.2 | -3.7 | 20.5 | -0.9 |
| Cash & cash equivalents at the beginning of the period | 10.4 | 15.4 | 11.4 | 12.2 |
| Foreign exchange rate effect | 2.2 | -0.3 | 1.9 | 0.1 |
| Cash and cash equivalents at the end of the period | 33.8 | 11.4 | 33.8 | 11.4 |
| * Includes reversal of non-cash items, income taxes and financial income and expenses. | ||||
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | ||||||||||||||||||||||||||||
| Attributable to equity holders of the parent company | ||||||||||||||||||||||||||||
| Fund for | Non- | |||||||||||||||||||||||||||
| Share | invested | Trans- | Re- | contr- | ||||||||||||||||||||||||
| pre- | non-rest- | Own | lation | tained | olling | |||||||||||||||||||||||
| Share | mium | Hedging | ricted | sha- | diffe- | earn- | inte- | Total | ||||||||||||||||||||
| MEUR | capital | fund | fund | equity | res | rences | ings | rests | equity | |||||||||||||||||||
| Equity on Jan 1, 2015 | 3.6 | 16.7 | -1.1 | 4.9 | -5.2 | -6.5 | 116.0 | 8.2 | 136.5 | |||||||||||||||||||
| Comprehensive income * | - | - | 0.4 | - | - | 3.8 | 6.7 | 0.3 | 11.3 | |||||||||||||||||||
| Purchase of own shares | - | - | - | - | -0.2 | - | - | - | -0.2 | |||||||||||||||||||
| Dividends | - | - | - | - | - | - | -7.7 | - | -7.7 | |||||||||||||||||||
| Equity on Dec 31, 2015 | 3.6 | 16.7 | -0.7 | 4.9 | -5.4 | -2.6 | 115.0 | 8.5 | 140.0 | |||||||||||||||||||
| Equity on Jan 1, 2016 | 3.6 | 16.7 | -0.7 | 4.9 | -5.4 | -2.6 | 115.0 | 8.5 | 140.0 | |||||||||||||||||||
| Comprehensive income * | - | - | 0.5 | - | - | 4.3 | -2.9 | 1.6 | 3.6 | |||||||||||||||||||
| Purchase of own shares | - | - | - | - | -0.2 | - | - | - | -0.2 | |||||||||||||||||||
| Dividends | - | - | - | - | - | - | -5.7 | -1.5 | -7.2 | |||||||||||||||||||
| Equity on Dec 31, 2016 | 3.6 | 16.7 | -0.2 | 4.9 | -5.6 | 1.7 | 106.4 | 8.6 | 136.1 | |||||||||||||||||||
| * For the period, (net of tax) | ||||||||||||||||||||||||||||
NOTES TO THE STATEMENT OF INCOME AND FINANCIAL POSITION
The financial information included in this financial statement release is unaudited.
This financial statement release has been prepared in accordance with IAS 34. Accounting principles adopted in the preparation of this report are consistent with those used in the preparation of the financial statements 2015 except for change in measurement of segment performance. Any new amendments to IFRS standards or IFRIC interpretations did not have a material impact on the information presented in this report. The Group has not applied any new standards as of January 1, 2016.
Impact of new ESMA guidelines
New ESMA (European Securities and Markets Authority) guidelines on alternative performance measures are effective for the financial year 2016. Rapala Group presents alternative performance measures to reflect the underlying business performance and to enhance comparability between financial periods. Alternative performance measures presented in this report should not be considered as a substitute for measures of performance in accordance with the IFRS and may not be comparable to similarly titled amounts used by other companies.
Change in measurements of segment performance
The Group has changed the measurements of segment performance by excluding items affecting comparability from operating profit. The Group measures segment performance based on sales, comparable operating profit and assets. Definitions and reconciliations to alternative performance measures are presented in the end of the notes. Reportable segments are consistent with those in the financial statements 2015. Segments are described in detail in note 2 of the financial statements 2015 and will be updated to financial statements 2016.
Use of estimates and rounding of figures
Complying with IFRS in preparing financial statements requires the management to make estimates and assumptions. Such estimates affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses. Although these estimates are based on the management's best knowledge of current events and actions, actual results may differ from these estimates.
All figures in these accounts have been rounded. Consequently, the sum of individual figures can deviate from the presented sum figure. Key figures have been calculated using exact figures.
Events after the end of the reporting period
The Group has no knowledge of any significant events after the end of the reporting period that would have a material impact on the financial statements for January-December 2016. Material events after the end of the reporting period, if any, have been discussed in the commentary section of the Board of Directors.
Inventories
On December 31, 2016, the book value of inventories included a net realizable value allowance of 14.2 MEUR (5.3 MEUR on December 31, 2015). The increase in allowance is due to decisions made in conjunction with the strategy update that the Group redefines inventory valuation to support new strategic actions to improve the Group's capital efficiency (e.g. renewal and optimization of product range, improved product lifecycle and inventory management) and to support implementation of new management procedures.
| H2 | H2 | FY | FY | |
| Key figures | 2016 | 2015 | 2016 | 2015 |
| EBITDA, % of net sales | -2.9% | 5.8% | 5.4% | 10.1% |
| Operating profit/loss, % of net sales | -6.0% | 2.9% | 2.8% | 7.6% |
| Return on capital employed, % | -5.8% | 2.9% | 3.0% | 8.7% |
| Capital employed at end of period, MEUR | 232.2 | 248.1 | 232.2 | 248.1 |
| Net interest-bearing debt at end of period, MEUR | 96.1 | 108.2 | 96.1 | 108.2 |
| Equity-to-assets ratio at end of period, % | 43.1% | 44.7% | 43.1% | 44.7% |
| Debt-to-equity ratio at end of period, % | 70.6% | 77.3% | 70.6% | 77.3% |
| Earnings per share, EUR (diluted = non-diluted) | -0.27 | -0.01 | -0.08 | 0.17 |
| Equity per share at end of period, EUR | 3.33 | 3.43 | 3.33 | 3.43 |
| Average personnel for the period | 2 740 | 3 206 | 2 829 | 3 078 |
| Definitions and reconciliation of key figures are presented in the end of the financial section. | ||||
| Key figures by half year | H1 | H2 | H1 | H2 | H1 | H2 |
| MEUR | 2014 | 2014 | 2015 | 2015 | 2016 | 2016 |
| Net sales | 143.9 | 129.3 | 154.0 | 124.2 | 143.1 | 117.5 |
| EBITDA | 19.5 | 10.5 | 20.9 | 7.2 | 17.6 | -3.5 |
| Operating profit/loss | 16.0 | 6.9 | 17.4 | 3.6 | 14.2 | -7.0 |
| Profit before taxes | 12.5 | 3.2 | 13.3 | 0.9 | 11.4 | -9.2 |
| Net profit/loss for the period | 8.4 | 1.8 | 8.3 | -0.2 | 8.2 | -10.2 |
| Bridge calculation of comparable operating profit | H2 | H2 | Change | FY | FY | Change |
| MEUR | 2016 | 2015 | % | 2016 | 2015 | % |
| Operating profit/loss | -7.0 | 3.6 | -294 % | 7.2 | 21.0 | -66 % |
| Items affecting comparability | ||||||
| Mark-to-market valuations of operative currency derivatives | 0.7 | 0.1 | +600 % | 1.6 | 2.1 | -24 % |
| Other items affecting comparability | ||||||
| Restructurings | ||||||
| France restructuring | 0.5 | 0.7 | ||||
| Southeast Asian distribution restructuring | 0.2 | |||||
| Closure of Chinese lure manufacturing | 0.5 | 1.7 | ||||
| Closing down of Norwegian warehousing operations | 0.5 | 0.5 | ||||
| Other restructurings | 0.2 | 0.2 | ||||
| Impairments | 0.1 | 0.1 | ||||
| Insurance compensations | -0.6 | -0.6 | ||||
| Redefined provision on inventory value | 9.2 | 9.2 | ||||
| Other items | 0.3 | 0.3 | ||||
| Comparable operating profit | 3.2 | 4.8 | -33 % | 18.8 | 25.3 | -26 % |
| Segment information* | |||||
| MEUR | H2 | H2 | FY | FY | |
| Net sales by operating segment | 2016 | 2015 | 2016 | 2015 | |
| Group Products | 77.1 | 81.2 | 172.1 | 184.7 | |
| Third Party Products | 40.3 | 43.1 | 88.5 | 93.5 | |
| Eliminations | 0.0 | 0.0 | |||
| Total | 117.5 | 124.2 | 260.6 | 278.2 | |
| Operating profit/loss by operating segment | |||||
| Group Products | 5.4 | 5.2 | 17.4 | 22.2 | |
| Third Party Products | -2.2 | -0.5 | 1.4 | 3.2 | |
| Comparable operating profit | 3.2 | 4.8 | 18.8 | 25.3 | |
| Items affecting comparability | -10.2 | -1.2 | -11.6 | -4.3 | |
| Operating profit/loss | -7.0 | 3.6 | 7.2 | 21.0 | |
| * The Group has changed the measurements of segment performance by excluding items affecting comparability from operating profit. The Group measures segment performance based on sales, comparable operating profit and assets. Reportable segments are consistent with those in the financial statements 2015. Segments are described in detail in note 2 of the financial statements 2015 and will be updated to financial statements 2016. | |||||
| Comparative figures 2014-2015 for comparable operating profit by operating segment | ||||||||||
| H1 | H2 | FY | H1 | H2 | FY | |||||
| MEUR | 2014 | 2014 | 2014 | 2015 | 2015 | 2015 | ||||
| Group Products | 10.0 | 4.4 | 14.4 | 16.9 | 5.2 | 22.2 | ||||
| Third Party Products | 6.3 | 0.2 | 6.5 | 3.7 | -0.5 | 3.2 | ||||
| Comparable operating profit | 16.3 | 4.5 | 20.9 | 20.6 | 4.8 | 25.3 | ||||
| Items affecting comparability | -0.3 | 2.4 | 2.0 | -3.2 | -1.2 | -4.3 | ||||
| Operating profit | 16.0 | 6.9 | 22.9 | 17.4 | 3.6 | 21.0 | ||||
| Assets by operating segment | Dec 31 | Dec 31 |
| MEUR | 2016 | 2015 |
| Group Products | 226.3 | 236.8 |
| Third Party Products | 55.1 | 61.3 |
| Non-interest-bearing assets total | 281.4 | 298.2 |
| Unallocated interest-bearing assets | 34.7 | 15.2 |
| Total assets | 316.1 | 313.4 |
| External net sales by area | H2 | H2 | FY | FY |
| MEUR | 2016 | 2015 | 2016 | 2015 |
| North America | 44.9 | 47.6 | 91.3 | 99.2 |
| Nordic | 21.9 | 22.0 | 55.3 | 56.2 |
| Rest of Europe | 33.3 | 35.5 | 81.3 | 86.9 |
| Rest of the world | 17.4 | 19.1 | 32.7 | 35.9 |
| Total | 117.5 | 124.2 | 260.6 | 278.2 |
| Commitments | Dec 31 | Dec 31 |
| MEUR | 2016 | 2015 |
| Minimum future lease payments on operating leases | 14.2 | 14.4 |
| Sales | Other | |||||
| Related party transactions | and other | Pur- | Rents | expen- | Recei- | Paya- |
| MEUR | income | chases | paid | ses | vables | bles |
| FY 2016 | ||||||
| Joint venture Shimano Normark UK Ltd* | 2.8 | - | - | - | - | - |
| Associated company Lanimo Oü | - | 0.1 | - | - | 0.0 | - |
| Entity with significant influence over the Group** | - | - | 0.2 | 0.1 | 0.0 | - |
| Management | - | - | 0.2 | 0.0 | - | 0.0 |
| FY 2015 | ||||||
| Joint venture Shimano Normark UK Ltd | 3.6 | - | - | 0.0 | 0.1 | - |
| Associated company Lanimo Oü | 0.0 | 0.1 | - | - | 0.0 | - |
| Entity with significant influence over the Group** | - | - | 0.2 | 0.1 | 0.0 | - |
| Management | - | - | 0.2 | 0.0 | - | 0.0 |
| * Group's share in joint venture disposed on September 1, 2016. **Lease agreement for the real estate for the consolidated operations in France and a service fee. | ||||||
| Open derivatives | 31.12.2016 | 31.12.2015 | ||||
| Nominal | Fair | Nominal | Fair | |||
| MEUR | Value | Value | Value | Value | ||
| Derivative financial instruments designed as cash flow hedges | ||||||
| Interest rate swaps, less than 12 months | 27.5 | -0.1 | - | - | ||
| Interest rate swaps, 1 to 5 years | 16.7 | -0.1 | 58.9 | -0.4 | ||
| Total | 44.1 | -0.2 | 58.9 | -0.4 | ||
| Derivative financial instruments designed as cash flow and fair value hedges | ||||||
| Cross currency swaps, less than 12 months | 15.0 | -0.7 | - | - | ||
| Cross currency swaps, 1 to 5 years | - | - | 15.0 | 1.3 | ||
| Total | 15.0 | -0.7 | 15.0 | 1.3 | ||
| Non-hedge accounting derivative financial instruments | ||||||
| Interest rate swaps, less than 12 months | 20.0 | -0.2 | - | - | ||
| Interest rate swaps, 1 to 5 years | 16.0 | 0.0 | 20.0 | -0.4 | ||
| Currency derivatives, less than 12 months | 52.2 | 0.1 | 70.9 | 1.6 | ||
| Total | 88.2 | -0.1 | 90.9 | 1.2 | ||
| The changes in the fair values of derivatives that are designated as hedging instruments but do not qualify for hedge accounting are recognized based on their nature either in other operating expenses, if the hedged item is an operative transaction, or in financial income and expenses if the hedged item is a monetary transaction. Some derivatives designated to hedge monetary items are accounted for according to hedge accounting. Financial risks and hedging principles are described in detail in the financial statements 2015 and will be updated in financial statements 2016. | ||||||
| In 2016 full year, the amount of the ineffective portion that was recognized in the financial income and expenses of income statement was MEUR 0.0 (2015: MEUR -0.1). Testing for effectiveness of the hedging relationship is conducted on a monthly basis. | ||||||
| Changes in unrealized mark-to-market valuations for operative foreign currency derivatives | ||||
| H2 | H2 | FY | FY | |
| 2016 | 2015 | 2016 | 2015 | |
| Included in operating profit | -0.7 | -0.1 | -1.6 | -2.1 |
| Operative foreign currency derivatives that are mark-to-market on reporting date cause timing differences between the changes in derivatives' fair values and hedged operative transactions. Changes in fair values for derivatives designated to hedge future cash flow, but are not accounted for according to the principles of hedge accounting, impact the Group's operating profit for the accounting period. The changes in unrealized valuations include both valuations of derivatives that will realize in the future periods as well as reversal of previously accumulated value of derivatives that realized in the accounting period. | ||||
| Fair values of financial instruments | Dec 31 | Dec 31 | |||||
| 2016 | 2015 | ||||||
| MEUR | Carrying value | Fair value | Carrying value | Fair value | |||
| Assets | |||||||
| Available-for-sale financial assets (level 3) | 0.3 | 0.3 | 0.3 | 0.3 | |||
| Derivatives (level 2) | 0.8 | 0.8 | 3.7 | 3.7 | |||
| Total | 1.0 | 1.0 | 4.0 | 4.0 | |||
| Liabilities | |||||||
| Non-current interest-bearing liabilities (excl. derivatives) | 41.5 | 41.5 | 58.6 | 58.7 | |||
| Derivatives (level 2) | 1.7 | 1.7 | 1.6 | 1.6 | |||
| Total | 43.2 | 43.2 | 60.1 | 60.3 | |||
| Fair values of other financial instruments do not differ materially from their carrying value. | |||||||
Shares and share capital
On April 1, 2016 The Annual General Meeting (AGM) updated Board's authorization on repurchase of shares. A separate stock exchange release on the decisions of the AGM was given, and up to date information on the Board's authorizations and other decisions of the AGM are available also on the corporate website.
| Share related key figures | Dec 31, 2016 | Dec 31, 2015 |
| Number of shares | 39 000 000 | 39 000 000 |
| Number of shares, average | 39 000 000 | 39 000 000 |
| Number of treasury shares | 677 208 | 639 671 |
| Number of treasury shares, % | 1.7% | 1.6% |
| Number of outstanding shares | 38 322 792 | 38 360 329 |
| Number of shares traded, YTD | 2 782 154 | 2 074 690 |
| Share price at the end of the period | 4.13 | 4.74 |
| Highest share price, YTD | 4.90 | 5.85 |
| Lowest share price, YTD | 3.90 | 4.57 |
| Average price of treasury shares, all time | 5.08 | 5.13 |
| Acquired treasury shares, YTD | 37 537 | 32 864 |
Short term risks and uncertainties
The objective of Rapala VMC Corporation's risk management is to support the implementation of the Group's strategy and execution of business targets. Group management continuously develops its risk management practices and internal controls. Detailed updated descriptions of the Group's strategic, operative and financial risks as well as risk management principles will be included in the Financial Statements 2016.
Due to the nature of the fishing tackle business and the geographical scope of the Group's operations, the business has traditionally been seasonally stronger in the first half of the year compared to the second half. Weathers impact consumer demand and may have impact on the Group's sales for current and following seasons. The Group is more affected by winter weathers after the expansion into winter fishing business, while the weather risk is diversified due to the wide geographical footprint of the Group.
The biggest deliveries for both summer and winter seasons are concentrated into relatively short time periods, and hence a well functioning supply chain is required. The uncertainties in future demand as well as the length of the Group's supply chain increases the challenges in supply chain management. Delays in shipments from internal or external suppliers or unexpected changes in customer demand upwards or downwards may lead to shortages and lost sales or excess inventories and subsequent clearance sales with lower margins.
The Group's credit facilities include some profitability, net debt and equity related financial covenants, which are actively monitored. Following higher leverage (net debt to EBITDA), the Group and its lenders agreed on a higher leverage covenant for Q4/2016. The Group expects to fulfill the requirements of its lenders at the end of the first quarter 2017. Liquidity and refinancing risks are under control, but increased leverage level may put pressure on Group's financing costs.
The fishing tackle business has traditionally not been strongly influenced by increased uncertainties and downturns in the general economic climate. They may however influence, at least for a short while, the sales of fishing tackle, when retailers reduce their inventory levels and face financial challenges. Also quick and strong increases in living expenses, sudden fluctuations in foreign exchange rates and governmental austerity measures may temporarily affect consumer spending. However, the underlying consumer demand has historically proven to be fairly solid. Political tensions, such as the conflict between Russia and Ukraine, may have negative effects on the Group's business. The development in geopolitical situation is followed closely by the Group.
The truly global nature of the Group's sales and operations spreads the market risks caused by the current uncertainties in the global economy. The Group is cautiously monitoring the development both in the global macro economy as well as in the various local markets it operates in.
Cash collection and credit risk management is high on the agenda of local management and this may affect sales to some customers. Quality of the accounts receivables is monitored closely and write-downs are initiated if needed.
The Group's sales and profitability are impacted by the changes in foreign exchange rates and the risks are monitored actively. To fix the exchange rates of future foreign exchange denominated sales and purchases as well as financial assets and liabilities, the Group has entered into several currency hedging agreements according to the foreign exchange risk management policy set by the Board of Directors. As the Group is not applying hedge accounting in accordance to IAS 39, the unrealized mark-to-market valuations of operative currency hedging agreements have an impact on the Group's reported operating profit. Some of Group's currency positions are not possible or feasible to be hedged, and therefore may have impact on the Group's net result. The Group is closely monitoring market development as well as its cost structure and considering possibility and feasibility of price increases, hedging actions and cost rationalization.
No significant changes are identified in the Group's strategic risks or business environment.
Definitions of key figures
| Operating profit before depreciation and impairments (EBITDA) | Operating profit + depreciation and impairments |
| Items affecting comparability | Change in mark-to-market valuations of operative currency derivatives +/- other items affecting comparability |
| Other items affecting comparability | Restructuring costs + impairments +/- gains and losses on business combinations and disposals - insurance compensations +/- other non-operational items |
| Comparable operating profit | Operating profit +/- change in mark-to-market valuations of operative currency derivatives +/- other items affecting comparability |
| Net interest-bearing debt | Total interest-bearing liabilities - total interest-bearing assets - cash and cash equivalents |
| Capital employed (average for the period) | Total equity (average for the period) + net interest-bearing debt (average for the period) |
| Working capital | Inventories + total non-interest-bearing assets - total non-interest-bearing liabilities |
| Total non-interest-bearing assets | Total assets - interest-bearing assets - intangible and tangible assets - assets classified as held-for-sale |
| Total non-interest-bearing liabilities | Total liabilities - interest-bearing liabilities |
| Return on capital employed (ROCE), % | Operating profit (full-year adjusted) x 100 |
| Capital employed (average for the period) | |
| Debt-to-equity ratio (Gearing), % | Net interest-bearing debt x 100 |
| Total equity | |
| Equity-to-assets ratio, % | Total equity x 100 |
| Total shareholders' equity and liabilities - advances received | |
| Earnings per share, EUR | Net profit for the period attributable to the equity holders of the parent company |
| Adjusted weighted average number of shares | |
| Equity per share, EUR | Equity attributable to equity holders of the parent company |
| Adjusted number of shares at the end of the period | |
| Average number of personnel | Calculated as average of month end personnel amounts |
| Reconciliation of key figures to IFRS | ||||||
| H2 | H2 | FY | FY | |||
| 2016 | 2015 | 2016 | 2015 | |||
| Items affecting comparability | ||||||
| Change in mark-to-market valuations of operative derivatives | 0.7 | 0.1 | 1.6 | 2.1 | ||
| Other items affecting comparability | 9.5 | 1.1 | 10.0 | 2.3 | ||
| Items affecting comparability | 10.2 | 1.2 | 11.6 | 4.3 | ||
| Other items affecting comparability | ||||||
| Restructuring costs | 0.7 | 0.9 | 1.1 | 2.1 | ||
| Impairments | 0.0 | 0.1 | 0.0 | 0.1 | ||
| Insurance compensations | -0.6 | -0.6 | ||||
| Redefined provision on inventory value | 9.2 | 9.2 | ||||
| Other non-operational items | 0.3 | 0.3 | ||||
| Other items affecting comparability | 9.5 | 1.1 | 10.0 | 2.3 | ||
| Capital employed (average) | ||||||
| Total equity (average for the period) | 137.9 | 141.6 | 138.0 | 138.2 | ||
| Net interest-bearing debt (average for the period) | 105.2 | 108.5 | 102.1 | 104.0 | ||
| Capital employed (average) | 243.1 | 250.1 | 240.2 | 242.3 | ||
| Return on capital employed (ROCE), % | ||||||
| Operating profit (full-year adjusted) | -14.0 | 7.2 | 7.2 | 21.0 | ||
| Capital employed (average for the period) | 243.1 | 250.1 | 240.2 | 242.3 | ||
| Return on capital employed (ROCE), % | -5.8% | 2.9% | 3.0% | 8.7% | ||
| Equity-to-assets ratio, % | ||||||
| Total equity | 136.1 | 140.0 | 136.1 | 140.0 | ||
| Total shareholders' equity and liabilities | 316.1 | 313.4 | 316.1 | 313.4 | ||
| Advances received | 0.6 | 0.5 | 0.6 | 0.5 | ||
| Equity-to-assets ratio, % | 43.1% | 44.7% | 43.1% | 44.7% | ||
| Earnings per share, EUR | ||||||
| Net profit for the period attributable to the equity holders of the parent company | -10.4 | -0.5 | -3.0 | 6.7 | ||
| Adjusted weighted average number of shares | 38 322 792 | 38 360 329 | 38 329 216 | 38 366 251 | ||
| Earnings per share, EUR | -0.27 | -0.01 | -0.08 | 0.17 | ||
| Equity per share, EUR | ||||||
| Equity attributable to equity holders of the parent company | 127.5 | 131.5 | 127.5 | 131.5 | ||
| Adjusted number of shares at the end of the period | 38 322 792 | 38 360 329 | 38 322 792 | 38 360 329 | ||
| Equity per share, EUR | 3.33 | 3.43 | 3.33 | 3.43 | ||
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