Rapala VMC Corporation Stock Exchange Release February 16, 2017 at 9:15 a.m.
RAPALA VMC CORP.: STRATEGY UPDATE - FOCUS ON ORGANIC GROWTH WITHIN FISHING, IMPROVING RETURN ON CAPITAL AND BUILDING SOLID PLATFORM FOR FUTURE GROWTH. CODETERMINATION NEGOTIATIONS START IN FINLAND.
After changes in the Group's management in third quarter of 2016, Rapala VMC Corporate ("the Group") initiated a process to update its future strategies.
The Group's top line and profitability development has been unsatisfactory and below the potential recently. Working capital has also remained at high levels, putting pressure on the Group's balance sheet position.
The key objective of the strategy update is to turn the recent financial trends. The Group has also addressed the need to respond to the ongoing developments in its business environment. This includes issues such as digitalization and changing consumer behaviour, more specialized and fast changing trends in fishing, changes in competitive and retail landscape, as well as changes in value chains.
Key near-term strategic focus areas
In order to build solid financial and operational platform for long term growth, the Group's primary focus in the next three years will be on following areas:
- Capturing organic growth opportunities in fishing tackle business
- Taking determined actions in improving profitability
- Lightening balance sheet
- Improving the operational performance
The upcoming strategies are built upon utilizing and capitalizing the Group's existing assets and capabilities, which form the foundation for the future success. These are:
- Brand portfolio
- Own manufacturing platform and established sourcing channels
- Research and development capabilities
- Broad distribution network and strong local presence all around the world supporting the sales of Group's own and selected synergistic third party products
Following actions and principles will be the key drivers in execution of the strategy:
Organic growth within fishing tackle business
- Deep market and customer focus.
- Leveraging and further strengthening the Group's global innovation power.
- Along with the leading mass market products also addressing specific product categories and niches within fishing where the Group has clear growth potential and has possibility to exploit its R&D, manufacturing, sourcing, sales, brand, marketing and distribution assets and capabilities.
- Strengthening and leveraging the Group's brands with modern and innovative marketing and brand management. Enhancing the brand experience and reaching the end consumers especially through the digital channels.
- Securing the position as valued supplier to retail customers by providing relevant, innovative and competitive product range and excellent customer service.
- Further leveraging the existing distribution infrastructure to distribute synergistic 3 rd party fishing and non-fishing product categories in a value adding manner: supporting sales of Group's own products, generating additional returns to the Group and creating value to the 3 rd party principals.
Improving the capital efficiency: improving profitability and lightening the balance sheet
- Rigid management of the product portfolio, increasing overall profitability of the offering.
- Securing the return on capital of the businesses and units and taking determined actions to improve the returns.
- Tight cost and capital control allocating resources to strategically important areas and implementing actions to increase cost efficiency.
- Developing the Group's supply chain management to be responsive and focus on optimizing the end-to-end flow of products, achieving permanent reduction in inventory levels and providing excellent service to the customers.
Improving the operational performance
- Operating in integrated manner, optimizing the end-to-end performance of the Group and securing benefits of scale.
- Increasing the speed, agility, responsiveness and efficiency of all operations.
- Implementing systematic management processes to support strategy execution and investing in common tools, processes and resources to enable and facilitate the execution.
- Utilizing the strong local presence, entrepreneurial commercial spirit and deep understanding of fishing tackle markets all around the world to implement Group's strategic priorities globally.
Group's mid- to long term target is to return to more aggressive growth track and actively seek synergistic growth opportunities also outside of fishing tackle business. The Group will organize a capital markets day during 2017 to elaborate the updated strategy and its execution.
Codetermination negotiations start in Finland to improve the performance of the operations
In line with the strategy update, one key near-term focus area of the Group is to improve the profitability as well as capital and operational efficiency.
Following the decisions by the Board of Directors on February 15, 2017 the Group will start codetermination negotiations affecting approximately 150 people of the total of 200 employees of Rapala VMC Corporation and Marttiini Oy in Finland. The aim of the negotiations will be to find solutions where the number of Rapala VMC Corporation's and Marttiini Oy's employees is in line with scope and profitability of current operations. The measures are expected to result in the reduction of approximately total 55-63 employees in Rapala VMC Oyj and Marttiini Oy in Finland and will include lay-offs and pension arrangements. Temporary employment contracts will not be continued and they are not included in the indicated reduction amounts.
Accordingly in Rapala lure factory in Vääksy the negotiations will cover plans to transfer parts of production to Group's factories in Russia and Estonia, which could mean approximately 41-45 production employees reduction in Finland. The target of these plans is to increase manufacturing efficiencies, shorten production lead time, decrease level of inventories and achieve cost savings. Correspondingly the possible transfer of production together with Group's declined profitability will also lead to reorganization of the work of white-collar personnel in Vääksy factory as well as in the Helsinki headquarters. These reorganizations will also be covered in the negotiations and could mean approximately 4-8 employees reduction.
Marttiini Oy knife factory will start codetermination negotiations concerning duplicate production functions (among others assembly, shipping and packaging) in Rovaniemi and Pärnu, Estonia, factories. This planned reorganization of production could mean maximum of 10 employees reduction in Rovaniemi. By re-organizing its production process Marttiini Oy could achieve cost savings and improve its production process as well as profitability.
Possible employee reductions relating to the above codetermination negotiations will start on spring 2017. The aim is to have about 1.5 MEUR annual savings which will be realized on 2018. Non-recurring costs related to any personal reductions, which are recorded in the year 2017, are revised at the end of the negotiations.
Helsinki, February 16, 2017
RAPALA VMC CORPORATION Jussi Ristimäki Chief Executive Officer
For further information, please contact:
Rapala Group: Jussi Ristimäki, Chief Executive Officer, tel. +358 40 700 1344 Olli Aho, Investor Relations, tel. +358 9 7562 540 Rapala factory: Arto Nygren, Executive Vice President - Lure Manufacturing, tel. + 358 40 5058 998 Marttiini factory: Päivi Ohvo, Managing director, tel. + 358 40 3110 610
Distribution: Nasdaq Helsinki and main media
Rapala VMC Corporation ("the Group") is a leading fishing tackle company and the global market leader in fishing lures, treble hooks and fishing related knives and tools. The Group also has a strong global position in other fishing categories and it is one of the leading distributors of outdoor, hunting and winter sport products in the Nordic countries. The Group has the largest distribution network in the industry. The main manufacturing facilities are located in Finland, France, Estonia, Russia, Indonesia and the UK. The Group brand portfolio includes the leading brand in the industry, Rapala, and other global brands like VMC, Sufix, Storm, Blue Fox, Luhr Jensen, Williamson, Dynamite Baits, Mora Ice, StrikeMaster, Marttiini and Peltonen. The Group, with net sales of EUR 261 million in 2016, employs some 2 800 people in 40 countries. Rapala VMC Corporation's share is listed and traded on the Nasdaq Helsinki stock exchange since 1998.
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