Amer Group reported that third quarter net sales declined 6.4% to 278.7 million ($340.8 mm) from 297.9 million ($335.6 mm) in the year-ago quarter. Net sales declined due to the withdrawal from the tobacco business in March.
Sales of fitness equipment grew significantly and also sales of winter sports equipment developed favorably whereas sell-through of golf products didnt meet expectations. Foreign exchange rate movements reduced net sales by 10 million.
Excluding the effect of currency exchange and the tobacco business, sales would have increased 7.8% for the period.
Sales for Wilson Racquet, Golf, and Team Sports products declined 3.6% in the third quarter when measured in Euros. Measured in home country U.S. dollars, Wilson sales rose 4.7% to $148.6 million from $142.0 million in the year-ago period. The Winter Sports business, anchored by Atomic, increased 6.5% in the quarter when measured in Euros, and the Suunto instruments business saw revenues increase 11.0% for the period. The Fitness business, which is built on the Precor platform, increased 19.3% when measured in Euros, but jumped 29.5% to $61.3 million when measured in U.S. dollars.
EBIT was 34.4 million, down 45.7% from 62.7 million in Q3 last year; a figure that includes a patent litigation settlement of 20.5 million. Third quarter 2004 EBIT was reduced by 2.8 million due to exiting the tobacco business and also declined due to a one off settlement paid by the Fitness Equipment Division because of a dispute, in the sum of 2.5 million. Excluding the one-time charges for both years, EBIT would have been roughly flat for the quarter versus last year.
Due to the extraordinary settlement charge, net income for Q3 fell 42.3% to 25.0 million, or 1.05 per diluted share, from 43.3 million, 1.85 per diluted share, in Q3 last year.
For the nine month YTD period, Amer Groups consolidated net sales decreased 3.7% to 797.8 million versus 828.7 million in the year-ago period. Earnings before interest and taxes (EBIT) declined 11.2% to 86.9 million compared to 97.9 million in the YTD period last year. Earnings per share were 2.54, down 9.3% from EPS of 2.81 last year. Exiting from the tobacco business improved EBIT by 11.4 million, but reduced net sales by 60.7 million compared to January-September last year. Amer Groups sports equipment businesss net sales are expected to grow by 5% during 2004. The sports equipment businesss EBIT is also expected to grow compared to 2003 (excluding the 2003 patent litigation settlement). The Group's profit after tax is estimated to be maintained at last year's level.
“2004 is going to be a year of good growth for Amer Sports. In January September, Amer Groups sports equipment businesss net sales grew by 10% in local currency terms,” said Roger Talermo, President & CEO, Amer Group. “Activity has continued to be positive in the sports equipment market during the year. At Amer Group, growth has been especially strong in the Fitness Equipment Division with net sales in local currencies growing by 30% in the January – September period.”
Talermo continued: “In the Winter Sports Division, net sales in local currencies grew by 10%. On the basis of the deliveries made as well as the level of orders received, we expect that the Winter Sports Divisions net sales for the year as a whole, stated in local currencies, will grow by approximately 10%. Margins have been depressed slightly by sales growth being weighted towards lower margin product groups and in addition, the Company hasnt been able to pass on in full its Euro-denominated manufacturing costs in terms of selling prices in North America due to the strong Euro.
In the Golf Division, the goal we set for this year is profitability. In January September, net sales in local currencies declined 2%. The good initial progress made by the Division, which was evident in January – March, was not sustained, as sell-through to consumers was slower than expected. Our goal in the Golf Division in 2004 continues to be a positive EBIT.
The Team Sports Division continued to grow and net sales in local currencies grew by 12%.
In Racquet Sports, net sales in local currencies grew by 5%. Suuntos net sales in local currencies increased by 5%.
During the remainder of the year, we will be strengthening our international sales and distribution network by establishing new Amer Sports sales companies in Italy and Russia. Amer Sports local organizations are responsible for the sales and distribution of the Groups sports equipment to the trade in their own markets. Including these two new companies, Amer Sports own sales companies will be represented in 28 countries.
For the year as a whole we expect Amer Groups sports equipment businesss net sales to grow by 5%. Excluding the 2003 patent litigation settlement of EUR 20.5 million, Amer Groups sports equipment businesss EBIT is also expected to grow compared to 2003. The Group's profit after tax is estimated to be maintained at last year's level.”
