In spite of slow sales in two of its six divisions, Amer Sports Corporation reported a six percent currency neutral sales gain during the second quarter with a substantial increase to the bottom line. Fitness equipment led the way with a 21% increase in sales in local currencies, while Golf showed declines for Q2 for the second year in a row. Amer’s Sports Instruments division was also showing declines compared to last year in both Euros and currency neutral sales.

Every division except for winter sports, which was ramping up for its selling season during the third and fourth quarter, reported positive EBIT numbers. However, the Golf and Sports Instruments divisions were less profitable than the previous year.

Total company net sales increased 4% for the quarter to €233.2 million compared to €224.9 million during Q2 last year. The group reported a 6% increase in currency neutral sales.

The Americas accounted for 64.1% of sales during the quarter, down one full percentage point from the 65.1% reported in Q2 of last year. The EMEA region, which includes Europe, the Middle East, and Africa, made up 22.7% of sales, up slightly from 22.1% last year while Asia Pacific took a slightly larger piece of the pie with 13.3% compared to 12.8% last year.

Sales in the Americas increased 2.1% in the Euro reporting currency to €149.4 million compared to €146.3 million last year, but in dollars, sales increased 6.9% to $188.3 million. EMEA reported a solid 6% sales increase to €52.9 million while Asia Pacific sales increased 7% to €30.9 million.

As indicated in the following chart, sales in local currencies tell a much different story. With over 64% of the company’s business done in the Americas, it is interesting to note that total company sales would have increased 7.5% if measured in U.S. dollars. For those businesses based in the U.S., Wilson actually saw a sales increase of 6.1% in U.S. dollars versus a meager 1.3% gain in Euros and Precor saw a 23% increase in sales in local currencies.

Net profit for the company’s continuing operations was up 65.9% to €6.8 million, or €0.09 per diluted share, compared to €4.1 million, or €0.05 per diluted share last year. Total EBIT more than doubled to €12.1 million compared to €5.3 million during Q2 last year.

Total Wilson sales were up 6.1% in Q2 when measured in U.S. dollars to $192.0 million from $181.0 million.

Racquet Sports net sales increased 8% during the quarter to €62.0 million from €57.5 million, but increased 12.8% in U.S. dollars to $78.2 million. Asia Pacific continues to be a strong market for Wilson’s racquet sport product with a 77% increase in sales during the first half. Badminton equipment led the way with a 48% increase in sales.

Wilson continues to be the global leader in market share for tennis racquets, with management calling out exceptional performances in the company’s ‘nCode’ product.

The Golf division faced a tough quarter with a flat world-wide business environment and relatively flat rounds played in the U.S. market. Sales in the division dropped 11% in Euros to €44.6 million and 6.8% in dollars to $56.2 million. The number of golf clubs sold declined 4% in the first half. This brought the Golf division’s EBIT tumbling 83% during the quarter to €800,000 from €4.8 million. In U.S. dollars, EBIT was down 82.6% to $1.0 million. Moving forward, Amer’s focus will be on profitability in the division through boosting operational efficiency and reducing expenses in the back half.

Amer’s Team Sports division continues to show consistent growth in both the top and bottom line. Worldwide, Team Sports sales increased 7.0% when measured in Euros to €45.7 million compared to €42.7 million last year during Q2. When measured in U.S. dollars, sales increased 12.0% to $57.6 million from $51.4 million during the second quarter last year.

Asia Pacific is the region with the strongest growth in the Team Sports division, with a 71% increase so far for the year-to-date. EMEA is showing an 11% increase in sales, while the Americas are up 8% over last year.

Overall sales outside of the U.S. are outpacing U.S. Team Sports sales growth by more than a three to one ratio. Baseball equipment sales remain the mainstay for the division, making up 45% of the total.

The Wilson divisions’ total EBIT increased 10.8% when measured in local U.S. dollars to $20.4 million versus $18.4 million last year.

The second quarter for the Winter Sports division, comprised primarily of Atomic Skis, is the slowest time of the year, with much of the production and marketing expenses accrued at the same time. “Unfavorable conditions” in the U.S. market were cited by management as the reason for the 5% currency neutral decline in sales. When measured in Euros, sales increased 2.6% to €7.8 million for the quarter. For the year to date, U.S. sales are down 25%, while EMEA sales dropped 5%, both of which were offset by Asia Pacific.

Current pre-season orders indicate that there is an “upward trend” in alpine boots, cross country skis, and snowboards, while alpine skis and bindings are relatively flat. EBIT for the Winter Sports Division was a loss of €12.1 million ($15.3 mm) compared to a loss of €9.8 million ($11.8 mm) last year.

The Fitness Equipment division saw sales increase 17.7% in Euros to €54.5 million, compared to €46.3 million last year. In dollars, sales jumped 23.2% to $68.7 million during the quarter. For the year-to-date, Amer Sports’ efforts at leveraging their global distribution network are paying off. Sales in the Americas increased 15% in local currencies, while sales outside of the Americas grew 21%.

The company’s recent acquisition of commercial strength equipment and fitness entertainment companies has helped with the rapid increase in sales, but the company still feels the profitability is not up to par. Nonetheless, the Fitness Equipment division’s EBIT increased 77% to €4.6 million compared to €2.6 million last year.

Amer Sports’ Sports Instruments division, Suunto, gives the company the distinction of being the only company that engineers both sporting goods equipment and electronics. However, a difficult U.S. market pushed the division’s sales down 10.1% to €18.6 million ($23.4 mm) from €20.7 million ($24.9 mm) last year. Geographically, the Americas were the only region to show a decline in year-to-date sales, while EMEA was relatively flat and Asia Pacific posted a 14% increase. In spite of this decline in sales, EBITA went up to €1.5 million ($1.9 mm) compared to a loss of €4.5 million ($5.4 mm) last year. Amer Sports recently appointed a new president for Suunto, Juha Pimonaa.

As reported earlier, Amer Sports has an agreement with adidas-Salomon to acquire Salomon, including the brands Salomon, Mavic, Bonfire, Arc'Teryx, and Cliché.

The combined business will create a leading global sports equipment company with annual net sales of about €1.7 billion and 6,800 employees. It is still expected that the purchase price will be about €485 million. It is expected that the transaction will be completed by the end of September 2005. When consummated, the transaction will have a positive impact of roughly €250 million on Amer Sports’ net sales in the last quarter of 2005. However, the acquisition is estimated to have no significant impact on earnings per share in the current fiscal year.

Amer Sports expects to realize annual cost-savings of €40 million with Salomon by the end of 2008 thanks to synergies and the restructuring measures that have already been initiated. The synergies will mainly be achieved from industrial operations in the winter sports business. In addition, synergies are expected in administration and R&D.
Looking at the back half of 2005, Amer expects that comparable net sales for the full fiscal year will increase by roughly 5% with diluted EPS in the range of €0.90 to €1.00.

Amer Sports 
Second Quarter Results
in $ millionsa 2005a 2004a  Changeb Local Chgc
Group Sales $294.0 $270.9 3.7% 6%
Americas $188.3 $176.2 2.1% n/a
EMEA $66.7 $60.0 6.2%
Asia Pacific $39.0 $34.7 7.3% n/a
Racquet Spts $78.2 $69.3 7.8% 10%
Golf  $56.2 $60.3 -11.0% -9%
Team Sports $57.6 $51.4 7.0% 11%
Winter Spts $9.8 $9.2 2.6% 4%
Fitness Equip $68.7 $55.8 17.7% 21%
Suunto $23.4 $24.9 -10.1% -10%
Net Income