Rapala VMC described the operating environment in the first half of 2024 as “reasonable” as inflation started to ease and retail activity improved from the prior year. This led to a solid improvement in sales despite the termination of some third-party product distribution deals.

The Finland-based fishing equipment and Nordic ski manufacturer and distributor said the consumer appetite for lower cost consumables improved while higher value item sales are on a path to recovery,” the company wrote in a media release accompanying its interim report for the six-month period ended June 30. “There is still cautiousness among consumers and retailers for high-ticket items, but [the] market showed improved demand towards the end of the first half of the year. Shift in retailers’ ordering pattern from pre-orders towards in-season replenishment favored those [manufacturers and distributors] with readily available inventory.”

The Group’s net sales increased 2 percent to €120.5 million in the first half, versus €117.9 million in the prior-year comparative period, with reported currency euro terms. In currency-neutral terms, net sales were up 3 percent, or €3.9 million organically from the comparative 2023 H1 period.

Group Product Sales
Group Products sales increased €6.3 million, or 5.7 percent, to €116.1 million in the first half. This represented 96 percent of total sales, up from 93 percent in 2023.

  • The largest sales increase reportedly came from the successful launch of CrushCity soft plastic lures, which also supported the sales of hooks.
  • Hard bait sales saw a temporary drop following a shift in some new fishing techniques, mainly in the North American market.
  • Excluding hard baits, sales grew in almost all open water consumables categories.
  • In the rod and reel category, Okuma sales reportedly returned to a growth path after the European market was saturated with rods and reels in the prior year.
  • In ice fishing, sales increased from the prior-year comparative period despite challenging ice conditions.
  • Ski category replenishment sales reportedly remained at prior-year levels despite the challenging macroeconomic conditions in the Nordic market.
  • The acquisition of DQC International (13 Fishing USA) in 2023 reportedly increased rod and reel sales in the U.S., although the impact was said to be “not significant” as the market remained challenging, and the focus was on integrating the operations.

Third-Party Products Sales
With comparable translation exchange rates, third-party product sales were down 44.4 percent year-over-year, or €3.6 million, to €4.4 million in the first half. Half of the sales decline was attributed to termination of distributorships. The other half came from a late delivery of a third-party supplier. Ski business replenishment sales reportedly “landed close to the prior-year level despite the market remaining difficult.”

Region Review

North America
Sales in North America increased 5 percent from the comparison period, or up 6 percent in currency-neutral terms. Newly launched Rapala CrushCity soft plastic lures contributed significantly to the increase in sales. The company said CrushCity also boosted VMC jigging hook sales. Sales reportedly grew in almost all categories except for hard baits, which was impacted by the trend shift in fishing techniques, which favored soft plastics over hard baits. Replenishment sales reportedly remained robust, with big box retailers dominating the market. The recently acquired 13 Fishing brand contributed positively but was held back by existing retail inventories. Ice fishing sales landed slightly higher than last year despite the second consecutive poor ice season, which “held retailer inventories on a high level.”

Nordic
Sales in the Nordic market increased by 1 percent from the comparison period in both reported and currency-neutral terms.

Nordic region retail inventories reportedly returned to “healthy levels,” but general economic conditions were said to have negatively impacted sales. The company said demand for consumables improved and the focus on operational excellence started to show results and focus on core consumables products such as Rapala increased the sales in these categories. North Europe has been catching up to the previous year due to better availability and a strong focus on core products. Winter season sales reportedly remained at last year’s level.

Rest of Europe
Sales in the rest of Europe increased by 2 percent (+3 percent currency-neutral) compared to the 2023 comparison in the H1 period.

The market reportedly remained challenging, but sales are above the prior-year levels, driven by successful new product introductions including CrushCity, a strong push on Dynamite Baits and a positive momentum on Okuma following a slow 2023 on investment products.

  • France sales have been supported by novelties and early seasonal order deliveries that have compensated for poor weather conditions in many areas of the country.
  • Germany has continued its strong growth recovery, becoming one of the largest European markets.
  • Weak consumer sentiment in Iberia resulted in a challenging start to the year.
  • Other Central Europe has a contrasted situation with Poland and Romania increasing sales whereas Hungary and Czech Republic are below previous year.

The termination of third-party distributorships reportedly had a large impact on sales. Excluding the terminated distributor businesses, sales in the region increased by 6 percent year over year.

Rest of the World
Sales in the Rest of the World (RoW) market decreased by 10 percent (-5 percent in currency-neutral terms) from the comparison period. Sales were down in most of the RoW markets following macroeconomic headwinds and low discretionary spending.

  • Asian markets reportedly suffered from weak currencies favoring locally produced products over imported goods.
  • In Latin American markets sales were said to have been partially postponed to second half of the year due to late deliveries from third-party suppliers.
  • A successful Okuma launch in Korea provided incremental growth and a strong boost from CrushCity, especially in Australia.

Reported operating profit increased by €6.8 million from the comparison period, and the items affecting comparability had a positive impact of €5.0 million (-€0.9) on reported operating profit.

Comparable operating profit margin was 5.1 percent (2023: 4.5 percent) for the first half of 2024. The improved profitability was driven by higher sales in the open water market. Sales margin decreased slightly but the focus on operational efficiency enabled lower operating expenses. The €6 million savings program continued and was expanded as part of the savings was offset by inflationary cost increases. Among the measures was bringing decision-making closer to the local markets and defining clear accountabilities. Following this, the size of the global management team was reduced to eight members.

Net profit for the first half of the year increased by €5.8 million and was €4.7 million (-€1.1) and earnings per share was €0.07 (-€0.03).

Short-Term Outlook and Risks
Trading outlook for 2024 is said to be reasonable as de-stocking is reportedly “tapering down” in most markets. The U.S. economy is holding and entering into a modest growth mode. Higher value durable items have also started recovering in North America surpassing the sales growth of lower cost consumer goods. In Europe, first half of the year results are very encouraging despite challenging market environment. The work continues to improve profitability and efficiency.

Pre-sales of the company’s winter businesses for the upcoming season are somewhat behind expectations as retailers rely on in-season replenishment and supplier inventories. Unfavorable ice conditions in the North American market last year left the retailers with high inventories.

On the manufacturing and supply chain side, the production transfers are concluded, and efficiencies have increased to satisfactory levels. Product and production quality has remained high despite the transfers.

Consequently, the Group expects 2024 full year comparable operating profit (excluding mark-to-market valuations of operative currency derivatives and other items affecting comparability) to increase from 2023.

Image courtesy Rapala