Rapala VMC (RAP1V) H1 2024 earnings summary

Executive summary

• Net sales increased 2% year-over-year to €120.5M in H1 2024, with operating profit up 155% to €11.2M and EPS at €0.07 compared to -€0.03 last year, driven by strong North American growth, operational efficiency, and successful product launches.

• Inventory reduction and improved cash flow resulted from operational efficiency initiatives and a major product launch, though initial air freight costs impacted profitability.

• The North American market, especially the US, showed strong recovery with destocking tapering and growth in both consumables and durable items, while European operations improved profitability and efficiency.

• Ice business faced a second consecutive weak year, resulting in high inventories but with potential upside if conditions improve.

• The company remains focused on its "One More Turn" strategy, emphasizing profitability, working capital management, and sustainable sales growth.

Financial highlights

• Net sales rose to €120.5M from €117.9M in H1 2023 (+2%), with operating profit at €11.2M (9.3% margin) and comparable operating profit at €6.2M (5.1% margin).

• Net profit for the period reached €4.7M, reversing a €1.1M loss in H1 2023.

• Inventories decreased 14% year-over-year to €84.7M, a 35% reduction from previous highs.

• Net interest-bearing debt decreased to €59.9M from €98.0M; cash flow from operations was €18.2M.

• Equity-to-assets ratio increased to 52.6% (from 41.7%); gearing improved to 36.9% (from 73.4%).

Outlook and guidance

• Full-year 2024 comparable operating profit is expected to increase from 2023, supported by easing destocking and improved trading conditions.

• Trading outlook remains reasonable, with destocking tapering and modest growth in the US; European H1 results are encouraging despite challenges.

• Pre-sales for winter business are behind expectations due to unfavorable ice conditions and high inventories; guidance remains cautious.