Rapala VMC reveals cost of a challenging first half of the year
Rapala VMC surprised no one when it reported a reduction in net sales and profitability in the first half of its financial year.
However, the severity of the reduction in revenue – nearly a quarter (21%) – may have raised a few eybrows. Sales for the first six months of 2023 came in at 117.9m EUR compared to 148.4m EUR in the comparable period last year. The blame for the performance was laid firmly at the door of current market conditions.
Newly appointed President and CEO Lars Ollberg told investors: “Current market conditions continue to pose challenges as the destocking process at both retail and wholesale levels persist for a longer duration than initially anticipated. This phenomenon is a direct consequence of global supply chain bottlenecks, which has flooded the market with excess products.
“Additionally, there has been a simultaneous shift in consumer spending patterns from outdoor activities to others post-COVID in conjunction with these challenges – the overall economic downturn and high inflation exerting adverse effects on consumer discretionary spending in key markets.”
Ollberg offered some crumbs of comfort when he remarked that the US economy has demonstrated resilience, characterised by robust consumer spending and consistently low levels of unemployment. “We have seen the tide starting to turn with summer fishing replenishment orders coming in strong and consequently our consumable sales in the US have surpassed budget and forecasts. We expect this positive sentiment to gradually transfer over to durables in which we have a lot to gain in the years to come with 13 Fishing products.
“Although it is expected that the destocking process will gradually ease in the latter half of the year, it will still have an impact on the Group’s winter and ice businesses. Pre-sales of our winter business for the upcoming season have fallen short of expectations due to a general economic slowdown and weak sell-through at the retail level, primarily attributed to unfavourable winter weather conditions experienced in the previous year.”
Ollberg also revealed that a major cost-cutting programme has been carried out across all levels of the organisation, including 25 redundancies – particularly at its head office.
“Cash challenges compel us to leave no stone unturned to search for working capital improvements. We have implemented an aggressive inventory reduction plan with an ambitious goal of reducing inventories by 25% under the initiative called ‘One More Turn’.
“Additionally, we are actively focusing on accelerating collection of receivables while simultaneously enhancing customer service. We are determined to maintain a positive momentum for the introduction of our new soft plastic lure range, Crush City, at ICAST.
“Our unwavering commitment to product development and innovation remains a top priority, and we are excited about the robust product pipeline that lies ahead in the coming years.
“In addition to our own innovative products, one of my focuses will be to initiate new strategic partnerships that further support our existing categories and make us stronger. Our recent strategy with third party distributorships has narrowed our product offering and consequently reduced the coverage of our fixed cost base.”