Rapala VMC Corporation

Good morning, everyone, and welcome to this Rapala VMC Investor Audiocast covering the first half of 2026. My name is Tuomo Leino, and I am here with President and CEO Cyril Villalart. Good morning, everyone. And CFO Miikka Parna. A very good morning to all. We will first go through a presentation, and after that, we are open to questions. But without further ado, Cyril, please go ahead.

Thank you very much to all for attending our call today for our first half 2026 results. What I can say as an opening word is the implementation of our recovery plan is proceeding as planned. I would say we are slightly ahead with North American replenishment demand that came out strong in the second quarter for our new items as well as existing range. In comparable currencies, North America grew 19% above previous year. This has compensated a slower activity in other parts of the world where we have contrasted situations. I would say draws in some key European countries that you have seen in the news have hit our sales, whereas we have had favorable developments in Northern Europe. Rappala VMC Group growth landed at 11% in comparable currencies. Growth and continued cost control have flowed directly into EBDA and comparable index, which increased by almost 5 million euro from 8.6 to 13.5 million. Growth was led with controlled inventories and investments. leading to above $60 million of cash flow for the first half compared to $6 million in the first half of 2025. Our innovation pipeline is strong, and our brand strategies are bringing clarity, focus, and long-term projections. We will increase in the second half gradually our investments in marketing to support our brands, to secure all our innovative products are well supported for the millions of passionate anglers we serve worldwide. We're still navigating in uncertain waters with fluctuating tariffs and an unfavorable geopolitical situation that everybody knows. Nevertheless, as we indicated, in our reviewed issued guidance last week. We expect today our comparable operating profit to be in the range of 12 to 14 million euro. Mika will guide you now in more details in our sales and financial performance. It gives me the opportunity, closing my opening words, to thank the global Rapala VMC team for the great results of this first half. Mika, for yours.

Thank you, Sirin. So, let's walk through the key points of the first half of the year. So, sales landed at 134.8 million euros for the first half of the year. In comparable currencies, we were up 11% from last year. Foreign exchange rates had slight or actually even a significant negative impact, so our reported sales were up by 7% from last year. And operating environment was affected continuously with these geopolitical instability and tariff volatility. Despite these macroeconomic headwinds, we showed very good resilience in North American market. Consumer demand improved from last year, and the demand, the pull, was strong. And this, of course, then compensated for the rather slow European market. European market was a little bit subdued. Consumer demand was dampened by the sharp conditions in certain parts of Europe. if we move forward and look a little bit closer to the regions and the markets we can see here that North America is almost 60 percent of our global sales and we have shown strong growth in the North American market for the last couple of years so we are up in comparable currencies 19 year-over-year in North America in Q2 Q1 and Q2 were rather similar growth, so Q2 comparable sales increased by 18%. So we had very good load in deliveries in Q1, and this continued with the consumer pool pulling the products out of the shelves. Our replenishment sales remained very strong in Q2 of the year. And here, from the product categories and brands, it's noteworthy to say that the flagship Rapala brand led the sales growth, but we were happy to see that the growth remained very broad-based across all of our key brands. In the European markets, we had a good start for the year. We were up in Q1. We had good loading orders. The season looked to be better as previous season, but then the heat waves and the drought conditions came in, and actually in Q2, our sales decreased decreased by 4% in comparable effects. Here, the Nordic countries were not that affected by the heat wave and the drought conditions. In Nordic countries, we were able to show a little bit better growth compared to the continental European markets affected by the heat wave. And here, as well, our strategy implementation continues. So, key Rapala and Okuma brands exceeded prior year level. while sales in some of some other brands which had greater exposure to the continental European markets affected by the weather conditions showed a little bit decreased sales. In rest of the world's region sales growth continued strong in Q2 so Q2 comparable sales increase was 11 percent and first half we are up nine percent currencies don't have a major impact didn't have a major impact in the sales of this region growth continues to be driven mainly by the Latin American markets where we have positive momentum continuing we have good consumer pool and also growth there is supported by the new Okuma distributorship in Chile in the Asia markets those markets remain challenging for us with the global trade disputes continuing on consumer sentiment. So the price is going up, less discretionary spending. And we are of course still experiencing that local, strengthening local competition in those Asian markets. So then on profitability, which is showing a nice trend of improvement. So, we landed with comparable operating profit for H1 with 13.5 million euros, or 10% of sales. 57% increase from last year. And this profitability was, of course, naturally primarily driven by the increased sales volumes in the open water market. We were also able to secure our sales margin which improved slightly from last year and also we continued our focus on maintaining operating expense level and lowering the break-even point. In the reported operating profit which landed higher at 15.8 million euros we have an impact of 2.5 million from the IEETA tariff refunds in the US. And with these results, we had slightly lower financial expenses, slightly higher tax expense, and net profit for the first half of the year landed at 8.5 million euros, which is 6.2 million euros higher compared to last year. And earnings per share landed at 19 cents per share. Then next, let's look at our cash flow. So starting from inventory levels, our inventory landed 2.1 million lower compared to last year at 80 million euros. Here the currencies play against us, so currency exchange rates increased our inventory value by one million euro. Organic trading inventory was 0.8 million euros and we had a Net Realizable Value Allowance, which the allowance increased and decreased our inventory value by 2.3 million euros. And then on the right side, if we look at our cash flow, our cash flow from operations increased by 10.5 million euros year over year. H1 landed at 16.7 million euros. We have less capital tied in net working capital, which brought a 3 million benefit in our cash flow. And if we look at the cash flow excluding the working capital impact, our cash flow landed at 18.5 million euros, which is 7.5 million higher than last year. Capital expenditure remains roughly at last year level. Again, the same, same. Same capital expenditure targets here, manufacturing capacity, maintenance, investments, and also investments in new products, which is, of course, a key investment for us to maintain the new product excitement in the market. Last year, we had a disposal of 1.1 million from the sale of real estate in Finland. This year, the disposals were very minimal. And let's move on to the last slide of my presentation. So our deleveraging is progressing. Net interest bearing debt landed at 60 million euros, which is, it is higher, 1.4 million higher compared to last year. But here the comparison is a little bit flawed. we have to take into account that we have hybrids. Last year we had 30 million euro hybrids. Now we have 25 million hybrids, and the hybrid is considered as part of equity. So here, more meaningful comparison is looking at 2025 Q4 and comparing that to Q2, where we show a almost 13 million decrease in our indebtedness. Leverage covenants landed at 2.28, so the improvement that we've been working towards is now showing results. Gearing there on the right side of the slide is slightly higher, and this is again explained by the lower hybrid capital as the hybrid is considered as part of equity in the IFRS statement. So our IFRS equity decreased by some 3 million euros, but here we have to recall the hybrid impact.

Okay, that concludes the presentation part. So if we have any questions now on the phone lines, we would like to have those first, and then let's see if we have any other questions.

The next question comes from Jonas Heija from OPP. Please unmute your microphone.

Yes, hi, good morning. It's Jonas Heija from OPP. Can you hear me? Yes, good morning.

Good morning, Jonas.

Good, good. So, a couple of questions. Firstly, regarding the updated guidance, could you walk us through your thinking and thinking around demand and cost development in the second half? What are the key uncertainties and moving pieces in the second half and what are the things that you have a fairly good visibility into?

So, one of the Key uncertainties was the July change in the tariffs, U.S. tariffs. So the new Section 301 tariffs that we now have been published are not as unfavorable as we had expected. That was important. So there's still more news to come after Labor Day in September. but we feel more confident that it will not have as an adverse effect as we had expected. That's a quite impacting point. And it's our latest sales development. You know, we are in a replenishment mode. We don't have a very strong visibility of our sales, and the larger part of our year now in our open water season is behind us. And as we had already mentioned in Q1, we had a good winter for us follows a good winter. So the winter item pipeline is clean due to a strong winter last year for mainly our U.S. operations. And so the pre-sales have been positive for our latter part of the year.

Yeah, thank you. And if I can just continue, you mentioned the clean winter pipeline. Do you refer to winter fishing? And could you comment on what are the dealer inventory levels in winter sports in the Nordics?

Well, that's... So the winter I mentioned is winter fishing, which is much more significant for us than our winter sports activity. The winter spot activity for us is now at a controllable, reasonable low level. It's difficult for me to... We have had... improved inventory levels in the winter spots. It's been much lower than the absorption of our other COVID overstocks because we had a highly, very high peak COVID and a much harder slowdown and the opportunities to sell that for all in the pipe to sell these inventories are much more limited because the conditions to, as you know, as a fin, the conditions to exercise that leisure need a really very specific environment. So it's improved. Honestly, it's improved every year, but it's not, I would say, optimal yet.

Okay, thank you.

My overall impression, but then it's...

it's still not a super exciting environment okay that's that's good color then moving on to the cost side you had quite good cost control in the first half so maybe a question about the second half what kind of or do you foresee any cost pressures in the second half you mentioned the increasing brand investments that is One thing, obviously, but could you comment on the magnitude and perhaps other costs as well, including raw materials, which will probably increase because of the oil price and that moving on to plastics and things like that?

So, on the raw materials, our philosophy is we secure our margins. That's a strict guideline from here, from we are a you know a very large global group not quite with a big regional reach and new instructions are very clear we safeguard our margins so if it affects top line then it will affect top line but margins first has been our approach with all the, as you've mentioned, the price pressure on the raw materials and the plastics. On the overall fixed costs, we are in our, what concerns our infrastructure cost or admin, we are very strict and will continue to find efficiencies. All the support functions where we are accelerating is in product development, in marketing, also internal resources for future growth.

Yeah. Thank you. And then maybe a question regarding H1 sales, specifically the sales mix between consumables and durable goods in the North American and European markets. What kind of demand have you seen towards the more expensive durable goods? Has the consumer sentiment improved in these categories?

So our exposure in North America to durables is... still limited. And we had last year strong introductions in 13 Fitching, which is our durables brands for North America. So in 2025, we had really successful combo introductions. This year, we didn't have such a pipeline of new products. So the sales have been living with their living on past year introductions. And you always have second year after strong new products, a natural slowdown for us as suppliers. So our exposure was there limited. And in Europe, our positioning, so our main brand is Okuma, which is in the very good value for money segment, which is actually well positioned in today's market environment.

Yeah, okay. Thank you. And then finally, a question related to the inventory level. You had the change in the provision or allowance, whatever you want to call it. Could you elaborate what was this related to more specifically? Okay.

yes so it was it was slightly higher so this if I go back a little bit with our inventory management and our supply chain as we have put a lot of focus on this and the demand plan it's part of that overall process that we also review the inventories for obsolescence allowance so it's part of the overall assessment making sure that our inventory stays healthy and being very proactive in identifying where we have inventory risk. making sure that we have the provisions in place. So also kind of, it's a little bit tight to also internal processes. Our NRV, we call it NRV, Net Realizable Value Provision, so that we are proactive with the NRV provisions so that internally we also then incentivize all the markets and the sales teams to then improve inventory term by clearing the obsolete and slow-moving items.

Okay, good. Understood. Thank you very much. That's all I have at the moment. Thank you.

There are no more audio questions at this time, so I hand the conference back to the speakers for any chat questions.

Okay, so we have a couple of questions also on chat. First question is about the increased marketing spend on the H2 and then the question is that what are the main focus areas where we see opportunities in and how quickly do we expect this expenditure to affect our top line?

So we are working on streamlining our brand portfolio. That's been our main strategic focus in the last 12 months. We've been working on to increase the visibility of all our identified top-tier brands, so Rapala, VMC, Sussex, Okuma, and Rappala being our flagship, and so the opportunities will be in multiple areas for around Rappala. We are, you'll see when it comes, I think. I won't spoil all that we are working on for our consumers. How do you expect this expansion to affect your top line? How quickly? It will support the growth plan we have in our strategic planning. It's a necessity. The exact relationship is very difficult to assess. The second question, shall I continue?

Yeah, then we have a... Question on the pickup of product development and marketing expenditures and how these will affect the inventory levels. And does the current levels give enough room to operate toward the growth of the investments?

So here, the key guideline is improving terms. So yes, we are going into new product categories with our flagship Rappala brand with innovative products, exciting innovative products, and extending that portfolio will have inventory impacts. At the same time, we are cutting other items, really maintaining and overall reducing our number of stock keeping units. So the main guideline is we need to improve our terms gradually. Sustain growth, free cash, and improve our terms without breaking the growth. So it's a fine line. That's the way we've been and that you've seen in the past year and reporting that we are improving our terms. And we see in a lot of opportunities to continue improving these turns with better forecasting tools, lower minimum order quantities, faster supply chain, et cetera. All the usual tools that we have, it's a lot of small streams that we are working on.

Then we have a question about if there's anything extraordinary things behind the high H1 tax rate.

Yeah, I can pick up that question. So we do have some withholding taxes that we have recorded in H1. I believe they were actually in the Q2. And those are related to internal repatriation of profits or internal dividends, which incur those withholding taxes. So that did increase our effective tax rate. So I would say without this withholding tax payment, our effective tax rate would be below the 30% level.

Okay, then we have one more question that what kind of networking capital impact and cash flow you are expecting for Q3 and Q4?

Yes, that's an excellent question. So for Q3, as we have showed now, higher EBITDA and higher volumes. So we still expect to have slightly better cash flow compared to last year, of course, driven by the higher volumes. We are still getting cash in from the summer fishing season, and the season is still continuing in parts of the world and many parts of the world. So Q3, we do see it in a positive manner. Then what happens at the same time, we start preparing for the winter fishing season. So we start to have cash outflows for the winter fishing season. And now, as Cyril also mentioned, a good season is followed by another good season. So we expect the cash flow roughly to be on the same level as last year in terms, in regard of the winter fishing season. Then in Q4, the cash flow is quite dependent on the load-in orders for the subsequent year. We start building working capital for 2027, and then the Q4 cash flow is very dependent on how the load-in orders and how the planning goes for 2027. We have a good product pipeline for 2027 as well. We have lots of new product introductions, but that's more information on that would follow then when we have better visibility on the subsequent year. Usually the Q4 cash flow is negative.

Okay, I think that there was no more questions and as there are no more questions, we conclude this call. So I wish everyone good fall season and keep on fishing and tight lines.