Amer Sports Q1 Sales up 20.5 Percent

amer-sports-logo-300x153 “Our strong performance which started in 2010 continued in the first quarter. The development was particularly good in Footwear, Apparel and Fitness, and geographically in EMEA and the Americas. I am pleased with the continuing improvement.” Said Amer Sports President and CEO Heikki Takala. He continued by saying, “Our business in Japan. . .was hit due to the earthquake and tsunami. In the first quarter, we were able to mitigate the impact, however we do foresee an on-going business risk in the country. Importantly, we remain committed to driving sustainable, long-term business in Japan, together with our trade partners and our own Amer Sports Japan organization. As part of this commitment, Amer Sports employees and the company made product, monetary and motivational donations to the disaster area.”

Here’s more from the company’s quarterly report:

JANUARY-MARCH 2011

  • Net sales totaled EUR 449.1 million (January – March 2010: EUR 372.6 million). In local currencies, comparable net sales increased by 12%.
  • EBIT was EUR 25.7 million (9.5).
  • Earnings per share were EUR 0.13 (-0.01).
  • Net cash flow after investing activities was EUR 87.1 million (93.9).
  • Gearing was 35% (December 31, 2010: 37%).

OUTLOOK AND GUIDANCE 2011
Amer Sports’ strategic development programs continue to contribute positively to the Group performance in 2011 and the company will continue investing into executing the new strategy and sustaining the growth. In Footwear and Apparel, fall/winter pre-orders are indicating that the strong momentum will continue. In Winter Sports Equipment, Amer Sports’ operational efficiency measures are expected to have a positive impact on the full-year profitability. The sporting goods market is estimated to continue to grow modestly in 2011, with sports specific and regional differences.

In 2011, Amer Sports expects its net sales to continue to clearly exceed the Group’s long-term financial target of 5% annual currency-neutral growth. EBIT margin excluding non-recurring items is expected to improve from the level of 2010 (2010 net sales EUR 1,740 million, EBIT margin excluding non-recurring items 6.2%).

heikki_jpg_118492a1

Amer Sports President and CEO Heikki Takala

The 34% growth in Footwear and 28% growth in Apparel are a result of the execution of our strategy to grow faster in softgoods. The improvement in Fitness reflects both an improvement in market conditions and our strong commercial gains. The solid progress in EMEA and Americas, and in most parts of Asia, reflect our strategic programs to strengthen the commercial footprint and better delight the consumer.

Our business in Japan, especially Racquet Sports where the season was just about to start, was hit due to the earthquake and tsunami. In the first quarter, we were able to mitigate the impact, however we do foresee an on-going business risk in the country. Importantly, we remain committed to driving sustainable, long-term business in Japan, together with our trade partners and our own Amer Sports Japan organization. As part of this commitment, Amer Sports employees and the company made product, monetary and motivational donations to the disaster area.

We improved gross margin by 0.6 percentage points in the first quarter. Cost inflation is a challenge but we have mitigation actions in place to protect the 2010 gross margin level. On operational expenses, we continued to invest in our new strategy to ensure we have strong building blocks in place for the future. We invested especially into our category based operations, Go to Market resources including geographic expansion, better customer service, and own retail.

The first quarter was good and a logical part of our long term improvement program. We continue to steer the company towards the long-term targets. Hence, as we now stay the course, we look forward to a positive continuous development.”

NET SALES AND EBIT
Amer Sports net sales totaled EUR 449.1 million (January – March 2010: EUR 372.6 million) in the review period. Comparable net sales increased by 12% in local currencies, particularly due to sales growth in Footwear, Apparel and Fitness. In local currencies, EMEA increased by 16%, the Americas by 9% and Asia Pacific by 4%.

Net sales by business segment
EUR million 1-3/
2011 1-3/
2010 Change
% Change
%*) % of sales
1-3/2011 % of sales
1-3/2010 2010
Winter and Outdoor 233.5 181.7 29 20 52 49 1,015.0
Ball Sports 159.0 145.4 9 2 35 39 520.6
Fitness 56.6 45.5 24 14 13 12 204.8
Total 449.1 372.6 21 12 100 100 1,740.4

*In local currencies

Geographic breakdown of net sales
EUR million 1-3
2011 1-3
2010 Change
% Change
%*) % of sales
1-3/2011 % of sales
1-3/2010 2010
Americas 186.4 158.3 18 9 41 43 687.9
EMEA 214.1 172.2 24 16 48 46 845.7
Asia Pacific 48.6 42.1 15 4 11 11 206.8
Total 449.1 372.6 21 12 100 100 1,740.4

* In local currencies

Group EBIT was EUR 25.7 million (9.5). In local currencies, increased sales volumes contributed EUR 28.7 million to EBIT growth, while higher gross margins contributed EUR 3.0 million. Operating expenses increased by EUR 14.9 million, driven by increased sales and distribution costs. Operating expenses as a percentage of net sales were 37.9% (40.7%).

EBIT by business segment
EUR million 1-3/
2011 1-3/
2010 Change
% 2010
Winter and Outdoor 9.3 1.7  96.9
Ball Sports 17.7 14.4 23 32.2
Fitness 3.3 -0.7  2.7
Headquarters -4.6 -5.9  -23.9
EBIT excluding non-recurring items 25.7 9.5  107.9
Non-recurring items – –  -11.1
EBIT total 25.7 9.5  96.8

Net financial expenses totaled EUR 4.3 million (9.1) including net interest expenses of EUR 4.5 million (3.2). Net foreign exchange gains totaled EUR 0.2 million (5.9 losses). Earnings before taxes totaled EUR�21.4 million (0.4) and taxes totaled EUR 4.3 million (0.1). Earnings per share were EUR 0.13 (-0.01).

CASH FLOW AND FINANCING
Net cash flow after investing activities (free cash flow) was EUR 87.1 million (93.9). Working capital in total was reduced by EUR 73.4 million (83.3). Net cash flow from investing activities was EUR -9.1 million (-4.8). In March the company paid dividend of EUR 36.4 million (19.5) and purchased own shares by EUR 9.2 million.

At the end of March, the Group’s net debt amounted to EUR 257.4 million (December 31, 2010: 294.8).

Interest-bearing liabilities amounted to EUR 375.5 million (December 31, 2010: 379.5) and consisted of short-term debt of EUR 98.8 million and long-term debt of EUR 276.7 million. The average interest rate on the Group’s interest-bearing liabilities was 4.4% (4.4%).The EUR 60 million hybrid bond is accounted as equity.

Short-term debt includes repayments of long-term loans totaling EUR 96.1 million (December 31, 2010: 97.0). Amer Sports has a commercial paper program of EUR 500 million. At end of the review period, Amer Sports had not issued commercial papers in the Finnish markets.

Cash and cash equivalents totaled EUR 118.1 million (December 31, 2010: 84.7).

The loan syndicate signed in 2005 consists of a EUR 325 million revolving credit facility and a term loan of USD 100 million. Amer Sports had not used any of the revolving credit facility at the end of the review period.

In April, Amer Sports Corporation issued a SEK 500 million floating rate bond with a loan period of five years targeted at Nordic institutional investors. Amer Sports will apply for listing of the bond on the NASDAQ OMX Helsinki Ltd stock exchange. The proceeds of the bond will be used to repay debt and for general corporate purposes.

The equity ratio at the end of March was 47.4% (December 31, 2010: 47.8%) and gearing was 35% (December 31, 2010: 37%).

CAPITAL EXPENDITURE
Capital expenditure totaled EUR 9.3 million (5.1). Depreciation totaled EUR 9.0 million (9.0). The whole year capital expenditure is expected to be approximately EUR 50 million (39.9). The increase is mainly due to the operational efficiency program in Winter Sports Equipment.

BUSINESS SEGMENT REVIEWS

WINTER AND OUTDOOR
EUR million 1-3/2011 1-3/2010 Change % Change %*) 2010
Net sales

  • Winter Sports Equipment 46.9 42.3 11 6 438.4
  • Footwear 91.1 62.7 45 34 219.6
  • Apparel 38.9 28.3 37 28 156.6
  • Cycling 34.4 29.3 17 8 106.4
  • Sports Instruments 22.2 19.1 16 7 94.0
  • Net sales, total 233.5 181.7 29 20 1,015.0

EBIT excluding
non-recurring items 9.3 1.7 96.9
EBIT % excluding
non-recurring items 4.0 0.9 �9.5
Non-recurring items – –  -10.0
EBIT total 9.3 1.7  86.9
Personnel, period end 4,377 4,002 9  4,293

* In local currencies

Winter and Outdoor’s net sales in the review period totaled EUR 233.5 million (181.7), an increase of 20% in local currencies. Net sales growth was driven by Footwear and Apparel. In geographic terms, the strongest growth was in the Americas.

  • EUR million 1-3/2011 1-3/2010 Change % Change %*) 2010
  • Americas 44.0 31.4 40 29 211.3
  • EMEA 163.5 128.9 27 19 687.2
  • Asia Pacific 26.0 21.4 21 10 116.5
  • Total 233.5 181.7 29 20 1,015.0

* In local currencies

EBIT was EUR 9.3 million (1.7). In local currencies, increased sales volumes contributed EUR 21.3 million to EBIT growth. Operating expenses increased by EUR 12.4 million due to increased sales and distribution costs.

Winter Sports Equipment
Winter Sports Equipment net sales totaled EUR 46.9 million (42.3), an increase of 6% in local currencies. Sales were up in all the main product categories. In regional terms, North America experienced the highest growth rate, fueled by good snow conditions.

Footwear
Footwear net sales totaled EUR 91.1 million (62.7), an increase of 34% in local currencies. Growth came from hiking and trail running, and was strongest in EMEA.

Apparel
Apparel net sales totaled EUR 38.9 million (28.3), an increase of 28% in local currencies. Growth occurred in all geographical regions.

Cycling
Cycling net sales totaled EUR 34.4 million (29.3), an increase of 8% in local currencies. Sales were up in all the main product categories. The strongest growth was in cycling apparel and shoes.

Sports Instruments
Sports Instruments net sales totaled EUR 22.2 million (19.1), an increase of 7% in local currencies. Sales of outdoor and training products grew double-digit.

Amer Sports sold the diving suit company Fitz-Wright Holdings Ltd. to Huish Acquisition LLC in April. Net sales of Fitz-Wright diving suits totaled EUR 9 million in 2010. The divestment had no material impact on Amer Sports’ financial results.

BALL SPORTS

  • EUR million 1-3/2011 1-3/2010 Change % Change %*) 2010 Net sales
  • Racquet Sports 67.1 64.3 4 -3 232.5
  • Team Sports 71.3 60.8 17 9 212.1
  • Golf 20.6 20.3 1 -5 76.0
  • Net sales, total 159.0 145.4 9 2 520.6
  • EBIT excluding non-recurring items 17.7 14.4 23  32.2
  • EBIT % excluding non-recurring items 11.1 9.9  6
  • Non-recurring items – –  -2.7
  • EBIT total 17.7 14.4 23  29.5
  • Personnel, period end 1,621 1,584 2  1,590

* In local currencies

Ball Sports’ net sales totaled EUR 159.0 million (145.4), an increase of 2% in local currencies. Growth in the review period was driven by Team Sports. Net sales in EMEA and the Americas increased by 5% and 3%, respectively. In Asia Pacific, sales declined by 11%, driven by the soft tennis market and the aftermath of the earthquake and tsunami in Japan, the region’s largest market.

  • EUR million 1-3/2011 1-3/2010 Change % Change %*) 2010
  • Americas 102.4 92.9 10 3 334.4
  • EMEA 39.3 35.0 12 5 114.0
  • Asia Pacific 17.3 17.5 -1 -11 72.2
  • Total 159.0 145.4 9 2 520.6

* In local currencies

EBIT in the review period totaled EUR 17.7 million (14.4), an increase of 23%. In local currencies, increased sales volumes contributed EUR 4.1 million to EBIT growth. Operating expenses increased by EUR 1.2 million due to increased sales, distribution and marketing costs.

Racquet Sports
Racquet Sports net sales totaled EUR 67.1 million (64.3), a decrease of 3% in local currencies. Racquet Sports was adversely impacted by the earthquake and tsunami in Japan where Wilson has a strong market position. Growth in EMEA offset the sales decline in Asia Pacific.

Team Sports
Team Sports net sales totaled EUR 71.3 million (60.8), an increase of 9% in local currencies. Growth in Team Sports was driven by bats, basketballs and ball gloves, the three largest product categories during the quarter.

Golf
Golf net sales totaled EUR 20.6 million (20.3), a decrease of 5% in local currencies.

FITNESS
EUR million 1-3/2011 1-3/2010 Change % Change %*) 2010
Net sales 56.6 45.5 24 14 204.8
EBIT excluding
non-recurring items 3.3 -0.7  2.7
EBIT % excluding
non-recurring items 5.8  1.3
Non-recurring items – –  -2.3
EBIT total 3.3 -0.7  0.4
Personnel, period end 735 735 0  691

* In local currencies

Fitness’ net sales totaled EUR 56.6 million (45.5), an increase of 14% in local currencies. Sales were up in all geographic regions.

  • EUR million 1-3/2011 1-3/2010 Change % Change %*) 2010
    Americas 40.0 34.0 18 8 142.2
    EMEA 11.3 8.3 36 24 44.5
    Asia Pacific 5.3 3.2 66 43 18.1
    Total 56.6 45.5 24 14 204.8

* In local currencies

The commercial business (clubs and institutions) sales were up by 13% in the review period. Consumer business (home use) was up by 21% in local currencies. In the North American fitness market, the commercial business started to show some early signs of recovery during 2010 and the market continued to improve through the first quarter of 2011.

Fitness’ EBIT was EUR 3.3 million (-0.7). In local currencies, increased sales volumes contributed EUR 3.7 million to EBIT growth while higher gross margins contributed EUR 2.0 million. Operating expenses were EUR 1.7 million higher than in the corresponding period last year mainly because of increased sales and distribution costs.

PERSONNEL

At the end of March 2011, Group employees totaled 6,804 (December 31, 2010: 6,645). The number of employees increased mainly due to strengthening the sales and distribution.

March 31,
2011 March 31,
2010 Change
% Dec 31,
2010
Winter and Outdoor 4,377 4,002 9 4,293
Ball Sports 1,621 1,584 2 1,590
Fitness 735 735 0 691
Headquarters 71 71 0 71
Total 6,804 6,392 6 6,645

March 31,
2011 March 31,
2010 Change
% Dec 31,
2010
EMEA 4,007 3,672 9 3,903
Americas 2,260 2,211 2 2,214
Asia Pacific 537 509 6 528
Total 6,804 6,392 6 6,645

OUTLOOK FOR 2011
Amer Sports’ strategic development programs continue to contribute positively to the Group performance in 2011 and the company will continue investing into executing the new strategy and sustaining the growth. In Footwear and Apparel, fall/winter pre-orders are indicating that the strong momentum will continue. In Winter Sports Equipment, Amer Sports’ operational efficiency measures are expected to have a positive impact on the full-year profitability. The sporting goods market is estimated to continue to grow modestly in 2011, with sports specific and regional differences.

In 2011, Amer Sports expects its net sales to continue to clearly exceed the Group’s long-term financial target of 5% annual currency-neutral growth. EBIT margin excluding non-recurring items is expected to improve from the level of 2010 (2010 net sales EUR 1,740 million, EBIT margin excluding non-recurring items 6.2%).

Outlook given in the Financial Statements bulletin on February 3, 2011

Amer Sports’ strategic development programs are expected to continue to contribute positively to the Group performance in 2011. The sporting goods market is estimated to continue the recovery started in 2010, with regional and sports specific differences. In Footwear and Apparel, spring/summer pre-orders are indicating that the 2010 strong momentum will continue. Overall, Amer Sports expects its 2011 net sales to increase from 2010 and EBIT to improve.

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