Hello, Inderes TV. Rapala gave out their Q2 report yesterday and we're going to cover it with the company's CEO, Cyrille Viellard. Welcome, Cyrille, to the interview.

Thank you very much, Thomas, for hosting me today.

I can imagine it's easy to smile after that Q2 report, but how would you summarize the Q2 for Rapala?

Q2 for us has brought very nice developments in our North American business. So we had, as we discussed in Q1, a very successful Q1 with a successful supply chain, with good load-in orders and filling well the stores with all our novelties. What we shall see in Q2 is that the sell-through was quite good and replenishment was very nice with these new products and as well our legacy portfolios. So very nice dynamics in North America, in the U.S. as well as in Canada.

I mean, obviously North America was the highlight of the quarter for you guys, but if we zoom in on your products. Because you really won quite a lot of awards at ICAST this year. What kind of visibility does this bring to you and how are you seeing demand react to it. So ICAST.

We had four wins this year, five wins last year, and we had wins in categories that are very important for us, which is the lure. Category, we had the best of show, not the best of category, for soft baits and for both freshwater and saltwater. It's an industry recognition you can have, and then not so a commercial success in the following year, but most often the awards are the industry and the press that support the voting are pretty accurate in their assessment. We see this year the Claptail was best freshwater hard bait. Last year, and it's a massive success this year. We won with the Otus, which is a new category of our pike fishing, very peculiar shaped lure, soft bait, and winning in the category, which has a strong hype, was important for us and we are confident that it will have significant sales impact next year.

I can imagine from your point of view this recognition really brings confidence into your product development pipeline. Correct.

It confirms the efforts. We are putting in that aspect. Really growth in our industry comes from innovation and the right way to communicate that innovation to the end consumers, so it's really driven by product and promotion to animate the passion behind fishing, and we are increasing our product development efforts, accelerating our cycles, and it's really satisfying to see that these efforts are also recognized by the industry and also short term, as we saw in Q2, generating good sales.

We'll come back to the product development later on, but if we dissect your performance a bit by market area and start off with North America since. That's really your biggest market area and it was really strong during this Q2. So what enabled this strong performance?

Well, again, excellence in supply chain execution. Strong. Again, the development of new products that we brought to market. This year, they were spot on in the segments we targeted and there is really demand. Also we brought in products this year that are not cannibalizing our existing portfolio. That was quite important. The Claptail that I mentioned earlier is clearly a new segment where we were not present today, and then our push in soft plastics continues. We are in soft plastics, we do not have the market. Share that we have today in hard baits, so we are growing fast, it's our third year with a significant presence in soft baits under the CrushCity brand, Rapala CrushCity, and. We have nice momentum, but still potential to grow.

And considering this nice momentum, do you have visibility to the products really selling through from the retailers as well or is it mostly.

In the U.S.? It's caught, there is not much edge between our deliveries and then the consumer deliveries. We work mainly with large big-box customers, Walmart, Bass Pro Shops, Scheels, Dick's Sporting Goods, Sports Academy, and we hold inventory mainly for them, to the inventory. They have is the inventory that is in our stores, as they have their own warehouses, but they rely on our ability and that's why. Market accelerations, we feel them. Immediately, as well as slowdowns. We are much more close to market demand and what is now relatively. New is there are sales statistics that we can acquire from Circana, and so we have quite precise point-of-sales data that tell us that the sell-through per product is quite good.

Good to hear, but considering the strong American sales, Europe was quite a disappointment with sales coming down from last year. What is behind this development in Europe?

So sales for us in Europe is very contrasted, so overall, Thomas. We went down 4% in Q2, a disappointment. We had a very promising Q1, similar to the United States, good selling of our new products into retail, nice execution in the supply chain to bring all this diversity and complexity at the right time in the stores, and then we had, as the season started, very diverse. Situations. North Europe went pretty well, as you spent your holiday around here. It was nice for fishing conditions, and so our activity in Northern Europe was quite good. Where we had more challenging times is in continental Europe, or both more south, where France, Germany, U.K. Where we are less exposed, but we are, where the heat wave hit us on the freshwater fishing side quite hard. Saltwater remained okay, but we are also quite freshwater exposed. The drought has had a significant impact on the fishing activity.

You see it as more of a market-level effect rather than changes in the competitive environment. Or acoustics.

This is. Quite exceptional impact, it's true. If every summer is like this, then we have to grow more in saltwater and reduce maybe our exposure in certain markets in freshwater fishing. But I believe it's quite exceptional and it was weather-related.

I see, now it's a mixed bag. But the other countries. Besides these two, the rest of the world developed very positively as well. What enabled this strong growth? So that's here.

Latin America is going well. So overall the rest of our world for us is lower numbers, so in percentage the whole rest of the world had nice growth. It's smaller figures for us, Latin America. We have the impact from our Okuma Chile distribution that is going well and is specific software for us. The area for us is Japan, China, Korea, Southeast Asia, Australia, where we have softer activity. Still consumer demand is hit by, I would say, fuel prices higher than in other countries, and then competition for us is harsher in these territories where we are very close to all the local manufacturers, and so we need to fight back to defend this market share.

But if we move on to your guidance, for this year you're guiding now to 12 to 14 million euro comparable EBIT, and considering the fact that you're almost on the higher end of this guidance with the H1 results alone. How are you thinking about the guidance for this year and maybe the possible moving parts affecting it?

We prefer to give good news. We learned, you know me, in the past two years now, year-end H2 historically is broadly flat because there are lower sales, even if we are still a Northern Hemisphere open-water fishing company. The latter part of the year is actually broadly flat in terms of profitability. We are cautious with the tariff decisions to be taken in September. Right now what has been decided with Section 301 is. For us acceptable compared to what was before. So we are cautious and we want to accelerate now. Some marketing investments to boost our brands, in that brand legacy we work on our brand strategy, on building these brand teams. They are now matured and we are ready to give them more firepower to express and implement these strategies. It makes no sense to give them more. I'm gonna give you marketing money if they don't know where they want to go, so first you need to build the teams, they need to build their projects so it's now mature, and I think it's surgically right then. Go for it, and that will impact our H2 panel.

We should expect you guys to invest more into marketing, product development. These kind of efforts during H2, so what kind of opportunities. Do you see for these growth investments currently?

It's boosting the Rapala brand, which will at the same time then have an effect to. Boost our very wide range of Rapala brand products. That's what we are going after. As well, we are already in our brand strategy, which is to strengthen and expand the Rapala brand. We are going next year in the U.S. into tackle storage, which is a new category for us. You know, when you go in the U.S. into a category extension, you don't go small, you go big. And so it needs to, as we had done three years ago with CrushCity, where we had massively invested in marketing to establish Rapala as a legitimate player in the soft bait segment with a real value proposition under the CrushCity designs and everything that we developed, we are to do the same, and in Europe. There is. I really, we really want to establish the Rapala brand as the inspiring. Brand for passionate anglers.

We expect these investments mostly to be focused on the Rapala brand, or do you see interesting opportunities with your other brands as well.

So it's gonna be. The drive, the push is on Rapala, but also on all brands, on Oku. Ma, on VMC, on Sufix, where we have a clear strategy on Sufix to place Sufix as the high-end technical line innovator, which we are, but which is not known enough, so I would say Rapala is the focus. That's where we have. The largest product portfolio, the largest global reach, and where each euro invested brings higher returns, but as we have defined where we take Rapala and where we take the brand, these brands will have also now their specific resources. Speaking of the Rapala brand, we project to where we have today in Vääksy the art development center for new lures globally, where we have all the core competence to develop new lures, where we have also workshops to make all kinds of lures with digital printing, with also our own injection machines, tooling. We also have the machine building of the lures. This we will extend and strengthen that location so we can. Have even better facilities to accelerate our innovation drive forward. That's also in the pipe.

Talking about products, one thing you historically struggled with somewhat is inventory levels and here during H1. You were able to lower your inventory levels to about 80 million euros. Despite growing the top line, so now that you're pushing more into growth, into these product investments. How are you expecting your inventory levels to develop going forward?

Well, we are. Targeting to continuously improve our turns, that's the target, that is what each business unit has in mind and knows that it has to accomplish, yes growth, but better turns, and when you look at our portfolio of products and you go into each product and you see the minimum order quantities. The lead times, the transportation time, the accuracy of our forecast, the way we work on our discontinued items. We have small improvements everywhere. Nobody can stand on a benchmark and say there is no improvement I can achieve, and so it's clear for everyone and there are a lot of action points that we must continuously improve. So you might see in value inventory increase, but our average turns, we calculate this over a 12-month rolling base, must improve. It is given if we get a massive adverse market downturn then obviously our lead times are pretty long and we will not hit that target, but really we know that this is coming in the way we forecast. We see quite interesting results on forecasting simulations with AI taking into account. All our seasonality and all the supply chain constraints, which product, so I believe we can continuously improve.

That is a good high note to end on. Thank you, Cyrille, for the interview and enjoy the rest of the summer.

Thank you, Thomas, for your time, for your good questions and for accompanying us and allowing everyone to understand better where we're going, what we're doing and how we're going to create value for Rapala.