Rapala VMC Corporation (RAP1V) Earnings Call Transcript & Summary

Good day, and welcome to Rapala VMC Corporation's Full Year Results Teleconference. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Olli Aho. Please go ahead, sir.

Thank you very much. Welcome, everybody to this telephone conference. I'm here together with Chief Executive Officer, Nicolas Cederström Warchalowski; and Chief Financial Officer, Jan-Elof Cavander. We go straight to the point. Please go ahead, Nicolas.

Thank you, Olli. Hello, everyone, and welcome to this conference call. My name is Nicolas Cederström Warchalowski, and I'm privileged enough to head up Rapala I'm also joined by Olli Aho, Head of Investor Relations; and our CFO, Jan-Elof Cavander. I would like to start by saying how proud I am of our Rapala VMC team members all around the world for delivering these record results. At all times, in 2021, the health and safety of all our team members have been strictly observed, and we have successfully navigated around the pandemic-related obstacles also in 2021. Importantly, the strict operational watch towers used in 2020 were diligently kept in place also in '21. And as a result, Rapala VMC suffered relatively few pandemic-related disruptions in 2021. On the contrary, we benefited from the continued demand surge in the sport fishing industry. I would like to comment upfront about the unusual pattern between first half year and second half year and the end year 2021 inventories. Jan-Elof will also cover this topic later in his part. We have seen abnormal patterns for first half year versus second half year, both in 2020 and 2021. Following the learnings made at the start of the pandemic, we did in 2021, try to up our game, and we asked all of our distribution units around the world for their product forecast 6 to 9 months earlier than pre-COVID. We have seen that fishing tackle retailers are afraid to be left without stock, and therefore, they have built in a safety window for their orders at least 1 to 3 months. As a result, we did in 2021, commenced external product purchases up to 9 months in advance, and we ramped up all of our group-owned production units 3 months earlier than normal to hit the key shipment windows for winter season 2022 and also for spring/summer season 2022. This unusual behavior explains a lot of the swing between first half year and second half year, both in 2020 and 2021. And also the somewhat higher inventories at the end of the year in 2021. This time around, the December '21 inventories are not a sign of operational weaknesses. On the contrary, there is sign of a more agile and efficient operational platform being able to adopt to the changed purchasing habits seen during the pandemic. And also importantly, a sign of the high ongoing demand for our largest market U.S.A., in particular, going into 2022, hence requiring higher inventory levels. Our net sales in 2021 increased by 13% to EUR 294 million despite the significant shortfall of having no Shimano and much less third-party brands in our key European markets in 2021. With increased focus on group brands, these brands achieved EUR 228 million of sales, which was also a new record. We also achieved our highest comparable EBIT ever of EUR 32.7 million in 2021. On top, we fully repaid the costly hybrid bond in '21, meaning that our balance sheet now is strong and will provide a great foundation for future growth. We also successfully acquired the Shimano units in Russia and Eastern Europe at a very favorable price, and we will be able to consolidate 100% of these markets in our books moving forward. We're very satisfied with this move and also an increased focus on group brands, also in the Russia and Eastern European markets. A few words about Okuma. For us, Okuma is a real game changer in the rod and reels market, and we're coming into the 2022 fishing season hot. Okuma is strong enough to go head-to-head against the largest global rod and reel brands anticipates for significant market shares in the largest rod and reel segments in the world. Okuma reels offer tremendous value for money, and I'm very impressed by their product quality. Okuma is providing a great, robust growth pillar for our group for many, many years to come. Switching to the topic of strategy execution and the ONE RAPALA VMC turnaround plan. The strategic target of the group is to become a united group brand and innovation-driven sport fishing powerhouse. With fewer management layers, less bureaucracy, less SKUs, fewer distribution center, sharper brand strategies and an improved financial and operational platform Rapala VMC today's moved much faster than in the past. The increased speed is also driven by the fact that several elements of our strategic plan are highly synergistic. As a result, several of the most important strategy execution projects were completed ahead of time and below projected cost in 2021. In our last investor call, I told about the largest SKU and brand cleanup in our company history. We want to reduce our SKUs by 35% and remove a significant amount of group brands and sub-brands. Our largest brands in the group, group brands in the group will benefit greatly from this but in particular, a flagship brand, Rapala. We want to put our flagship brand on an aggressive growth trajectory and I'm pleased to see that our product pipeline for Rapala brand is filling up nicely. I'm especially proud to announce that I consider 2021 as a breakthrough year in terms of sustainability. Without clean and healthy waters, there would be no angling and there certainly would be no Rapala VMC. Our ambition is to take a leading position in sustainability within the sports fishing industry by 2024. There will be a lot of hard work to get there. And I'm happy to report that sustainability actions have been finalized in 2021 for multiple of our brands, including targets for renewable energy use and introduction of plastic-free packaging and shifting to more ecological raw materials in production. To sum up, we're very proud of the tremendous work by Rapala VMC team members delivering a record year 2021. Current strategic actions are providing significantly wrapped up capabilities and significantly improved speed of strategy execution. As a result, we aim to utilize the full potential of Rapala VMC in the coming years and to also take a leading position in sustainability within the sports fishing industry. In our eyes, this great journey has only begun.

No, Jan-Elof, please go ahead.

Thank you, Nicolas and Olli. Let's continue on the full year earnings presentation that is found on our website as usual. So I will start on Page #2. First of all, thanks for my part for being listening on the line. This is actually during my career, this is absolutely the best earnings call that I have participated in. Two reasons I'm really happy for. First of all, we have all-time high numbers to report to you. And secondly, and maybe even more importantly, the strategy execution and the turnaround that we have generated for the group is really visible here. And this strategy execution has provided already results and will continue to provide results. And from our perspective, we have now built a solid foundation during the past 2 years on which we can continue to build significantly. So as I said, I'm extremely pleased from both of these points to be up here today to present you the number performance for 2021. So sales ended at [ EUR 294.3 million ] with a strong focus on group product sales, which grew very solidly from prior year at around 23% using the comparable FX rates. And as can be seen on this picture, group product sales, as said, increased significantly and Third Party Products has been coming down. We are actually very satisfied with the development on the mix between the Third Party business and Group Products, and we have been intentionally and forcefully driving down the Third Party category in order to put all focus on the high value creating Group Products segment. So we are really progressing according to our plans in this mix. And this is also visible in the profitability numbers. Secondly, in addition to strong and good top line and especially good top line mix, as sales strategy execution has been progressing very solidly, and we have made a lot of development in this area and continue to do so in the future. And based on the high market demand and faster-than-expected strategy execution, our comparable operating profit reached an all-time high number of EUR 32.7 million. And there is also a second aspect to the -- both top line and bottom line performance of previous or is that only about changing the strategic focus to Group Products. But secondly, it's also very importantly driven by our culture and our internal culture. We have made a lot of leadership work with our teams worldwide on shifting the focus on day-to-day basis in all customer meetings, all PD meetings and basically all the work that's happening inside the company, the shift of focus has been transferred to Group Products. And that's one important point that I want to emphasize, which is now starting to be also visible in the numbers. Then going into the earnings per share. This is maybe the -- I may be happiest to go through this picture. Because here this picture is evidence of both very strong profitability that we have generated, but also that the turnaround of the group has been done which means that the exceptional one-off items that have been damaging the profitability for some years were very, very small in 2021. And as a consequence of that, our earnings per share was at EUR 0.45 per share. And taking into account both the solid foundation of the company from the balance sheet perspective as well as taking into account the earnings from 2021, the Board has decided in its meeting to propose a $0.15 dividend to the AGM after 2 years of no dividends paid out. Then I move to Page #3. These comments are all applicable. The comments I'm going to go through are applicable for the full year numbers and important to highlight here, again, which was also highlighted in the release yesterday. We witnessed exceptional swings between the first and second half of the year, both in 2020 and 2021 due to several reasons, pandemic-related reasons, demand-related reasons and also reasons of, let's say, initiative from our part to take orders early, deliver orders early. And there were shifts -- the shifts between the half years varied also by region and by product categories. So for this year, comparison between half year is very difficult to make because of these exceptional swings. And this affects both to sales, but also to certain operating expenses and consequently also to profitability on the different -- on the H1 and H2. Our internal focus with all our teams and all our business units has been fully on the full year numbers, both in sales and profitability based on the internal management of the company because as I said, the half years have been swinging at an exceptional way compared to historical and the normal seasonality pre-pandemic in this industry. Then going into our 4 geographical regions. All regions generated sales growth from prior year despite the fact that the Third Party businesses that we decisively exited last year played a big proportional role in some of the regions. North America, which is our biggest region with EUR 134.8 million top line, grew more than 20% from prior year in 2021. We experienced great market conditions both in U.S.A. and Canada and fishing remaining a [ COVID safe ] activity. We witnessed strong demand for our products in this market. And here, our group product categories, all key group front categories witnessed double-digit growth in the region. Nordic sales equaled EUR 45.5 million with close to 10% growth from prior year. Three key items to mention from this region. First of all, we made successful consolidation of our Nordic distribution units, distribution centers in fishing to Pärnu in Estonia. This distribution center is now fully operational and is actually a top-notch operation really, really on a good level and high level with good delivery metrics built under 1 campus where we have several factories in Estonia and top talent, really top talent in the region. Also, the exit of both hunting and Shimano business in the region was done very decisively and very forcefully, and our teams managed to do that in an excellent way. And what makes us really proud for this region is that at the same time, we made significant restructuring of the region operationally and also for the sales team and managed to grow the business at the same time on a very good level. Rest of the Europe ended at EUR 80.6 million in top line. Here, we also saw a great shift in the sales mix from larger Third Party region to more a Group Product region. And this shift was done very successfully also in this region by our team. Rest of the World posted a EUR 33.4 million top line for the full financial year. In this region, we also experienced solid demand throughout the year. And also here, we generated the same focus shift and exited certain Third Party Products businesses and focused on our Group Products. Then I'm moving to Page #4. Inventory at the year-end was EUR 86.2 million. Inventory management historically for this company has been a challenge. But now during the past 2 years, we have really gained a tight and good control on our supply chain, both on internal produced products as well as for the sourced products. And due to supply chain issues worldwide known to basically all industries that do cross-border business. We are also witnessing those issues, and we have intentionally stocked up for the year-end to prepare for the 2022 both winter and summer fishing seasons early on. And we are rather happy with this inventory level, taking into account the future business, and the content of the inventory is very healthy and very, very good quality products. Cash flow from operations was on a good and healthy level of EUR 24.4 million. And I want to highlight that this -- the cash flow is on this good level despite the fact that we grew inventories as was just explained. Then I move on to Page #5, on our financial position. So as a result of strong strategy execution and turnaround of the group, our financial position is now strong, and we are happy with our balance sheet. The key win in this domain was clearly last year, the full repayment of the hybrid bond that was in our balance sheet for several years. This is a key victory also for the team to be able to repay this and come back to the business with a solid balance sheet. Liquidity position of the group is on a good level with almost EUR 60 million of uncommitted -- sorry, committed undrawn long-term credit facilities. And due to the -- mostly due to the hybrid repayment, our reported IFRS net debt increased from prior year. And here, just to remind everybody, so the hybrid bond was not computed in as net debt according to IFRS. So this repayment explains almost all increase in the net debt during the previous year. And as a result of the net debt change, gearing rose to 50.7% and equity ratio landed at 44.2%. Then before going into the Q&A session, one more slide on the short-term outlook for 2022. So the general market demand for fishing products has been on a high level and is expected to gradually normalize. However, the group expects the overall demand for fishing tackles to stay on a higher level compared to pre-pandemic levels. The group expects 2022 full year comparable operating profit to be in line with the previous year. So that was all. And then next, we are really happy to take questions for us.

[Operator Instructions] And we will take our first question.

It's Jonas [indiscernible] from OP Markets. I have a couple of questions. Firstly, on the gross margin of H2, it looks like gross margin weakened quite a lot almost by 4 percentage points even though the share of own products grew. So could you perhaps elaborate a little bit this and the drivers behind it.

Okay. Do you want to present your second question also, should we take them?

Let's take them one by one. I actually have a few more.

Okay. Good. Yes. So you are probably referring to the operating margin for the second half of the year. So as explained here, so the seasonality shift in -- between the first and second half of the year was big. And there was different type of seasonality by region and by product categories and also by also some impacts on summer and winter fishing. That was kind of on the sales shift between the year halves. But secondly, this applied also to some extent, to operating expenses. Basically, what -- not investments as CapEx, but cost investments were done in first and second half of the year. So these factors explain the difference in the operating margin for first and second half of the year.

Okay. And what kind of role did cost inflation have in the margin development of Stage 2? Did you increase prices to offset that or was the [ where ] price is sticky, how should we think about it?

Yes. We have experienced cost inflation mainly in 2 areas. First of all, the freight costs have increased compared to previous levels. And secondly, the sourced products mainly from Asia. There, we have seen cost inflation. And the pricing environment has been kind of good, and we have been able to push through price increases in the areas where it has been needed.

Okay. So have you compensated for the cost inflation fully or just partially?

There is kind of a couple of elements to this. One is the timing aspect that, of course, the cost increases and the price increases in our business because we tend to have fixed contracts for 1 year. So the price increases are not kind of going out at the same time when the cost increases are coming in as how products are not priced kind of on a daily or weekly basis. But overall, the big picture is that, that we are able to offset cost increases.

Okay. Great. And then moving on to retailer inventories. I'm just wondering what kind of visibility do you have on the inventory levels of your retail partners as any retailers seem to have increased their inventories in order to secure supply? So I'm just curious if what kind of visibility do you have on those at the partner?

Well, we -- just kind of a general answer to that one. We see no destocking in retailer trade at the moment in our key markets going into 2022 fishing season. Demand is still on a high level, and I believe that is what we were planning for when we were building up inventories coming into the 2022 fishing season that is to satisfy the high ongoing market demand.

Right. But at the same time, you were saying that you expect demand to normalize gradually over the year. So wouldn't that basically imply that at some point of the year, retailers will start destocking and that will be -- could be a headwind for you in 2022. Do you see the risk?

I mean, a couple of aspects to this. So we expect, as said, to see a normalization in the market but it's a bit more complicated than that because of the supply chain issues are kind of impacting different regions and categories differently. For example, for us, it's a different world in Rapala lure business, where we have own factories, and we control pretty much the whole value chain. And then again, for the for the sourced products where we rely on subcontractors, the supply chain and the value chain act in a different way.

Okay. And still on the guidance, you have a guidance for adjusted EBIT, but you don't have a guidance for sales. So can you talk a little bit about your expectations in 2022? How should we think about it? Is it so that you're basically expecting the uptake in Okuma's sales to compensate for the normalizing demand of fishing here?

Yes. So as you said in our guidance, we are not disclosing or giving an estimate on top line.

[Operator Instructions] We will now take the next question.

Sebastien here from Quaero Capital. I have a couple of them, and please, I would like to ask them one by one. First, I would like to get your comment on your second half because most of your comment was for the full year. And as you said, there is a big swing between H1 and H2. And you are very happy of your full year results. But what's your view about the second half?

I think we -- our second half, we are equally as happy for second half as for the full year here. And I said several times, so there were really exceptional swings between the first and second half of the year. So we are as I said we're very happy both with the full year numbers and the second half numbers.

But looking at the market reaction and your share price, and I suppose that you look at it too, the market is not really agree with you and the things that the second half is disappointing.

We cannot, of course, comment on the stock market or the market reaction, all market parties make their own conclusions.

Well. Okay. Looking at your different geographies and especially starting with North America. The second half, your sales decreased compared to second half last year. When we look at the importation of fishing tackle in the U.S., which we are booming in H2 2021 and also looking at your listed competitors who make a very strong H1 and H2. So could you explain us your loss of market share in North America?

I wouldn't be talking about losing market share. I come back to this comment of the seasonality swings and to remind you that the first half of 2020, our warehouse was closed for several weeks. And also second half of 2020 was very exceptional compared to a typical second half because the deliveries -- there were a lot of deliveries in first half of 2020 that we were not able to make because of the warehouse closure and those were done in the second half of 2020. And I would say also the 3 different topics. One is how much fishing goods fishing tackle are imported in U.S., that's a different thing compared to the sale of fishing tackle to retailers. And then a third thing is the sale of fishing tackle out from retailers in the U.S. So those are 3 different metrics.

Just to second, Jan-Elof's comments there, we're not losing market share anywhere. We are -- on the contrary, we are strengthening our marketing positions. I would say basically all over the world. It's on a high level. We're winning pegs. We're winning market shares. We're winning sales pace in the retail environment, and we're coming in strong into the 2022 fishing season. So no losing of market shares.

Okay. It's very reassuring to hear that. But I'm not sure to understand why importation of fishing tackles are very different of what your dealers are stocking and so your revenue because you recognize revenue when you sell to dealers and then dealers recognize revenue when they sell to end customers.

Warehousing and logistics time in the country plays a big role here. If you import, for example, in June to U.S., you sell it to retailer in July, then it's, of course, already a different period.

Okay. So presumably, you.

If you have -- sorry, go ahead.

Should I understand that you have a big warehouse in the U.S. where you are filling up inventories?

Well, I think the only thing you could kind of analyze within the numbers is that we have the open water sales window, and that one falls right in between the first half year and second half year. And I think what we did there is to that explains the kind of the shift. If other fishing companies that you're comparing with are not as strong. You would see other also, we are in freshwater versus cold water, saltwater fishing segment. But the way our segments are falling within -- if we're talking U.S.A. in particular. It's just on the day or the week there, if it falls in the first half or in the second half. And I think that explains the kind of the large swing. There were large quantities of stock that went into the market there, resulting in some of the swing. And to comment on the -- our business model in the U.S., so we have a very good inventory warehouse in U.S. with a lot of items to be able to service our customers on a very, very, very, let's say, very good levels to our customers. So we are carrying a lot of inventory in the United States to be able to deliver in short delivery times to our customers' products. Also, several of the U.S. retailers, they have penalties in effect, and I think we were able to a little bit negotiate on those being able to mitigate perhaps with some delivery is coming in a little bit late in the beginning of the year and then kind of ramping up towards the end of the year in order to kind of mitigate those kind of -- to keep our customers very happy as the demand remains high.

Okay. But if you have a lot of goods in your warehouse in the U.S., it means that the inventories at dealers level are already quite full.

No, no, no.

No, that would not be our interpretation. What I commented on earlier is that retailers are nervous that they will not get enough stock and have asked us to provide stock earlier, and this is what we what we plan for in 2020, end of 2021 in order to come in with high inventory levels to kind of get the shipments out early in the shipment window as we're entering the -- both the -- sorry, the ice fishing season and in general, the kind of the open water fishing season, in particular, in the United States.

Okay. But then we're still on the U.S., it makes your full year revenue in the U.S. quite low comparing to the market. Even, if you say you are gaining market share. There is something I can't understand. When I see a booming U.S. market and your figures. Okay, you grow in 2021, but comparing to the data we gathered and what the market -- the figures from the market we've seen, you grow much lower.

Well, I'm not sure what data that you're looking at, but you need to break it down a little bit further. There could have been 1 or 2 competitors growing faster than us, but it could also be that those competitors that you're comparing against are very heavy into rod and reel that they've been able to satisfy demand of entry level rod and reel combos, et cetera, and getting additional kind of no sales in that way. We are building up our portfolio in rod and reels now. And that could perhaps explain if you see some 1 or 2 competitors growing stronger than what we did in North America. I think that will be my comment on that.

So just to remind, so we are heavy on hard bodied lures in U.S., and I don't -- and that's the reference point where most of -- let's say, our U.S. top line should be mostly reference benchmarked against.

Okay. And for the rest of Europe, with France, it's probably the main market in this area against the second half number showing a revenue decreasing by minus 12% is disappointing. We understand that last year. You continue to sell some Shimano's products, but the swing because between H2 this year and H2 last year, especially when we know that the market is growing fastly is quite low. Could you please give us more color about it?

Yes. Very simple answer. So as you said last year, we carried Shimano in most or all the big markets in Rest of Europe, which we did not do this year.

Perhaps to shed some light on that. In some of our units, the sales of Shimano has been very high, even up to a proportion of 70% to 80% of the sales. So losing that while still kind of being able to compensate for it. I still think it's a remarkable achievement.

And so what was your growth for Group Products, so excluding Shimanos in Rest of Europe in H2.

We're not disclosing that exact figure.

Have you grew.

Yes.

Yes.

Single digits, double digits?

Are you -- so Group Products has been growing in rest of Europe in 2021.

And in second half.

We are not disclosing the group product growth per region per year halves.

Okay. I don't want it for all regions, but looking at your figures of minus 12% in rest of Europe, it may be useful that you gave more explanation. And maybe you explained that the decrease is mainly due to Shimano's products. But could you help us to understand the comparison basis and how your own product has developed in this area?

I will stick to my earlier comment that the overall development in Rest of Europe in second half of the year has a lot to do with exiting Shimano in 2020.

Okay. And so now switching to profitability level. Last year, you made a great EBIT margin on your own product for the second half with a calculated EBIT margin over 17%, 17%. When this year in the second half for your own products EBIT margin decreased to 7%. So could you explain the swing in your profitability of EBIT margin, knowing that your group product sales were flat?

This has to do with the cost. The fixed cost allocation between different -- the cost -- the fixed cost base of the total group, how that has been allocated to the different segments because, as you know, a large part of our fixed costs are only indirectly tied to the segment and directly kind of general expenses. And secondly, also, as we have explained, there have been swings, and there have also been swings between product categories, which could also have different margins.

Now it's quite unusual to shift costs from one segment to another year-on-year, but yes, let's say. And so could you help us understand which products are the better contribution to your product mix and your profitability and which one where may be lower?

I'll give a general comment. And if we think about the value chain in the product categories where we own a larger share of the value chain, of course, brings us higher margins and the categories where we have a shorter ownership of the value chain lower. Maybe I'll keep the answer on that general level.

Okay. And what we could think that you supported a lot of costs regarding the launch of 13 Fishing than Okuma, and that may explain the shift in profitability. But hearing your answer, it has no real impact.

We have had, of course, expenses in the second half of the year preparing for the launch of Okuma in Europe and Russia.

And could you help us to understand the expenses related to that?

We are not disclosing at that detailed level.

Yes. But you understand that we have to understand what's going on what you are investing in brands, what you are investing in products? And what do you expect for future growth for these products?

As I said, so of course, the PD expenses and marketing expenses, especially marketing expenses are recorded to the P&L when the marketing campaigns are executed and so on. And of course, the idea of these are to benefit current periods, but also future periods and especially in new introductions, such as Okuma, Europe and Russia.

And you mentioned during the presentation that your expectation for Okuma is very high, and it's the main growth driver for the next coming years. But could you help us to understand what kind of revenue you are targeting?

So we are not disclosing any number targets on that business.

Sorry, I think we have some other -- sorry, we have some other guys who want to ask questions. So can you present your last question?

No, no. I will let the other people ask their question and then I will come back.

Thank you for your questions.

[Operator Instructions] We will now move to the next question.

Olli Vilppo from Inderes. I can understand that the shift between the half periods of the sales. But can you still work in detail why there was more costs in the second half of the year because I think the market don't understand how the P&L shifts and how the costs move? What happens as the revenue declined by EUR 10 million and the EBIT declined EUR 11.5 million in the half 2?

Yes. This has to do with 2 -- I would say, 2 kind of key issues or key topics here. One is what we just touched upon is this general expenses, fixed costs, what has been our fixed cost profile in these 2 years and especially shifting those also between the year halves. And second is the different gross margins of different product groups. So those 2 things are explaining the shift in the cost basis.

Okay. And what has changed in the fixed cost profile?

This is related to -- maybe the best example to clarify this is the preparation for 2022 in the growing new businesses. So of course, we have experienced in '21 expenses. We have had -- we have incurred expenses in the second half of '21 already, for example, for the launch of Okuma Europe and Russia, where we're prepared to do a major big launch as one example.

Okay. Is there any other examples?

Maybe, this is the best.

And we don't have any further questions at this time. [Operator Instructions] We will move to the next question now.

Yes, this is Marc Saint John Webb. I just had a question on your indications given for 2022 for stable profitability, which I'm a little bit difficulty to understanding in that you've explained that the fishing -- the sports fishing market is very solid that you've built up inventories at the end of the year, anticipating a strong start to the year that you're launching Okuma right now that 13 Fishing is going to be accelerated and rolled up around other European markets. And at the same time that you've got new products being launched under the Rapala brand in terms of -- and rod and reels, et cetera. I'm just trying to understand why -- what is going to compensate that at the profitability level? Why is -- profit's going to remain flat if all these initiatives are going to be delivered in 2022, which as well will benefit from the fact that as you explained that in terms of you had rising costs, you've raised prices, but on yearly contracts and therefore, those price rises should come in, in 2022 and improve margins. So a little bit of a loss to understand why profitability is expected to be flat in 2022.

Thanks for the question. First of all, we are also continuing to exiting Third Party businesses in 2022, which, of course, has an impact. And secondly, we are investing -- we are very confident, for example, in the Okuma, Europe and Russia business, extremely confident about the business, and we are investing significant amount of marketing resources to that launch to build it very solidly over the years to come. So those are a couple of points explaining the situation.

So I still don't understand. I mean you would have to spend quite a number of million marketing spend on Okuma to compensate all the positive dynamics that are likely to happen. You've already explained for 2022. Can you explain what other factors are going to compensate those dynamic factors to lead to a flat profitability this year?

Yes. I'll come back to the decreasing Third Party Product portfolio, which is one important part of this as well. And the market normalization will be different by region and by product category. So despite the fact that we are growing or investing or having high expectations in certain categories -- certain other categories may witness a decrease.

As far as I understand from your accounts, the profitability on third party is so low that, that impact will be practically 0 this year.

Here, I have to actually remind of something that has been discussed in earlier years. So the operating profit margin for the Third Party business takes into account allocations of fixed cost of the group. So for example, headquarter costs, as an example, are allocated to different segments. But of course, those are very fixed and sticky costs. This means that the Third Party business that we have, of course, have a good gross margin. And when the sales go down, that gross profit also goes down in euros. And we still, of course, have those central fixed cost that we allocate to the category. So when evaluating the bottom line impact on the total group by exiting a third-party brand, the impact is not only, of course, the operating margin of that business, but rather the gross margin of that business. And those businesses have, of course, a good positive -- have had a good positive gross margin.

And there are no further questions. So I would like to turn the call back to our host for any additional or closing remarks.

Yes. Thank you very much for everybody for this very active participation of our telephone conference. So we will be back with our 6 months numbers on July 14. Thanks again. Thank you very much, and hope to be seeing everybody.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.