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Precor, Salomon Boost Amer's 1Q Revenues

MAY 02, 2006 -- (1:45) Amer Sports’ 1Q net sales grew by 8% to €417.4 million (€385.0 million in 2005). Comparable net sales in local currencies were up 3%. The group lost €2.4 million vs a profit of €14.2 million.

Amer said the three-year turnaround initiative to improve profitability kicked off at Salomon last December is progressing in line with plans.

CEO Roger Talermo commented: "The trend in the sports and leisure markets was favorable in the first months of the year. The winter sports equipment and apparel trade in particular benefited from the good winter season. Amer Sports’ net sales grew by 8% in January-March. Of the business segments, Precor and Salomon saw particularly good growth.

"Our key objective in 2006 is to pave the way for improving the profitability of Salomon. In December last year, we started up a three-year turnaround initiative which focus during current year is on codetermination negotiations in France and the restructuring of industrial production. The initiative is proceeding in line with expectations and the estimated schedule.

"The sales of the Golf Division have not measured up to plans. One of the factors that cut into sales was the focus on the major customers in the US in line with the new distribution strategy. The effects of measures to improve profitability are not as yet fully evident in the result."

Results by business segments follows (Salomon's 1Q05 results are shown on a pro forma basis as if it were owned by Amer throughout 2005):

The trend in Salomon’s 1Q sales was good. Comparable net sales in local currencies rose 12%. The breakdown of net sales was as follows: Winter Sports Equipment, 35%; Apparel and Footwear, 41%; and Mavic, 24%. The Americas generated 21% of net sales, EMEA 71% and Asia Pacific 8%. Sales rose in all market areas.

Salomon’s EBIT was €-22.4 million. Due to seasonal variations, Salomon’s deliveries of winter sports equipment largely take place in the latter half of the year, for which reason the 1H are in the red.

Net sales of Salomon’s Winter Sports Equipment rose by 12% in local currencies. Sales increased thanks to favorable winter conditions in almost all market areas. Of the product groups, growth was especially seen in sales of cross-country skiing equipment.

Net sales of Apparel and Footwear grew by 12% in local currency terms. Net sales growth was boosted by excellent winter conditions and Arc'teryx’s robust product portfolio. The net sales of the bicycle component manufacturer Mavic grew by 13% in local currency terms.

Wilson’s comparable net sales in local currencies declined by 3%. The breakdown was as follows: Racquet Sports, 37%, Team Sports, 42% and Golf, 21%. Of the net sales, the Americas generated 69%, EMEA 19% and Asia Pacific 12%. Sales declined 1% in the Americas, 3% in EMEA and 13% in Asia Pacific. Wilson’s EBIT was down 7% to EUR 24.3 million. The decline was due to weaker
than expected earnings of the Golf Division.

Racquet Sports continued to perform well and retained its leadership in tennis. Net sales of Racquet Sports increased by 2% in local currencies. The development of Team Sports remained good. Net sales were up 8% in local currencies. Sales of baseball equipment grew extremely well. Sales growth was seen in other product groups as well.

Sales of the Golf Division fell short of objectives, and its net sales were down 26% in local currencies. Focusing on the major customers in the US in line with the new distribution strategy cut into the net sales of the Golf Division. In December 2005, the Golf Division kicked off the realignment of its organization to increase operational efficiency and lower costs. The effects of the cost cuts and the reorganization measures are not as yet fully evident in results.

Precor’s year got off to a very good start. Net sales increased by 15% in local currencies. Of the net sales, the Americas generated 82%, EMEA 12% and Asia Pacific 6%. Sales rose by 14% in the Americas, 16% in EMEA and 18% in Asia Pacific.

Although the trend in the global demand for fitness equipment was positive,growth in the number of fitness clubs leveled off in North America. Precor’s sales to fitness clubs outperformed average growth in the field. The growth was fueled particularly by Precor's ability to deliver a "total product" that addresses commercial facilities' business needs.

The market for elliptical cross-trainers for home use grew. Precor will continue to bolster its position in home product categories. Precor’s EBIT grew substantially to EUR 12.0 million. EBIT increased due to growth in sales and the improvement in the profitability of units supplying strength equipment and entertainment systems.

Atomic’s net sales declined by 13% in local currencies. Of the net sales, the Americas generated 22%, EMEA 75% and Asia Pacific 3%. Sales declined by 13% in the Americas, 12% in EMEA and 26% in Asia Pacific. The distribution of Asics products, a non-core category for Atomic, ended in
Austria, depressing net sales €5.2 million. Exclusive of the effect of Asics, net sales would have risen by 8%.

Toward the end of the winter sports season, the result of operations was a loss of €9.4 million (-8.4%). Atomic and Salomon will continue to engage in close cooperation to maximize winter sports synergies. The major synergy potential stems from the efficiency-boosting measures deployed in the production of alpine and cross-country skis and alpine boots.

Suunto’s net sales declined 9% in local currencies. Of the net sales, the Americas generated 38%, EMEA 51% and Asia Pacific 11%. Sales declined 19% in the Americas and 3% in EMEA, but rose by 5% in Asia Pacific. Sales of diving and wristop computers, which are part of Suunto’s core business, developed favorably. Their sales accounted for 66% of Suunto’s net sales, which were weakened by the decline in sales of diving suits and watersports apparel.

Sales of Suunto’s sports instruments were weakened during 2H05 by a lack of PCBs caused by a fire at a supplier’s premises. There were still delivery constrains which weakened sales in Q1 2006.
EBIT declined by 35% to €1.1 million.

Amer Sports is the world’s top sports equipment company. Amer estimates that the trend in demand for sports equipment will be favorable in 2006. In 2006, net sales are expected to be €1.8 billion (2005: €1,732 million). EPS in 2006 are expected to come in at €90–€1.05. 2006 is a transitional year for Salomon. Substantial earnings improvements are expected in 2007 and 2008.


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Sporting goods industry
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Precor Inc.
Sales of the Golf Division
Racquet Sports

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winter sports
winter sports equipment
comparable net
business segments

Roger Talermo

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