CEO's review

In the third quarter of 2020, Harvia’s business continued to be very strong. The entire Harvia personnel have, together with our partners, stretched to an outstanding performance to ensure that our customers and their customers have been able to enjoy the natural well-being and relaxing moments provided by the sauna. My warm and special thanks to you all!

During the third quarter, Harvia’s revenue increased strongly by 63.8 percent to EUR 28.0 million. At comparable exchange rates, the increase was 68.1 percent. The impact of the EOS acquisition on the third quarter revenue was naturally significant, but I am especially satisfied with the fact that the share of organic growth was more than 35 percent in a situation in which the markets have reacted in very different ways to the COVID-19 situation.

Revenue growth was good in all product groups in the third quarter. It was particularly strong in the control units (+98.2%) and sauna heater (+61.4%) product groups. Despite the strong and volatile demand, we have been able to maintain good customer service even if in some cases, delivery times have been longer than normal. The sauna rooms product group continued its strong growth as well, and demand has at least temporarily exceeded our expectations. The investment decision made in the second quarter to increase the production capacity in the USA with AHS was made at the optimal time. The installation stage of the incremental production equipment investments at the Romanian sauna factory is commencing just ahead of the high season. The market situation in the Arab countries, Asia as well as in Russia remained challenging, which continued to be reflected in the sales of steam generators.

Nearly 75 percent of our revenue already comes from international markets despite the strong growth of the Finnish market (+22.5% in the third quarter). During the third quarter, revenue growth in Germany and other European countries was particularly strong. The organic growth in the German market was 78.5 percent, and with the sales of EOS included, the growth amounted to 224.7 percent. Revenue continued to grow very favorably in North America, and year-on-year growth was 82.9 percent.

Our business performance has been very good, and we continued to improve our profitability in the third quarter. Our adjusted operating profit increased to EUR 6.1 million, representing an increase of 108.2 percent year-on-year. The adjusted operating profit for January–September increased considerably to EUR 13.7 million, exceeding the adjusted operating profit of the entire previous year. Our relative profitability has also developed favorably, and our adjusted operating profit margin increased to 21.8 percent in the third quarter from 17.2 percent in the corresponding period last year. Relative profitability for January–September also improved by 3 percentage points to 21.2 percent.

In the longer perspective, COVID-19 still does not seem to have a significant impact on the sauna and spa market as a whole. Differences between markets remain very large and partly even local. For Harvia, the total impact has been exceptionally favorable and in certain markets, interest and activity has even been on a remarkably high level. However, we estimate that some of this interest and demand is so-called advanced demand. The professional channel and partly also the DIY channel are showing signs of normalizing. Based on this, we assume that there have been no significant changes in the long-term growth drivers in the sauna and spa market.

Our supply chain has been very agile and able to respond efficiently to the growing but very volatile demand, all of this despite the additional challenges brought on by the COVID-19 pandemic. Continuous improvement of productivity has proceeded according to plan. The fast demand growth has caused somewhat longer than normal delivery times and we have gradually increased capacity in all our production units. We have also recruited approximately 40 new employees, the majority of which to our heater and component factory in Muurame. Furthermore, we remain prepared for higher than normal volatility in demand continuing, and regarding critical components, we have increased buffer stocks in order to maintain needed agility.

It can be said that operations continued in exceptional circumstances in the third quarter as the COVID-19 pandemic was prolonged, and measures to fight the pandemic were further reinforced towards the end of the review period. At the same time, we are prepared for the possibility that impacts associated with COVID-19, such as potential quarantines, may further extend our delivery times. I am very happy to be able to say that we have succeeded in keeping Harvia’s personnel healthy and fit for work.

The integration of the German EOS Group has proceeded well and according to plan, although the majority of the integration process has been carried out completely in virtual format. The common shared view of the situation and the good team spirit have significantly supported this favorable development.

Naturally, we will keep our eyes determinedly on the cornerstones of our strategy and will implement the strategy with a focus on increasing the value of the average purchase, geographical expansion, and continuous improvement of productivity. In addition to organic growth, we continue to actively explore opportunities to grow in the sauna and spa market through acquisitions, in line with our strategy.

Our strategy
Our key strategic priorities to achieve our objectives
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Increasing the value of the average purchase
Geographical expansion
Improving productivity