CEO's review 5th of May 2021

During the first quarter of 2021, we experienced exceptional demand in all of our key markets and product categories. The whole Harvia team and especially operations and supply chain have done amazing work in ramping up production volumes and productivity.

Tapio Pajuharju, CEO

Traditionally, the first quarter is very good in the sauna and spa industry. During the first quarter of 2021, we experienced exceptional demand in all of our key markets and product categories. Despite incremental challenges caused by the pandemic and limitations in availability of key raw materials and componentry, the whole Harvia team and especially operations and supply chain have done amazing work in ramping up production volumes and productivity during the first quarter. The outcome is best reflected in the substantial growth in our revenue as well as in improved profitability. I would like to pass my humble and sincere thanks to everyone involved in making this happen. Great work, all of you! Thank You.

Our revenue landed at EUR 39.6 million, representing a record growth of EUR 19.2 million, or 94.6%, year on year. The impact of the EOS acquisition is clear and visible, but having said this, we remain very happy that also our organic growth was an excellent 61.9%. Altogether, the sales performance was so strong that this level brings us on par, if not slightly ahead, of the largest player in the sauna and spa market. By the same token, it is good to reinforce the management judgement regarding the sauna and spa market. According to Harvia’s estimate, the sauna and spa market is experiencing some incremental growth due to the increased awareness and appreciation of sauna and spa related health benefits. Furthermore, it is good to recognize that a part of the demand is so-called advance demand.

On top of the strong performance in sales, we continued our robust improvement of profitability, even somewhat ahead of plans. The first quarter’s operating profit was EUR 11.0 million (operating profit margin 27.9%), which represents a staggering growth of 255% year on year.

Volatility in the availability of key raw materials has caused some changes in our sourcing policy, and we have been gradually increasing the stock levels of critical raw materials and components. This is somewhat visible in our net working capital. The volatility is expected to continue for the time being. We have also seen substantial volatility in the prices of some key raw materials like steel, lumber, and electronics. We have analyzed the situation in great detail, and with good cooperation with our customers and partners. We have implemented an action plan where we are landing on a balance between incoming and outgoing pricing. The solid and strong demand has led to a situation where we have prolonged some of our standard delivery times. I am very pleased with how this has been discussed with and received by our customers.

EOS is becoming an integral part of the Group, and both the integration process and collaboration are progressing well. Despite the pandemic, the sales of EOS products in new markets are progressing, and we expect to receive product approvals for the North American and Asian markets for selected flagship products as planned before the end of 2021.

Regarding our operational capacity, we have been able to finalize the new machinery installations at the Renick facility in the US, at the sauna factory in Romania, as well as in the heater manufacturing in Muurame, Finland. During the first quarter, the expansion plans for Muurame and the acquisition of a new production facility in Lewisburg, West Virginia in the US have been finalized. We have been adding new labor as well as new flexible shift models in order to further increase the available capacity. For Harvia, the mid-term demand seems to remain strong, and we may need to consider further expanding our capacity, especially in the sauna category.

During the remainder of 2021, we will continue to be fully focused on the cornerstones of our strategy by working on increasing the value of the average purchase, geographical expansion, and continuous improvement of productivity. M&A activity in the sauna and spa market increased throughout the year 2020. In line with our strategy, we continue to seek opportunities to grow in the sauna and spa market also through M&A.

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