Harvia’s Financial statements bulletin 2022: Solid performance in challenging market environment

Stock Exchange Release | 9 February 2023

Harvia Plc, Financial statements bulletin, 9 February 2023 at 9.00 a.m. EET

This release is a summary of Harvia Plc’s Financial statements bulletin 2022. The complete report is attached to this release as a pdf file. It is also available on Harvia’s website at https://harviagroup.com/.  

Highlights of the review period

October–December 2022:

  • Revenue decreased by 18.0% to EUR 38.1 million (46.5). At comparable exchange rates, revenue decreased by 20.6% to EUR 36.9 million. Organic revenue growth was -16.4% compared to October–December 2021.
  • International business amounted to EUR 30.8 million (38.0), making up 80.7% (81.7) of the revenue.
  • Operating profit was EUR 6.6 million (11.1), making up 17.2% (23.9) of the revenue.
  • Adjusted operating profit reached EUR 7.9 million (11.1), making up 20.8% (24.0) of the revenue. At comparable exchange rates, the adjusted operating profit was EUR 7.8 million (21.0% of the revenue).
  • Operating free cash flow amounted to EUR 15.1 million (3.8) and cash conversion was 158.9% (30.2). Harvia’s net working capital decreased by EUR 6.3 million in Q4 2022. In Q4 2021, Harvia carried out a large-scale investment program which the company financed from its cash reserves.
  • On 7 November, Harvia Plc signed an agreement to sell its 80.0% shareholding of EOS Russia to Mr. Vasilij Sosenkov. EOS Russia has not been consolidated in the Harvia Group figures as of November 2022.

January–December 2022:

  • Revenue decreased by 3.7% to EUR 172.4 million (179.1). At comparable exchange rates, revenue decreased by 7.0% to EUR 166.7 million. Organic revenue growth was -7.7%.
  • International business amounted to EUR 136.0 million (142.2), making up 78.9% (79.4) of the revenue.
  • Operating profit was EUR 34.7 million (46.6), making up 20.1% (26.0) of the revenue.
  • Adjusted operating profit reached EUR 36.5 million (47.3), making up 21.1% (26.4) of the revenue. At comparable exchange rates, the adjusted operating profit was EUR 34.7 million (20.8% of the revenue).
  • Operating free cash flow amounted to EUR 34.0 million (20.4) and cash conversion was 79.1% (38.5)
  • Net debt amounted to EUR 54.5 million (43.8) and leverage was 1.3 (0.8).
  • Equity ratio was 47.3% (42.4).
  • Earnings per share was EUR 1.45 (1.80).
  • The Board of Directors’ dividend proposal is EUR 0.64 per share, to be paid in two instalments.

Key figures

EUR million10-12/
EBITDA 8.212.7-35.6%41.252.5-21.6%
% of revenue21.4%27.3% 23.9%29.3% 
Items affecting comparability *1.40.04135.0%1.80.6182.5%
Adjusted EBITDA **9.512.7-25.0%42.953.1-19.1%
% of revenue25.0%27.3% 24.9%29.7% 
Operating profit6.611.1-40.9%34.746.6-25.7%
% of revenue17.2%23.9% 20.1%26.0% 
Adjusted operating profit **7.911.1-28.8%36.547.3-22.9%
% of revenue20.8%24.0% 21.1%26.4% 
Basic EPS (EUR)0.220.44-50.3%1.451.80-19.6%
Operating free cash flow 15.13.8294.3%34.020.466.2%
Cash conversion158.9%30.2% 79.1%38.5% 
Investments in tangible and intangible assets-0.7-3.8-81.2%-3.6-11.8-69.5%
Net debt 54.543.824.4%54.543.824.4%
Leverage1.30.8 1.30.8 
Net working capital 45.341.98.1%45.341.98.1%
Adjusted return on capital employed (ROCE)54.5%112.6% 54.5%112.6% 
Equity ratio47.3%42.4% 47.3%42.4% 
Number of employees at end of period633824-23.2%633824-23.2%

* Consists of items outside the ordinary course of business, relating to the Group’s strategic development projects, acquisitions, business divestments, restructuring expenses and loss on sale of fixed assets, and affecting comparability.

** Adjusted by items affecting comparability.

Financial targets and outlook

The company has set long-term targets related to growth, profitability and leverage. Harvia targets an average annual revenue growth of more than 5%, an adjusted operating profit margin exceeding 20% and a net debt/adjusted EBITDA between 1.5x−2.5x in the long term. The future impacts of changes in IFRS reporting standards have been excluded in the net debt/adjusted EBITDA ratio target.

The company’s management estimates that due to the special circumstances caused by the COVID-19 pandemic, the sauna and spa market experienced exceptionally high demand. The ending of advance demand in the first half of 2022 is not expected to have an impact on the long-term growth expectations of the sauna and spa market, nor on Harvia’s long-term financial targets.

Harvia does not publish a short-term outlook.

Harvia’s dividend policy is to pay a regularly increasing dividend with a bi-annual payout.

Tapio Pajuharju, CEO:

During the last quarter of the year, the impact of the Russian invasion of Ukraine, inflation and low consumer confidence continued to affect Harvia’s performance. The markets remained polarized as Central Europe, especially Germany and many of the nearby counties, was impacted the most, whereas North America as well as some of the newer sauna markets continued to enjoy solid interest and growth.

In the fourth quarter, our revenue landed at EUR 38.1 million, showing a decline of 18.0% compared to the corresponding period in 2021. On a full year basis, our revenue amounted to EUR 172.4 million with a decline of 3.7%. 

The performance of market areas was closely connected to the sales mix development during the last quarter. Electric heaters felt the heaviest impact of the European energy crisis and high electricity prices. Sauna sales were extremely strong in the United States but were affected by the low consumer confidence in Central Europe. At the same time, wood burning heaters experienced an exceptional hike in sales for the time period, which supported the overall sales especially in Finland and Scandinavia. This indicates that even in demanding economic conditions, consumers greatly appreciate sauna experiences and remain agile in selecting alternative energy sources.

The fourth quarter’s adjusted operating profit amounted to EUR 7.9 million, decreasing 28.8% from EUR 11.1 million the year before and making up 20.8% of revenue. For the full year 2022, we achieved adjusted operating profit of EUR 36.5 million, or 21.1% of revenue. The market conditions have been exceptionally stormy and challenging, and team Harvia has done its utmost with excellent commitment in maintaining solid profitability. I would like to express my sincerest thanks to the whole team at Harvia and all our partners.

We have remained agile in adapting our resources and cost structure to the market sentiment. This has resulted in optimizing our cost base and rightsizing our operations in multiple operating countries and units. Our ambition continues to be to deliver above 20% operating profit margin even in the challenging business environment.

Inventory levels in our distribution channels have been gradually normalized and in general returned to normal, healthy levels. A handful of Central European e-commerce platforms still have a higher-than-normal inventory of entry level sauna heaters and equipment. Our proactive initiatives to normalize Harvia’s net working capital and especially inventories have been successful and at par with targets. Harvia’s ability to generate healthy cash flow has traditionally been strong, but in the fourth quarter, the results of our efforts are directly visible in an exceptionally high free operating cash flow of EUR 15.1 million, a major improvement from EUR 3.8 million the year before. Because of this and the normalized investments, our cash conversion landed at exceptionally high 158.9%, also a major improvement from 30.2% in the previous year.

We have been evaluating tangible and sustainable options for complete exit from Russia since the beginning of the war, also for EOS Russia. We suspended our Harvia branded operations at the beginning of March, and at the beginning of November we completed the exit by successfully divesting our remaining 80% share in EOS Russia. Closing of the transaction is subject to official approvals in Russia.

Going forward, on top of all current activities, we will continue to direct our efforts and offering to match even better the demand in the more premium and professional market, as it currently has more new opportunities for Harvia than the somewhat challenged entry-level market. While Central Europe will likely remain challenging for some time, we have and will focus our efforts more to support our solid growth in North America and in other new and strongly developing sauna markets. Additionally, we are working on addressing opportunities in enhancing the energy efficiency of sauna. Our levers to ensure solid profitability have been successfully applied, and we remain alert to address them further if needed.

While the market environment is challenging, it does not affect Harvia’s strategic cornerstones or long-term financial targets. We continue to have full focus on our strategic cornerstones of geographical expansion, increasing the value of average purchase, and improving our productivity. On top of the organic business growth path, we remain active in seeking strategic opportunities on the M&A front. Our innovation pipeline continues to deliver excellent products to the market.

The sauna and spa market has traditionally been very resilient also during economically challenging times, and the positive long-term growth outlook for sauna awareness and the sauna and spa market as a whole is intact.

Press conference on financial results

Harvia will hold a webcast for analysts, investors and media on 9 February 2023 at 11:00 a.m. EET. The conference will be held in English. Harvia’s CEO Tapio Pajuharju and CFO Ari Vesterinen will host the event. The webcast can be followed at https://harvia.videosync.fi/q4-2022-result/.

You can also participate in the conference by calling. Please register to the teleconference by using the following link: http://palvelu.flik.fi/teleconference/?id=1009973. After the registration, you will be provided phone numbers and a conference ID to access the teleconference.

A recording of the webcast will be available later at the company’s website https://harviagroup.com/investor-relations/.

For more information, please contact:

Tapio Pajuharju, CEO, tel. +358 50 5774 200
Ari Vesterinen, CFO, tel. +358 40 5050 440

Harvia is one of the leading companies operating in the sauna and spa market globally, as measured by revenue. Harvia’s brands and product portfolio are well known in the market, and the company’s comprehensive product portfolio strives to meet the needs of the international sauna and spa market of both private and professional customers.

Harvia’s revenue totaled EUR 172.4 million in 2022. Harvia Group employs more than 600 professionals in Finland, China and Hong Kong, Romania, Austria, United States, Germany and Estonia. The company is headquartered in Muurame, Finland, adjacent to its largest sauna and sauna component manufacturing facility.

Read more: https://harviagroup.com