Harvia Plc, Interim report 7 November 2024 at 9:00 a.m. EET
Harvia Q3 2024: Growing both organically and through M&A, strong profitability
This release is a summary of Harvia Plc’s Interim Report January–September 2024. 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
July–September 2024:
- Revenue increased by 14.0% to EUR 38.7 million (34.0). At comparable exchange rates, revenue increased by 14.9% to EUR 39.0 million. Organic revenue growth was 7.9%.
- Operating profit was EUR 8.3 million (6.8), making up 21.4% (20.0%) of the revenue.
- Adjusted operating profit was EUR 8.9 million (6.9), making up 22.9% (20.3%) of the revenue. At comparable exchange rates, the adjusted operating profit was EUR 9.1 million (23.3% of the revenue).
- Operating free cash flow amounted to EUR 3.4 million (8.3) and cash conversion was 31.7% (98.7%). The increase of inventories and investments decreased the operating free cash flow and cash conversion.
- In July, Harvia signed and closed an agreement to acquire 100% of the shares of ThermaSol Steam Bath LLC, a leading manufacturer of high-end steam showers and steam rooms in the United States. The financial figures of ThermaSol have been consolidated with Harvia’s figures starting from 31 July 2024.
January–September 2024:
- Revenue increased by 11.8% to EUR 124.3 million (111.1). At comparable exchange rates, revenue increased by 12.1% to EUR 124.6 million. Organic revenue growth was 9.6%.
- Operating profit was EUR 27.1 million (23.8), making up 21.8% (21.4%) of the revenue.
- Adjusted operating profit was EUR 28.4 million (24.1), making up 22.8% (21.7%) of the revenue. At comparable exchange rates, the adjusted operating profit was EUR 28.6 million (22.9% of the revenue).
- Operating free cash flow amounted to EUR 20.0 million (29.1) and cash conversion was 60.0% (101.2%). The increase of inventories and investments decreased the operating free cash flow and cash conversion.
- Net debt amounted to EUR 61.8 million (40.6), and leverage, calculated as net debt divided by last 12 months’ adjusted EBITDA, was 1.4 (1.1).
- Equity ratio was 44.8% (47.7%).
- Earnings per share were EUR 1.01 (0.86).
Key figures
| EUR million | 7-9/2024 | 7-9/2023 | Change | 1-9/2024 | 1-9/2023 | Change | 1-12/2023 |
| Revenue | 38.7 | 34.0 | 14.0% | 124.3 | 111.1 | 11.8% | 150.5 |
| EBITDA | 10.1 | 8.3 | 20.8% | 32.1 | 28.5 | 12.6% | 39.3 |
| % of revenue | 26.0% | 24.5% | 25.8% | 25.6% | 26.1% | ||
| Items affecting comparability * | 0.6 | 0.1 | 453.7% | 1.3 | 0.3 | 308.5% | 0.6 |
| Adjusted EBITDA ** | 10.7 | 8.4 | 26.3% | 33.4 | 28.8 | 16.0% | 39.9 |
| % of revenue | 27.5% | 24.8% | 26.9% | 25.9% | 26.5% | ||
| Operating profit | 8.3 | 6.8 | 22.1% | 27.1 | 23.8 | 13.6% | 33.0 |
| % of revenue | 21.4% | 20.0% | 21.8% | 21.4% | 21.9% | ||
| Adjusted operating profit ** | 8.9 | 6.9 | 28.8% | 28.4 | 24.1 | 17.6% | 33.7 |
| % of revenue | 22.9% | 20.3% | 22.8% | 21.7% | 22.4% | ||
| Basic EPS (EUR) | 0.29 | 0.24 | 22.0% | 1.01 | 0.86 | 17.2% | 1.25 |
| Operating free cash flow | 3.4 | 8.3 | -59.5% | 20.0 | 29.1 | -31.3% | 44.6 |
| Cash conversion | 31.7% | 98.8% | 60.0% | 101.2% | 111.7% | ||
| Investments in tangible and intangible assets | -1.5 | -0.5 | 194.7% | -4.3 | -1.7 | 156.9% | -3.1 |
| Net debt | 61.8 | 40.6 | 52.2% | 61.8 | 40.6 | 52.2% | 37.6 |
| Leverage | 1.4 | 1.1 | 1.4 | 1.1 | 0.9 | ||
| Net working capital | 42.8 | 35.9 | 19.3% | 42.8 | 35.9 | 19.3% | 36.1 |
| Adjusted return on capital employed (ROCE) | 48.5% | 42.5% | 48.5% | 42.5% | 44.2% | ||
| Equity ratio | 44.8% | 47.7% | 44.8% | 47.7% | 51.0% | ||
| Number of employees at end of period | 675*** | 600 | 12.5% | 675*** | 600 | 12.5% | 605 |
* Consists of items outside the ordinary course of business, relating to the Group’s strategic development projects, acquisitions, business divestments, restructuring and loss on sale of fixed assets, and affecting comparability.
** Adjusted by items affecting comparability.
*** Includes the personnel of ThermaSol Steam Bath LLC, totaling 38 employees on 30 September 2024.
Financial targets and outlook
The company has set long-term targets related to growth, profitability and leverage. In May 2024, Harvia’s long-term financial targets were adjusted to reflect the company’s growth ambitions. Harvia targets an average annual revenue growth of 10%, an adjusted operating profit margin exceeding 20%, and a net debt/adjusted EBITDA below 2.5x. The future impacts of changes in IFRS accounting standards have been excluded from the net debt/adjusted EBITDA ratio target.
Harvia does not publish a short-term outlook.
Harvia’s dividend policy is to pay a regularly increasing dividend with a bi-annual payout.
Matias Järnefelt, CEO:
In the third quarter of 2024, Harvia grew both organically and through the acquisition of ThermaSol. At the same time, we maintained our strong profitability.
Our revenue in the third quarter amounted to EUR 38.7 million, increasing by 14.0% from the comparison period. As in several previous quarters, the revenue growth was driven especially by our good sales performance in North America as well as in Asia-Pacific and the Middle East. In addition, the acquisition of ThermaSol boosted our revenue. Organic growth was 7.9%.
The market conditions in the July–September period were similar to the first half of the year, with the strongest market momentum in the regions outside Europe. In North America, the market demand stayed on a high level, and we achieved good sales performance in all product groups. We succeeded especially well in the sales of heaters and other sauna components while we also continued to grow the sauna solutions sales in North America. In addition, the acquisition of ThermaSol increased especially our steam product sales. In APAC & MEA, we continued our systematic work to drive growth in the strategically most important regional markets and again achieved solid sales results.
In Continental Europe, the market continued its slow recovery, and we succeeded in growing our sales in the region. We delivered good growth especially with our EOS branded products that are aimed at the professional and more high-end segments. In Northern Europe, the market remained challenging, and our sales were below the comparison period. The difficult market conditions in Northern Europe also impacted the sales of saunas and Scandinavian hot tubs on the Group level. Harvia’s hot tub demand historically has come primarily from Northern Europe and is overall more sensitive to consumer confidence than the replacement demand of heaters.
The third quarter’s adjusted operating profit amounted to EUR 8.9 million, increasing by 28.8% from the comparison period. The adjusted operating profit margin amounted to 22.9% of revenue. Our profitability was supported by the increased sales volumes, good sales mix, and the successful actions in supply chain management. Harvia’s operative performance and service level were overall solid during the quarter, and I want to thank team Harvia and our partners for their ongoing good work.
In order to improve our service level, we decided to increase our inventories especially in the United States before the coming, traditionally high-demand winter season. In addition, we made several add-on investments into our production facilities to support the continuous improvement of our operational efficiency and future growth. These activities reduced our operating free cash flow and cash conversion, which were below our typical high level during the quarter. In the third quarter, Harvia’s operating free cash flow amounted to EUR 3.4 million, and cash conversion 31.7%.
Profitable growth is a key priority for Harvia. We execute activities systematically to drive continued organic growth as well as pursue opportunities for value creating acquisitions in line with our strategy. In July, we announced and closed the acquisition of a U.S. steam solutions manufacturer ThermaSol, which strengthened our position in North America and increased our capabilities especially in steam and in digital solutions. The acquisition is also well aligned with our strategy and aim of being an active industry consolidator. The acquisition increased Harvia’s leverage to 1.4 at the end of the quarter, which was still well below our long-term financial target of under 2.5. Already after a few months, I can happily say that the expanded Harvia team in North America is working well together, and we are eager to capture all the growth opportunities and cost synergies that the acquisition is estimated to bring us.
We continue on our growth path and strengthen our position as an industry leader also outside North America. In APAC & MEA, we continue to focus on winning in strategically important markets, such as Japan, China and Australia, where we see the largest potential for Harvia. In Europe, improving sales performance is highly important for us, even if the market especially in Northern Europe has been challenging for a long time.
To support our growth, our innovation pipeline is focused on providing new, exciting products to the market. During the third quarter, we completed the development process of several innovations, such as the woodburning version of our top-selling heater model Cilindro, as well as the world’s first solar-powered outdoor electric sauna. This Kirami FinVision Tile sauna is a great example of the work we are doing to create more energy-efficient and sustainable sauna solutions. Both of these products were launched to the public in October and will be widely present in our tradeshows during the fourth quarter, with sales starting in early 2025.
Harvia has clear potential for long-term profitable growth. The global sauna market remains attractive, and Harvia is well positioned, even more after the acquisition of ThermaSol, to shape the market as an industry leader. This includes growing organically, but also through M&A, when the time and opportunity are right.
Press conference on financial results
Harvia will hold a webcast for analysts, investors and media on 7 November 2024 at 12:00 p.m. noon EET. The conference will be held in English. Harvia’s CEO Matias Järnefelt and CFO Ari Vesterinen will host the event. The webcast can be followed at https://harvia.videosync.fi/q3-2024.
A recording of the webcast will be available after the event on the company’s website https://harviagroup.com/investor-relations/.
For more information, please contact:
Matias Järnefelt, CEO, tel. +358 40 5056 080
Ari Vesterinen, CFO, tel. +358 40 5050 440
Harvia is one of the leading companies operating in the sauna 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 market of both private and professional customers.
Harvia’s revenue totaled EUR 150.5 million in 2023. Harvia Group employs over 600 professionals in Finland, United States, Germany, Romania, China and Hong Kong, Austria, Italy, Estonia, and Sweden. The company is headquartered in Muurame, Finland, adjacent to its largest sauna and sauna component manufacturing facility.
Read more: https://harviagroup.com
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