CEO’s review

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PROFITABLE GROWTH IN THE FIRST QUARTER

During the first quarter of 2019, the demand for sauna and spa products remained steady, and thanks to the systematic implementation of our strategy, we were able to improve our competitiveness. In the sauna and spa market, the first quarter of the year is important and now we faced comparison figures from Harvia’s all-time record quarter in 2018. Revenue for the first quarter increased significantly (16.9%) year on year and amounted to EUR 19.3 million. Organic revenue growth was at a good level (7.5%). Part of our growth is attributable to the acquisition of the business operations of Almost Heaven Saunas (AHS) in the United States at the end of 2018.

Our revenue increased especially in the sauna heater market, with strong growth in electric heaters and particularly in wood-burning heaters. Our new and innovative products had a favorable impact on sales development. Our electric sauna heaters Glow, Cilindro Plus, and The Wall as well as the SENTIO by Harvia products have been well received in the market. In the wood-burning heater product group, one of our largest products, Harvia Pro 20, received its long-awaited update, and we began delivering the renewed version to customers in March. We achieved significant growth also in the sauna room product group, largely thanks to the AHS acquisition.

Demand was good and Harvia’s operations were successful in most of our key markets. Nevertheless, the decrease in demand in the German market that we faced at year end 2018 did not recover in the first quarter of the year. This was reflected in the deliveries of electric heaters and particularly control units.

The profitability of our business remained stable and strong. Harvia’s profitability improved significantly year on year, and the Group’s adjusted operating profit grew to EUR 4.0 million (3.2). Our increased sales volumes, attractive product range and continuous improvement of productivity had a positive impact on our profitability. Our adjusted operating profit margin was 20.6%, showing a clear improvement from the comparison period (19.5%). We continued our investments in improving productivity and we completed investments in new advanced machinery during the first quarter.

Taking over the operations of the US-based Almost Heaven Saunas, acquired at the end of 2018, has proceeded as planned. Among other things, we have renewed AHS’s product range and pricing as well as improved the terms and conditions of purchases. Our revenue in North America increased significantly thanks to the acquisition of Almost Heaven Saunas. Additionally, growth among other customers in North America was exceptionally strong.

Our first quarter of the year was strong, and both Harvia’s team and our key customers have done a very good job. We continue to implement our strategy with determination and focus on increasing the value of the average purchase, geographical expansion as well as the continuing improvement of productivity. In addition to organic growth, Harvia is actively looking into possibilities of growth through business acquisitions.