CEO’s review 8 February 2024

Harvia Q4 2023: Revenue back to growth with strong profitability and cash flow

For Harvia, year 2023 was characterized by achieving strong profitability and cash flow in a mixed market environment. In the fourth quarter of 2023, Harvia’s revenue returned to growth while we continued to deliver strong profitability and strengthen the foundations for future growth.

Matias Järnefelt, CEO

In the fourth quarter of 2023, Harvia’s revenue returned to growth while we continued to deliver strong profitability and strengthen the foundations for future growth.

During the fourth quarter, our revenue reached EUR 39.4 million, an increase of 3.4% compared to the previous year. This was driven by the strong growth in North America and improving sales performance in Central Europe. Organic growth was 5.2%. The exit from Russia in 2022 and some exchange rate developments, mainly due to USD to EUR exchange rate changes, impacted our revenue negatively.

The market conditions continued to differ also in the fourth quarter, with the European markets generally weaker than the markets outside Europe. However, Central Europe started to show some signs of stabilization after a long, weak period. The sales channel inventory levels were decreasing to a normal level and our B2B customers were more confident in ordering products. However, the market conditions were tough in Finland and Scandinavia, where high interest rates, low consumer confidence and challenges in the construction sector still continued to have a negative impact on sales in all product groups.

Outside Europe, Harvia maintained and even accelerated its already strong growth. The North American market continued to grow at a fast pace, which supported our excellent sales performance in the region. The majority of our business in North America comes from selling complete solutions to customers rather than selling only heaters. This is visible in the increasing share of sauna rooms of our total sales. Our sales efforts were successful also in Asia-Pacific, where our sales developed very favorably and according to plan. Excluding sales in Russia in 2022, the revenue of the “Other countries” market area grew by 33% in the fourth quarter, driven by the Asia-Pacific countries.

The fourth quarter’s adjusted operating profit reached EUR 9.5 million, increasing by 20.1% from the comparison period and amounting to 24.2% of revenue. Our profitability was supported by the increased revenue, but it also reflects the systematic work we have done to adjust pricing, improve supply chain efficiency and optimize our operations. Additionally, inflationary cost pressures have eased in some of our key materials and components. Harvia’s operating cash flow was again strong at EUR 15.5 million. We also managed to further reduce our inventories, which is visible in the unusually high cash conversion of 138.9%. I would like to thank the entire team Harvia and our partners for their great work in the fourth quarter and the full year 2023.

Harvia continues to work systematically to strengthen the foundations for the company’s future profitable growth. Ensuring continued strong sales performance in North America is very important for us. Moreover, we continue to actively drive growth in Japan and more widely in Asia-Pacific. We will also be working hard to maximize opportunities in our home markets in Europe. While we drive top-line activities, we are also focusing on maintaining our very good operative performance, a key competitive advantage of Harvia. We are also increasing our level of ambition in delivering exciting innovations to the market. Our new organizational structure, supporting the implementation of our strategy, came into effect on 1 January 2024. In addition, we have continued to work determinedly to further develop the sustainability of Harvia’s products and operations and prepare for the upcoming EU sustainability reporting requirements.

For Harvia, year 2023 was characterized by achieving strong profitability and cash flow in a mixed market environment. Our growth was strong in North America throughout the year, and it became our largest reported market area in 2023. Towards the end of the year, our sales development in North America and our improving sales performance in Central Europe helped us to turn our revenue back to growth. Looking at the future, the sauna and spa industry continues to offer several opportunities for Harvia in both short and long term. We continue to advance industry consolidation and seek growth opportunities actively also on the M&A front. Harvia is well positioned to strengthen its standing as industry leader.

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