Harvia Forum or Haarumi - International Growth and Well-being Megatrends

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7958

Strong Revenue Growth and Excellent Cash Flow in the Fourth Quarter of 2024 – Full-Year Growth and Profitability in Line with Long-Term Targets

October–December 2024:

  • Revenue grew by 29.3% to EUR 51.0 million (39.4). Revenue calculated at comparable exchange rates grew by 28.0% to EUR 50.4 million. Organic revenue growth was 21.7%.
  • Operating profit was EUR 8.4 million (9.2), or 16.5% (23.4%) of revenue.
  • Adjusted operating profit was EUR 8.7 million (9.5), or 17.1% (24.2%) of revenue. Adjusted operating profit calculated at comparable exchange rates was EUR 8.4 million (16.6% of revenue).
  • Operating free cash flow was EUR 15.0 million (15.5) and the cash conversion rate was 140.3% (138.9%). Operating free cash flow and the cash conversion rate were improved by changes in working capital, especially the decrease in sales and other receivables and the increase in purchase and other payables.

January–December 2024:

  • Revenue grew by 16.4% to EUR 175.2 million (150.5). Revenue calculated at comparable exchange rates grew by 16.2% to EUR 175.0 million. Organic revenue growth was 12.9%.
  • Operating profit was EUR 35.5 million (33.0), or 20.3% (21.9%) of revenue.
  • Adjusted operating profit was EUR 37.1 million (33.7), or 21.2% (22.4%) of revenue. Adjusted operating profit calculated at comparable exchange rates was EUR 36.9 million (21.1% of revenue).
  • Operating free cash flow was EUR 35.0 million (44.6) and the cash conversion rate was 79.4% (111.7%).
  • Net debt was EUR 57.2 million (37.6). The gearing ratio, calculated as net debt to adjusted EBITDA for the last 12 months, was 1.3 (0.9).
  • The equity ratio was 47.2% (51.0%).
  • Earnings per share were EUR 1.30 (1.25).
  • The Board of Directors’ dividend proposal is a total of EUR 0.75 (0.68) per share. The dividend is proposed to be paid in two instalments.

Näyttökuva 2025-02-13 kello 9.03.37

Financial Targets and Outlook

The company has set long-term targets related to growth, profitability, and gearing. Harvia updated its long-term financial targets in May 2024 to align with the company’s growth objectives. Harvia aims for an average annual revenue growth of 10%, an adjusted operating profit margin of over 20%, and a net debt to adjusted EBITDA ratio of less than 2.5x. The target for net debt to adjusted EBITDA ratio does not take into account the future impacts of changes in IFRS accounting standards.

Matias Järnefelt, CEO:

Harvia’s growth accelerated significantly in the fourth quarter of 2024, while the company invested in strategic projects promoting future growth. The costs of these growth-promoting projects and the strong demand generated by relatively low-margin winter campaigns affected our operating profit margin, which fell below the long-term target level.

Harvia’s revenue for the last quarter grew by 29.3% from the comparison period and was EUR 51.0 million, which is the company’s all-time sales record for a quarter. Geographically, revenue growth was particularly strong in North America and the Asia-Pacific and Middle East region. The ThermaSol acquisition in July also supported Harvia’s overall growth. Organic revenue growth was 21.7%.

Market conditions remained largely unchanged in the last quarter compared to the first nine months of the year. The most positive situation was in North America and the APAC & MEA region, where we achieved strong growth in all product categories. In North America, interest in sauna products and awareness of the health benefits of sauna continued to grow as the high-demand winter season began. Harvia achieved excellent order volumes during the quarter with sales campaigns, such as Black Friday and Cyber Monday special offers. In the APAC & MEA region, sales grew strongly in several strategically important markets. Favorable timing of deliveries for certain large projects provided additional support for Harvia’s sales in the region during the last quarter.

In Europe, the market situation remained quite challenging despite positive developments, especially in the professional and premium segments. In these segments, we achieved good sales growth for EOS-branded products, particularly in Continental Europe. The Northern European market has been difficult for a long time. Especially in Finland, the sluggish construction and housing market and weak consumer confidence have significantly weighed on our sales throughout the year. Despite the challenges, the Northern European region managed to grow slightly in the last quarter, driven by the Scandinavian and Baltic countries, while sales in Finland continued to decline.

Earnings Release Event

Harvia will organize an English-language webcast for analysts, investors, and media on February 13, 2025, at 11:00 a.m. (EET). CEO Matias Järnefelt and CFO Ari Vesterinen will present at the webcast. The event can be followed live as a webcast at https://harvia.events.inderes.com/q4-2024. The webcast will be recorded and will be available on Harvia’s website at https://harviagroup.com/fi/sijoittajat after the event.

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7959

harviaq424pre copy

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7960

Compared to Harvia’s earnings (1.30€/share), the share price of 49€ seems quite stretched. Especially when the growth target is 10%. To a layman’s eye, 30€ would sound like a more in-line figure.

My view might be influenced by the fact that I already sold my “expensive” Harvia shares at 38€.

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7961

Nonsense, don’t be bitter, the stock just has a beautiful future discounted into it.
Harvia is growing strongly, even operationally by 13%, and there are good growth opportunities from business acquisitions in the future.

January–December 2024:

  • Revenue grew by 16.4% and was EUR 175.2 million (150.5). Revenue calculated at comparable exchange rates grew by 16.2% and was EUR 175.0 million. Organic revenue growth was 12.9%.
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7962

That was last year’s result. Shouldn’t we be looking at the current year and next year already? What is the estimated earnings per share for '25 and '26?

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Yep. One could almost predict that these low-margin campaigns would not have been affordable if the current share price level is considered. Wasn’t it supposed to be the other way around, that the further you sell, the better the margins?
Since the competitive position is strong in my opinion, was this blip just a “calculation error”? Or is this a more permanent trend?

7964

Harvia’s result fell short of forecasts – a hefty dividend increase. :point_down:

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Hopefully, you’re shorting the stock after having thrown such a well-reasoned view!

Harvia has never guided for strong growth. A while ago it was around 5%, and now they are guiding for 10%. If such strong figures were reached with a 5% target, then with 10% we’ll reach the moon.

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Growth good, result a small disappointment for which there were long explanations in the CEO’s review. Then we’ll see if the market buys the growth story or sells into the earnings dip. Regarding growth, the essence is found on page 6, meaning we are growing where the most potential is found, and we are indeed growing strongly!

image

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Inderes analyst comments:

“Harvia’s Q4 revenue was ‘shockingly’ good. Market shares were gained by selling through discount sales on Black Friday and other campaigns, and a lot of money was also poured into marketing expenses…”

The customer “gets tied” to the Harvia brand, and later maintenance supplies, accessories, and even a new sauna/heater are sold with a better margin.

This excellent growth must also cost something through discount sales, campaigns, and marketing.

Well. dividend companies are dividend companies and growth companies are growth companies. Oh, I almost forgot. Harvia’s owners will also receive the highest and most surprising dividend in history: in honor of Harvia’s 75th anniversary, €0.75/share :wink:

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Is growth really growth if revenue grows strongly, but the bottom line shrinks? Pretty thin explanations, in my opinion, but apparently they still believe in over 20% margin going forward. Hopefully these campaigns won’t be used too much in the future, if this is the result.
Now I’m wondering if they can grow in terms of revenue in the coming quarters?

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What a good result, the year went well. The result grew, albeit very moderately due to investments in growth and decisions made in the last quarter. Profitability was still in line with targets. The big picture remains unchanged, quality execution. Now it will be interesting to see what management says in the webcast.

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At least I certainly didn’t say that; I think I commented on the revenue with roughly those words when I first saw a 30% growth in the press release, but the result was clearly below expectations and even the comparison period.

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As a neighbor of the Harvia factory and with family members having worked there, I can say that Harvia’s management knows what it’s doing. For a few decades, the factory’s operations have been closely monitored, and sometimes those operations have significantly affected my own family. That’s why my trust in Harvia remains high. With timely actions, the factory has, firstly, stayed afloat, and secondly, embarked on a global conquest. If the margins have now become weak, it was certainly known in advance within the company, and there are surely reasons for it. Well done, Harvia! And thanks for the dividends.

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The webcast starts at 11 AM at Harvia Q4 Results.

A recording will also be available if you can’t watch it live.

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Is growth growth if revenue grows strongly? Yes. Is it profitable growth if the money remaining below the line shrinks? No. The story looks very different if margins over 20% are no longer seen, but everyone can draw their own conclusions as to whether this is the case or not. Since I don’t have a crystal ball, it’s hard to say, but it’s refreshing to see tremendous organic growth where there’s market to be captured, and when margins are focused on more again, a larger slice of the pie is in store (as Harvia is the go-to supplier).

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7975

The last quarter slightly impacted profitability, but for the full year, we clearly exceeded the 20% level. When listening to the webcast, some good points emerged as to why the margin in this quarter fell below the long-term target level. It wasn’t due to any compulsion but rather conscious choices (plus a setback with timber prices vs. campaigns).

I wouldn’t see any particular cause for concern now; the company is in great shape and is achieving good results, even though some of the major markets are difficult at the moment (especially Finland).

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Correction. I meant the top line, i.e., revenue, of course. In a hurry, I seem to mix up profit and revenue.

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7977

Harvia’s already strong growth accelerated at the end of the year, but profitability fell to an exceptionally low level compared to the company’s previous profitability. Harvia’s CEO Matias Järnefelt explains the reasons behind the strong growth and weakening profitability in an interview with analyst Rauli Juva.

Topics:
00:00 Introduction
00:12 Background of strong and weak profitability
05:19 Reasons behind the decline in gross margin
08:49 Fixed costs grew in relation to revenue
12:08 Developing the organization
12:36 Impact of tariffs and reaction to them
15:54 European outlook for this year

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7978

Analyst’s comments following Harvia’s Q4 results and updated analysis. :point_down:

Recommendation rises to REDUCE (previous: SELL), target price rises to 46.00 euros (previous: €40.00).

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