Harvia FY 2023: Back to Growth in Q4 After a Year of Destocking

Harvia Plc reported full-year 2023 revenue of EUR 150.5 million on 8 February 2024, down 12.7% from EUR 172.4 million in 2022. Q4 was the turn: revenue grew 3.4% year-over-year to EUR 39.4 million, the first quarterly growth since Q1 2022, with an adjusted operating margin of 24.2%, up from 20.8% a year earlier. Harvia shares jumped on the print. (Prior year: FY 2022 reset. Next quarter: Q1 2024. Full coverage: Harvia News hub.)

The turn came in ahead of forecast

Heading into the report, Inderes had expected revenue to edge back into growth of just under 1%, with adjusted operating profit of EUR 8.2 million. Harvia delivered organic growth of 5.2% in Q4 and adjusted operating profit of EUR 9.5 million. CEO Matias Järnefelt credited strong growth in North America and improving sales in Central Europe, where sales channel inventories were coming down to normal levels. Finland and Scandinavia stayed weak.

“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. … Our growth was strong in North America throughout the year, and it became our largest reported market area in 2023.” Matias Järnefelt, CEO, Harvia financial statements bulletin, 8 February 2024

That North America callout was a first. For most of Harvia’s history as a public company, Northern Europe had been its anchor market. The 2022-2023 destocking cycle had inverted the mix: US consumer demand had held up through higher rates, and sauna rooms, which make up most of Harvia’s North American sales, were a growing share of its total sales. North America was now the largest single market area in Harvia’s revenue base.

Margin walk

Q4 adjusted operating margin of 24.2% was well above the 20%-plus long-term target and materially above the 21.1% full-year 2022 result. Järnefelt named three drivers: (1) higher revenue; (2) systematic work to adjust pricing, improve supply chain efficiency and optimize operations; (3) inflationary cost pressure that had eased in some key materials and components.

Operating free cash flow of EUR 44.6 million

The cash flow line was where the destocking cycle actually paid off. Harvia generated EUR 44.6 million in operating free cash flow for the year, a cash conversion of 111.7% (138.9% in the fourth quarter). That reflected lower working capital: net working capital fell to EUR 36.1 million from EUR 45.3 million as Harvia reduced its inventories. Net debt finished at EUR 37.6 million, leverage at 0.9x, both comfortably below long-term targets.

Dividend raised to EUR 0.68

Harvia’s board proposed a total dividend of EUR 0.68 per share for 2023, up from EUR 0.64 for 2022. Payment was split into two installments in May and October 2024, in line with Harvia’s policy of a bi-annual payout.

Inderes raised its target price and cut its rating

Inderes said the result beat its expectations, raised its 2024 and 2025 forecasts by 2 to 4% and lifted its target price to EUR 28 from EUR 25, but cut its recommendation to Sell from Reduce, judging the shares clearly overvalued. The stock rose 21.9% on the day and continued to trade higher into the spring as the Q1 2024 print approached.