Harvia Oyj

OMXH:HARVIA

Earnings Call Analysis

Harvia's Q1 2024 Performance and Future Growth Plans

Harvia's revenue grew by 2.3% to EUR 42.4 million in Q1 2024, driven by strong sales outside Europe, particularly in North America and APAC regions. Despite headwinds in Northern Europe, the adjusted operating profit rose nearly 9% to EUR 10.1 million with a 24% margin. Earnings per share increased to EUR 0.40 from EUR 0.34 last year. The company focused on growth, evidenced by acquiring new land for expansion in the U.S. and expecting positive impacts from postponed Q1 sales in Q2. Harvia aims for over 5% annual revenue growth and a 20% profit margin while expanding its infrared and steam sauna offerings.

Steady Revenue Growth Amidst Challenges

In the first quarter of 2024, Harvia reported a revenue increase of 2.3% to EUR 42.4 million, which reflects an organic growth of 1.4%. Despite some headwinds from political strikes in Finland impacting operations, strong growth outside Europe, particularly in North America and the APAC regions, bolstered sales. Organic revenue growth was affected slightly by an acquisition made last year, highlighting the company's expanding footprint internationally.

Profitability and Cash Flow Performance

Adjusted operating profit climbed to EUR 10.1 million, representing a 9% improvement compared to the same period last year, with an adjusted operating profit margin of around 24%. High cash flow and a cash conversion rate of 95% demonstrate effective operational management, helped by decreasing inflation in key materials. Additionally, net debt decreased to EUR 26.5 million, with a leverage ratio of just 0.6%, underscoring a solid financial position.

Market Dynamics and Regional Performance

Northern Europe saw a notable revenue decline of 17%, primarily due to weak construction activity and holiday shifts affecting sales patterns. In contrast, North America experienced growth of nearly 24%, quadrupling in size since 2019, pointing toward robust market demand. The company recognized the need to navigate shifts in customer behavior, especially in Sweden, and aims to reinforce its market position through new partnerships.

Growth Opportunities and Strategic Initiatives

Looking ahead, Harvia plans to expand its operational capabilities, having recently acquired land near its manufacturing facility in West Virginia. The company maintains a strategy of increasing average purchase values by selling comprehensive sauna solutions, which are performing particularly well in North America. Management aims to leverage its strong financial position to explore both organic and inorganic growth opportunities, especially in the fragmented sauna market.

Long-term Outlook and Financial Goals

Harvia's long-term financial targets aim for average annual revenue growth exceeding 5% along with a profitability margin exceeding 20%. The company's adjusted operating profit margin in the first quarter aligns well with these ambitions, showing resilience and adaptability in the face of tough market conditions. Dividends were approved at EUR 0.68 per share, with a biannual payout strategy reflecting management's commitment to returning value to shareholders.

Challenges and Future Directions

As the company grapples with reduced sales in key European markets, recovery will depend on a resurgence in construction activity and consumer demand. Management is strategically focused on diversifying product offerings, particularly in the infrared and steam sauna segments, to balance the current dependence on Nordic sauna products. With targeted investments in marketing and operational improvements, Harvia is poised to capitalize on its growth potential moving forward.

Earnings Call Transcript 2024-Q1

[Matias Jarnefelt, executive]

Hello, everyone, and welcome to Harvia's Quarter 1 '24 Earnings Webcast. My name is Matias Jarnefelt. I'm the CEO of the group. And with me, I have Ari Vesterinen, our CFO.

[Ari Vesterinen, executive]

Hi.

[Matias Jarnefelt, executive]

To begin with the presentation, I will cover first the highlights of the quarter. And after me, Ari will be covering the financials in more detail. First, top line. Our revenue increased by 2.3% to EUR 42.4 million. Organic growth was 1.4%. During the quarter, we had some negative impact from the political strikes taking place in Finland. The sales results was supported by strong sales development outside Europe, both in North America and our APAC, Middle East and Africa regions. On the other hand, we faced some severe headwinds in Northern Europe. Market continued to stabilize in Central Europe. However, the level of demand in Central Europe continues to be below its normal long-term potential. Our good performance in North America continued to support our sauna rooms sales since majority of our business is selling complete sauna kits or sauna rooms to the markets. On the other hand, weakness in Northern European business impacted especially our equipment business, namely wood-burning heater sales. Profitability and cash flow was on a strong level. Quarter 1 adjusted operating profit was EUR 10.1 million, which is around 9% more than quarter 1 before last year. Adjusted operating profit margin was around 24%. Cash flow continued to be on a high level and cash conversion was 95%. We were able to deliver the strong profit and cash flow results due to high performance in our operations as well as our commercial execution, including pricing management to optimize for both sales and margins. At the same time, we also saw support from inflation being less in some of the key materials cases and components in certain key markets of ours. Going forward, we have a heavy focus on driving growth. We already have a strong level of profitability and a key lever for us to drive the value of the company is to scale the business up. And we have been implementing a number of activities during quarter 1. One of them is that we've acquired land around our Northern American factory, which will support the continued development aside for the years to come. We have also implemented our new organizational structure effective 1st of January, and it has started well. And overall, we stay very positive in terms of long-term outlook for the business where we are. A bit more detail for the quarter 1 results. As said, revenue was EUR 42.4 million. That's EUR 1 million more than the quarter 1 last year. At comparable exchange rates, revenue increased by 2.7% and organic revenue growth was, as mentioned, 1.4%. The difference between organic and overall revenue growth is due to our rather small acquisition of Phoenix El-Mec, a component manufacturer in Italy last year. Operating profit was EUR 9.9 million and adjusted operating profit as said, EUR 10.1 million, with roughly EUR 800,000 more than a year before. and relative profitability increased by 1.4 points, percentage points to 23.8%. At comparable exchange rates, the adjusted operating profit was EUR 10.2 million and 24% of the revenue. Earnings per share during the quarter were EUR 0.40 and that compares to EUR 0.34 a year before. Operating free cash flow was EUR 11.1 million. We are very solid. Net debt was EUR 26.5 million, and our leverage is 0.6%. The rationale here is that we feel that there's plenty of opportunities for growth in the market, both organic and inorganic, and we want to make sure that we have warchest to invest when the opportunity arises. Equity ratio was 52.4%. During the quarter, we continued to implement systematically our strategy. Increasing the value of average purchase essentially means that we want to get more money out of every sauna built or everyone sauna renovated. One key part of that strategy is continuing to sell our full sauna kits or sale solutions. And the Northern American performance is heavily driven by our success here. Also, we have been selling well our premium range of offering during the quarter, especially in Central Europe, where we see, on average, higher prices for the equipment compared to, for example, our Northern European region. And we are definitely working on an ongoing basis to deliver in the future, even more exciting innovations to the market supporting this strategy. In terms of geographical expansion. Over the past years, we've expanded our distribution. And currently, our products are sold in around 90 countries. Right now, our key priority is to make sure that we drive actively market making and take share in the most important markets, for example, U.S. and Japan being examples. And I'm very happy to see that the results of this systematic work is also bearing fruit as can be seen in our performance, for example, in U.S. and Japan was a key driving force for our growth in APAC, Middle East and Africa. At the same time, we recognize that still a majority of our business is coming from Europe, and it's very important that we are able to turn it back to sustainable growth, and we are implementing a number of activities to support our European business in the quarters to come. One core pillar of our competitive advantage is that we are able to produce products that markets want and do that in a sensible effective manner. There, our operative performance plays a key role. And again, I would like to thank our team in Harvia for delivering such strong results again during this quarter, and we've continued also developing our capabilities for future improvements in productivity. As mentioned, we also acquired a land around our West Virginia factory so that we can continue to invest both to continue to modernize production and also increase capacity as the market demand requires. And the new organization model became effective from 1st of January, and I'm happy to report that it has started to perform well. Here, we can see the geographical and product group split of our revenue. As communicated during last year, we changed somewhat our geographical segments. Now we have 4 regions: Northern Europe, which consists of the Nordic countries, Finland, Sweden, Denmark, Norway as well as the Baltic countries, Estonia, Latvia and Lithuania. It also includes Iceland. The green one here is Continental Europe that includes Germany and the other European countries. Red is North America and yellow is APAC, Middle East and Africa. Here, you can see that 60% of our revenue came from the European regions, 28% came from Northern Europe and [ 32% ] came from Continental Europe. The biggest shift in this picture is that the Northern European weight of our total revenue distribution was less than year before. One year ago, it was 34% and this year, 28%. And on the other hand, the European North American role continue to grow from 27% of our revenue last year to 32% this year. And some slight increase also in our APAC and Middle East in terms of the share of the total pie. Revenue by product group still continues to be dominated by what I would call equipment business, mainly selling heating equipment and control units. Blue one is saunas and Scandinavian hot tubs. The sales for saunas and Scandinavian hot tubs was supported by our strong performance in Northern America. However, Scandinavian hot tub sales decline, and that's why the share did not change too much compared to last year. So here, we can see the regional sales development. And of course, there's one glaring exception in this picture, which the red or Northern Europe declining by EUR 2.4 million compared to quarter 1 last year. That 17% decline. This was -- is basically a combination of a number of things. One is that in Northern Europe, the biggest market for us is Finland. And in Finland, construction market and also property market are at very low levels. And typically, when consumers make a sauna renovation, it has to have a trigger event like a move. Another trigger event, of course, is building a new house. And because of the property market and construction market being on the low level, that does have an impact. Another big market for us in Northern Europe is Sweden, where, as mentioned already in our quarter 4 report during last year, there is a significant customer channel shift taking place as one of our key customers is restructuring their retail network in Sweden. On the other hand, we see a great development in Northern America, and our Northern American business has already basically from 2019 to '23, it's 4x as big and it continued to grow again by nearly 24%. Of course, this is a great performance and heavily supportive to our business and will continue to play a strong role in our strategy also going forward. APAC and Middle East and Africa also grew over 20%. And the main market driving this performance is Japan. We have been also taking a very active role in driving market through our Harvia Japan limited joint venture. Continental Europe, remained flat compared to last year. Revenue by product group now not so big red marks anymore compared to, for example, some of the reports during the last year and more of blue, which is, of course, great. Saunas and Scandinavian hot tubs grew by EUR 0.5 million. That's 5% compared to last year. And as I said, sauna room sales grew more than that and Scandinavian hot tub sales declined. Accessories and heater stones also performed pretty well during the quarter. Now let's look at the quarterly performance, both in terms of revenue and adjusted operating profit since '21 to this year. One of the things that you could draw your attention to is the fact that when we compare the quarters last year to this year, we can see that the biggest quarter during '23 quarter 1. And that was the only quarter during last year, where we sold more than EUR 40 million worth of -- delivered more than EUR 40 million worth of revenue. And we increased that. Looking at quarter 2 and quarter 3 from last year, we can see that the base in terms of comparison figures is much lower. Another point to make is regarding quarter 1 performance is that actually with EUR 42.4 million, it's the second highest quarter 1 ever, with the exception being the quarter 1, 2022, which was the all-time high at nearly EUR 51 million. In terms of adjusted operating profit, we delivered EUR 10.1 million, and that's more than during any of the quarters during last year. We see plenty of opportunities for Harvia to grow. One of them is that we want to play in all of the 3 global sauna types, that's the Nordic sauna, the steam sauna and Infrared and also play more of the solutions game, which is a strategic priority for us. And right now, most of our revenue comes from selling equipment to the Nordic sauna, and the shift to solutions is supportive to our long-term growth ambitions. And in the coming years, we have ambition to significantly grow also our business in infrared and steam saunas.And the strategic priorities, we continue to drive them systematically. Increasing the average purchase value that is essentially, we want to get more money out of any sauna built or renovated geographical expansion is very much about being active in market making in markets that matter, and productive improvement continues to be in the heart of our strategy also going forward. Now Ari, you can go through the financials more in detail.

[Ari Vesterinen, executive]

Yes. Thank you. Okay. Here, we have the comparison table of the most important finances. Okay. The revenue grew 2.3%. This is the accounting revenue. There is something in the background also last year, we had really the pipeline quite empty order stock very well shipped at the end of March. Now we've shifted for certain reasons, the strikes in the harbors and also for the sake of effectiveness, some sales in the quarter 2. So this describes just the accounting numbers, but the effect is well over EUR 1 million, at least, in the comparison between the 2 years. But yes, -- we are reporting the accounting numbers. Then what is important is here to see how the adjusted operating profit has improved in relation to the sales. We were having a 2.3% increase in the sales, but the adjusted operating profit increased almost 9%. So our effectiveness of the company has been improving quite nicely. This time, it came -- if you compare the interim report line by line, mainly from the difference in the material and service costs, we have been not anymore facing so strong inflation as in the past. And we have quite good pricing power in respect of the sales prices. So we have been improving our material margin quite nicely still. Then the basic earnings per share has been improving also clearly more than the sales increased. That's due to certain actions in tax planning and other like financing costs, which have been going down thanks to the good cash position, which has been invested to earn some interest. Net debt has come down substantially compared to last year, and that's because of the strong cash position and tight control of the net working capital, which has also gone down about EUR 9 million compared to last year and a couple of millions compared to end of last year. So the company has very strong financials, good profitability. And we are really happy about the situation where we are now after the recovery years from the COVID and so forth. As you see, we have been also able and willing to employ more people for Harvia Group end of last year, we had 605 employees, now 20 more after 3 months. So we are growing in production and in operations. Here, we see the development of the cash conversion and the free cash flow, it's always been very strong in Harvia, and that development continued also this quarter. As we see from the left hand picture, the net debt, interest-bearing net debt and leverage have been going down quite rapidly. The peak time in Q3 '22 was after the acquisition of the EOS minority last 20%. And after that, we have been earning quite well money and controlling our net working capital, not having too high investments volumes. So we are going down with the net debt quite rapidly. Actually, we had end of Q3 altogether a EUR 1.5 million cash. And we try to earn also interest with that, but it's also, as Matias mentioned, to be prepared for potential acquisitions. We had -- we would have, of course, the opportunity to also pay back the loans, but we don't do it right now. The net financial items have been quite stable even if the interest rates have gone up. But since we have some cash earning also interest income, so that stabilized the situation a little. Here, we see the investments in tangible and intangible assets. They have been growing in Q1 '24 and that's mainly due to the investment in the plot of land in U.S. around our current factory, 8.7 hectares, roughly. So we have the opportunity to expand the factory and the logistic facilities also in future. The distribution of the shares has changed quite much compared to last year, end of [ Q, 1 year ] ago, we had about 5% less international investors, 39.5% and now 44%. So the international investment funds have shown great interest towards Harvia, and they have been investing again in Harvia shares. The sale which has gone down are the Finnish households. We have -- now there about 28% of the shares in Finnish households, and it was almost 6% more a year ago in this time. And you can see that development also from the right picture, how the amount of the shareholders. There are mainly small shareholders, households, private people. That amount of shareholders has gone down. But at the same time, the market value of the shares has increased from roughly 10 from roughly EUR 410 million to EUR 720 million. The Harvia's long-term financial targets, as you may know, we target average annual revenue growth exceeding 5% and profitability over 20% adjusted operating profit margin, which we exceeded clearly during Q1 also. And the leverage target is between 1.5 to 2.5. Now we were at 0.6%. So we've been quite strong in cash, and that means also that the leverage we are under the leverage range currently. Harvia pays regularly increasing dividends and biannually. We had the organizational and management changes from the 1st of January, as Matias said, and that has been implemented very well, and we are now going forward based on the new organization for geographical regions and EOS as a special brand and then the group functions and internally in the management level, we are also reporting and targeting the results on that level. And Jennifer Thayer has also started very well in U.S. to manage the U.S. business. We had actually -- last week, the AGM, Annual General Meeting of Harvia. And the Annual General Meeting approved the based on our Board of Directors proposal EUR 0.68 per share to be paid as dividends. And the remainder of the distributable funds be transferred to shareholders' equity. And the first installment will be paid actually beginning of next week, EUR 0.34. And the other EUR 0.34 will be paid in late October '24. Okay. Questions.

[Ari Vesterinen, executive]

We have had some questions here coming from through the chat, and I start just from the beginning, and you can ask, I can answer and so forth. Any comments from the start of infrared saunas under Almost Heaven Saunas in the U.S.

[Matias Jarnefelt, executive]

I think it's a bit early to comment on that. Overall, we see plenty of opportunities for a stronger role for Harvia also in infrared saunas in the U.S. market. We know that Infrared plays a very significant part of the U.S. overall sauna market. And that by being mainly focused on the traditional saunas in the U.S. has limited our market potential, and we are determined to change that. We see that there's plenty of very interesting differentiation opportunities for us in the Infrared. Of course, one example is so-called [ multimodal ] saunas that saunas cabins that come with both traditional heater and also infrared panels. But a key competitive advantage for us compared to the current competition is that we have a very efficient production facility in West Virginia. And we have certainly plans to offer high-quality, very attractive, innovative -- made in America infrared saunas in America going forward.

[Ari Vesterinen, executive]

Okay. Also a U.S. related question. Do you have more local production in the U.S. than the competition, would this became a competitive advantage?

[Matias Jarnefelt, executive]

We have a very significant production facility in the kind of scale of Harvia in Lewisburg, West Virginia as mentioned. And you can probably read between the lines that the acquisition of land around that manufacturing facility is really opening up interesting opportunities for us to keep investing in our operational capabilities there. In terms of the heating equipment manufacturing, we actually don't do it at the moment in the U.S., but of course, also something that we will be assessing on an ongoing basis. Overall, we feel that compared to our main competitors, we are very well positioned in terms of our manufacturing capability in the U.S. And we, as said, are determined to keep investing in this and making sure that we stay ahead of competition.

[Ari Vesterinen, executive]

When do you think the Swedish distribution issue can normalize?

[Matias Jarnefelt, executive]

Of course, this is something that is really driven by our essential key customer. And it's related to customer actually closing down the consumer-focused store chain. My personal assessment is that it will take the whole year before the -- for the kind of new kind of distribution landscape really kind of settles in Sweden.

[Ari Vesterinen, executive]

Where have you been firing -- hiring, sorry, the most people during Q1? What countries or tasks, do you see the need to hire more people in coming quarters?

[Matias Jarnefelt, executive]

Well, essentially, we are a growth-focused company. And some of the increase in the headcount that you saw there is related to increase in production volume. So that's under direct labor. But we've also invested in indirect labor that basically is, for example, sales, it's innovation and product development. And the investment in people is really, I would say, balance between different capability areas of Harvia. One part of our strategy is to strengthen our regional presence. We can see that, for example, in the U.S. or in Japan, the fact that we have feet on the ground and are more active in really, I would say, taking control of our destiny in important markets does pay off. And our regional presence is something that we keep investing. Another area which we expect to keep investing in terms of kind of fixed cost or indirect labor is R&D because we really see opportunity to broaden our portfolio. We talk about infrared. We talk about multimode saunas, we talk about steam, et cetera. And these products will come from they will not come from nowhere. We need to have the people who are experts in this area. So we do plan to keep investing in these areas.

[Ari Vesterinen, executive]

In the interim report, there is also one section personnel. And there you see also the changes of the headcount, full-time equivalents in different companies. And also one source of the increase in the headcount is the unit in Italy, 11 persons. A year ago, we didn't have it yet. But as Matias said, we are planning to hire more people and we need them definitely. How much is the impact of strikes in Q1 in euros? In which segment sales this is visible?

[Matias Jarnefelt, executive]

This maybe something you can...

[Ari Vesterinen, executive]

Yes. Well, this is a bit soft area because there is always some shift of sales from 1 month to other. And there, we had also Easter the long holiday season at the end of March. By the way, the main wood burning sauna heater season normally starts after the Easter in Scandinavia. But we have to just estimate and we don't have the exact figures. But at the -- let's say, in the middle of March, I estimated that shift from March to April be about EUR 0.5 million or something like that. And actually now, when we look back the shipments, what we didn't do, we filed them together and try to organize the transfer as effective as possible and logistically-wise, I estimate that, that shift was about [ EUR 1 million to EUR 2 million ] at the end of quarter 1. But as said, this is not an exact accounting figure, just -- this is just an estimate.Yes, that's another question to the some -- same topic. So it was partly strikes, but partly also the seasonality and the calendar position of Easter holidays. Did the strikes in Finland postponed shipments or were the loss is permanent?

[Matias Jarnefelt, executive]

Well, maybe I can comment since you already no permanent. So we should be seeing a positive impact in our quarter 2 figures. Essentially, it was timing, as Ari mentioned, overall, we -- in my mind, have managed the situation towards our customers in a very professional manner. And we've seen a lot of understanding from our customers and the assessment is that there's not really a big damage done to our customer relationship or the customers' business.

[Ari Vesterinen, executive]

Ignoring the soft market environment, what are the main bottlenecks holding back your growth?

[Matias Jarnefelt, executive]

Well, of course, when we look at the figures, we can see that our outside European regions are performing very well. And they are, of course, they have become also in terms of absolute numbers, so important for us that continued growth in those areas, of course, is very critical. And that's why we systematically keep investing in increasing our commercial presence and also matching our supply chain that we can effectively meet the needs of those regions. We're also broadening our portfolio at the moment. I would say we are somewhat limited with our portfolio since it's so heavily skewed towards the Nordic sauna and we need to invest in a broader portfolio for infrared and steam in the coming years. Around 60% of our sales is currently coming from Europe. And given its large weight in our revenue portfolio, it's important that we also make that market move. And it's, at the moment, quite significantly impacted by the market conditions, but we are certainly working very hard to make sure that what's in our control, we do as best as possible and drive these regions also back to growth.

[Ari Vesterinen, executive]

8% of revenues come from the APAC-MEA region. When do you expect the Japan joint venture to be fruit in terms of significant revenue growth in that area?

[Matias Jarnefelt, executive]

I would say already now, of course, the starting levels in terms of absolute figures has been fairly small, but it has been growing fast. And looking at the 23% growth we delivered in APAC-MEA, majority of it came from Japan. So it's very pleasing actually to see that areas where we continue to decide to focus on and really drive determine action, it does yield results, and this just increases our confidence level that we are, of course, discussing internally whether we could multiply this approach in some other significant-sized Asian markets to really scale the business in Asia up. So it has basically kind of contributions to us, one, in terms of absolute numbers, it starts to turn the needle in Japan. And the other one, it's a great learning platform for us, which we hope to scale also in other markets.

[Ari Vesterinen, executive]

On the investment made in North America, how do you see capacity evolve over the next years?

[Matias Jarnefelt, executive]

In the U.S., our business has really multiplied in size, 2019 to '23, our revenue, actually, we are 4x as big as in 2019, and we continue to grow this year. We already made quite significant investment in our capacity in '21, and we are again seeing a need that we need to invest more into the site to fulfill the very positive demand in the market. There are many ways for us to manage demand. Kind of one is that what we are doing that -- [ during ] even the kind of lower seasons like quarter 2 and quarter 3, typically are a bit lower in sales. We actually keep the production lines running full steam, building inventories that we can then sell and deliver during the hot sellout seasons like quarter 4 and quarter 1. So this is, of course, one means for us to make sure that we have the goods available when there's demand in the marketplace. But it is clear that we also need to in the coming years, increase our capacity as the demand keeps growing.

[Ari Vesterinen, executive]

In light of your biggest competitor in Finland, Sauna360 being acquired by Masco, do you think you eventually become a potential target for bigger players in the home improvement or as a sector, especially in Northern America?

[Matias Jarnefelt, executive]

Well, of course, we've taken note of the acquisition of Sauna360 by Masco, which is a large U.S.-based stock listed company. And there was another quite significant acquisition made by [ Kolar ] that's a privately held similar sized company as Masco, and they bought [ clubs ] a large competitive hours in particularly in the high-end sauna cabin business in Europe. To us, is a signal of a few things. One is that this is an interesting market, which has interesting long-term growth dynamics. That's the reason why big players are also eyeing on this market. I will not comment Harvia being on anyone's target list, but it is clear that we have certainly our own target list because we see that there is a clear opportunity for consolidation and is still a quite fragmented market. If you think about sauna products and solutions market, Harvia being last year, EUR 150 million top line business, and we are the market leader, and we talk about multibillion business. It tells that how fragmented this business still continues to be. And with our brand, with our operational efficiency, best practices, financial position, allowing for investment, we feel that we have a great opportunity to be a real consolidator in the market. And that is something that we stay focused on our own game, both in organic growth, in operational efficiency, improving our product portfolio and completeness and competitiveness and also looking actively at the acquisition market.

[Ari Vesterinen, executive]

I can probably answer the next question. Could you explain why the general meeting rejected the revised remuneration policy for the company's governing bodies. As the resolution is advisory, what will be the consequences?Well, First of all, this compensation remuneration policy was well passed through the AGM in 2020, when it was represented last time. And the only change what was made after that time was the percentage of the annual bonuses, theoretical annual bonuses for the CEO of the company. It was raised from 50% to 100%, and that's really just an option for future. And as you may have noticed, we had also the remuneration report in our annual report and it passed the AGM very well. So it will -- it was well accepted, and we are still in the same practices in practice than what was stated in that report. But there was a new option and probably new climate also among the, let's say, working proxies about these remuneration policies. And parallel that our Board of Directors has also set up a new personnel and compensation committee, which will certainly thoroughly analyze the situation and the normal practice is that next year, in the spring '25, the company will introduce the remuneration policy again to the AGM and let's see what happens then. So let's see if we have other new questions here. Okay, Japan-related also, but I ask it once more. Will your joint venture with Japan give you a chance to enter the Onsen market even indirectly?

[Matias Jarnefelt, executive]

Well, Japan overall is a very interesting market. As the person asking the question correctly pointed out, it has a very long kind of geothermal spa history, so Onsens. And that's, I believe, one of the reasons why the uptake of sauna kind of is [ healing with heat ] philosophy is so well received in Japan. Actually, Harvia is a company which has ample of growth dimensions, growth opportunities. In the long term, I see really opportunities in more kind of, I would say, spa direction as well. But even in the, I would say, core sauna market where we talk about steam infrared, traditional Nordic saunas are more in the solutions-centric way of selling. There's a lot of growth opportunities, geographical expansion and really taking a stronger market maker role in big countries, it is just about prioritization. It's managing our resources, making sure that when we focus on something, we really get results and get it done. And what I don't see for us is that we try to kind of spread our wings too far apart and then our resources might be too thin. It's better to concentrate on the key battles that we really want to win now in the coming years. And essentially, they are North America, key markets in Asia, bringing Europe back to growth and strengthening our solutions business for Nordic saunas and strengthening our position in infrared and steam.

[Ari Vesterinen, executive]

Okay. What do you think needs to happen to Nordic European sales to recover?

[Matias Jarnefelt, executive]

Well, it's a Northern European situation is actually quite interesting. It's not just one thing that's affecting it kind of -- there are a number of things. One, of course, is the construction and property market. In -- if you think about the Northern European market that we report, by far, the majority is one country, it's Finland. And in Finland, of course, construction market is significantly down. And also because the property market is down, people are not moving that much. So of course, one thing that would really support us is that construction and property market starts to pick up again, visibility for more stable and maybe lower interest environment than during the past couple of years for sure would be helpful for us. And then I said there are some, what I would call, onetime changes that big customers is rearranging their distribution in Sweden that I would take in the assumption, as mentioned that it will still impact our business in Sweden during this year. At the same time, we are really pushing innovation. We are broadening our distribution. We, for example, in the Swedish market now that our key partner for consumer-driven hardware retail is changing its strategy. We're actively building new partnerships there. So there is certainly a lot of activities ongoing. Actually, then there are some things that are pretty much beyond anyone's control, like actually, we had a really, I would say, long and arctic winter in Finland this year. And one of the key drivers for the quarter 1 sales in Finland traditionally is the wood burning heaters for the summer cottages and the cottage season now because of the winter conditions really has shifted from like starting already in March to now really starting in April. So that's, of course, something that was out of our control. So yes, are not always equal. But we are certainly vigilant, building our capabilities. So when the property and construction market starts to revive, we have what it takes to strike back.

[Ari Vesterinen, executive]

Is there a need to increase marketing spend in the U.S. or does the social media channels and worth of mouth work as well?

[Matias Jarnefelt, executive]

I would say, we are very lucky that the category that where we play is very interesting for media and also for celebrities. So you can, for example, make -- they can exercise go to Google and CR7, that's Cristiano Ronaldo, Sauna, Instagram. And you'll see plenty of Cristiano's pictures that he's posted himself in Instagram stories. And as you might know, now it would be very expensive for Harvia pay for post like this, and it's, of course, not just Cristiano, but there's Kim Kardashians and [ Neymars ] and Lady Gaga, et cetera. So there's a lot of celebrities that create kind of market visibility that is worth actually tens, maybe even hundreds of millions of dollars. At the same time, yes, I do see that there is some need for us to strengthen our marketing investments also in strategic markets. We want that Harvia really becomes a true brand that is more widely known than just, I would say, within the kind of professionals within the sector and kind of real sauna enthusiast, over time, hopefully, Harvia will really be maybe not a household brand as such, but still something that consumers do and recognize and appreciate as a real quality brand for a healthy lifestyle.

[Ari Vesterinen, executive]

Okay. Outside of Nordic countries, Japan and U.S., which seem to be the hottest markets for you. What is a country that has emerged in the last few years, let's say, post-COVID, as particularly promising growth-wise?

[Matias Jarnefelt, executive]

There are actually many, and I can take some examples. And if we go to, for example, Asia, Australia has performed very well, again, starting from low base but developing very nicely -- there, kind of the key logic is you look at the U.S. and then you'll see some years later, the same thing happening in Australia. So kind of the sauna boom in U.S. seems to spill over to Australia in a very positive way for us. There are good developments in a number of other markets as well. So when we look at, for example, China, at the moment, it's still the kind of main purpose for China in our business at the moment is that we have one factory there that is also exporting internationally. So it's actually more important manufacturing country for us. But increasingly, it starts to be kind of a market for domestic demand as well. So we see certainly opportunities there. So there are a number of examples. And I could say even like places like India, which is a huge country, and you could think that, wow, it's a very hot country. But then again, still, when we look at the U.S. as an example, we see Florida, always summer, Texas, always summer, South California, always summer, and they are great places for our sauna business. And we interestingly see also increasing interest in places like India.

[Ari Vesterinen, executive]

Okay. Thank you very much. We don't have any further questions in the chat. Thank you for following. Let's stay in touch.

[Matias Jarnefelt, executive]

Thank you very much.