Harvia Oyj (HARVIA) Earnings Call Transcript & Summary

Hello, and welcome onboard for Harvia's 2020 Financial Review. My name is Tapio Pajuharju, I'm the CEO. And next to me, we have Ari Vesterinen, our CFO.

Hello, welcome.

We'll run the show today. I'll try to entertain more on the operational issues and what we've been doing and achieving on the marketplace, and then Ari will have a deep dive on the financial. That's what we speak. And after the presentation, we'll have opportunity to entertain questions and comments from the audience. So welcome aboard. When starting with the review of the 2020, I think you realized that the saunas have been hot, so has been Harvia's operational machinery and equipment, and it's been a very, very strong year on top line. Also on the bottom line, we've been able to grow the profitability, both on the absolute terms as well as on the relative terms. And I'm happy to say that in almost all of the markets, as well as in almost all of the product categories, we've been able to gain profitable growth. As we expected on the previous round, we still see a bit of an incremental activity on the marketplace. We call that advanced consumption. And I think that feature has been visible on most of the markets. But having said that, at the same token, we also experienced incremental, what I would call maybe publicity and sauna trend as well as the health and well-being trend is boosting this general knowledge of the sauna spa and the impacts of that. During the year, we've been improving our capacity. But as you realized, it's not been enough, especially on the sauna market, we've been having some limitations for the capacity in the Central European marketplace as well as on the U.S. But on the heater and componentry, we've been expanding in China. We've been expanding in Finland, and we got also the EOS operations supporting the demand in that respect. And then going forward, as you may have already heard today, we will have some further investments in the U.S. to improve our operational capacity in the sauna production, and I will have a bit of a deeper look to that in a later stage. And also regarding the Muurame facility, we are entertaining opportunities to expand the capacity over there, but it's still a bit premature to say what we -- tell what we are exactly going to do, and I will keep you up-to-date at the later stage of this year. Integration with the EOS team, happy to say that we have a good and professional team onboard. We've been able to do most of the things we agreed to do on the integration. But we've been able to do that on the virtual format. So still not able to travel, still not able to meet face-to-face, but we've been doing a good job together, and that's also visible on the numbers, and you will see that in a second. Last quarter, we were growing quite nicely on the top line, and it was escalating towards the year-end, 70% as the total number and the organic growth, close to 40%. On the currencies, we got a bit of a headwind. You can imagine that both the Russian ruble as well as the U.S. dollar took a bit of a step back and that had an impact both on the top line as well as a slight dip on the profitability. But even with this unfavorable impact, it's been a very good top line and very good bottom line. Operating profit, both on the adjusted format as well as in absolute terms, good numbers in that respect. Earnings per share going nicely up and operational cash flow, very good, exceeding EUR 10 million for the last quarter. So I think the Harvia team has done a very good job as a totality. Full year numbers still good, slightly down from the last quarter, excellent numbers, but almost 50% top line growth and an organic close to 30%. And I think the long-term historical growth rate in the sauna and spa industry has been slightly shy of 5%. So this is clearly a different magnitude in that respect. With this one, we can say that the sauna market has been growing faster than in history. But at the same time, I'm very happy to say that Harvia has been gaining share, and we've been really gaining share in all of the markets where we are present. We don't know the exact numbers of our peers. But I think it's fair to say that we used to be on the top 3 on the podium, but on the bronze medal position. Today, we are either on the #1 or share #1, hard to say, KLAFS is the historical leader in the industry. We are exactly at par or slightly ahead. No one knows what that is. But when we know, we will share the final information. Adjusted profitability, an excellent improvement, EUR 24.4 million, and exceeding our long-term target quite nicely at 22.4% on relative terms and with the comparable exchange rates, slightly better in that run. Earnings per share for the full year growing nicely, and operating free cash flow exceeding very well the last year number. Net debt, EUR 30 million and unchanged, and equity ratio of 42%. So solid numbers for the year. I think on the strategic path, we've been executing, keeping eye focused on what we've been doing in the past. So no major news on this one. But on the upselling of the heaters, the team has done a good job with all the brands, all the markets, and then that's been boosted with the very professional offering of the EOS, both on the premium, residential marketplace as well as on the professional marketplace. Then I think within the team, we're always saying that the sale of a complete sauna room is maybe the best example of adding value in the marketplace. On this one, we've been extremely good on the Central European market and also in the U.S. But I think the Central European market has been an area where we've been gaining speed. We've also been gaining share. We've been doing that together with our partners. So it's a job well done for the team. As said, the EOS team, even though I have to say that like the KUSATEK, which is the gas-driven heaters due to the COVID-19, installation and service has not been maybe easy to implement and execute. As a totality, the EOS team has been performing extremely well. I'm very happy for the efforts they've been doing. Then on the expansion. I think we've not been opening too many new markets, still in the infancy with the -- Australia-Pacific, but we've been gaining baby steps over there. Asia, unfortunately, the COVID-19 has had a bit of a drawback for our Asian efforts, but we'll come back to it in a later stage. All of the rest, very happy. And in the U.S., especially happy for our own direct sales as well as for our own web store. They've been doing an excellent job, and they've been able to upgrade. They've been able to upsell in all of the terms, a great job done over there. Central European sauna sales amazingly good in Germany, also in Austria, Switzerland and the neighboring markets, solid performance. And then I think even though it's -- we are still not the leader in Scandinavia, we are behind the #1, but we are catching up, and the team has done an amazing job over there. And even though not mentioned over here, on the domestic marketplace, Finnish team also have been doing good. And even though the growth numbers are not 30% and above, we've been gaining share very nicely on the home market in that respect. Markets where the pandemic has had an impact, unfortunately, quite a bit in all of the Asian markets. And doing business so what that you need to meet with the people, you need to discuss, and they are mainly project related. Same applies for the Arabian markets. What we have been able to sell at the earlier part of the year, we've been implementing and executing. But to get new business onboard has been bit of a tedious work and not so easy. Russia, on and off. And as you can imagine, Russian market is never boring, and we had good moments over there. But as a totality, the market has been hurt quite bad with the pandemic in that respect. But altogether, I think the EOS team and the Harvia team, solid work in Russia, even though it's not visible fully on the numbers. Then on the productivity, and that's an area where I think -- and it's good to remember that we are still a very traditional company. We basically design, develop and manufacture everything we sell. And so we've been ramping up our supply chain quite a bit. And the team and our own team, together with our partners, amazing job done, ramping up a business, which in the past have been used to have 3% to 6% growth and now experiencing 30-plus percent growth, not the job which is very easy and can only be done with an excellent dedication and team effort, amazing job done. Then manpower, for sure, we've been adding manpower over the operations, both in Finland, Romania, U.S. and China. We've also been working longer hours. So excellent agility and flexibility in that respect. New machinery, we've been installing in the China operation, in the Romanian marketplace for the sauna manufacturing, a bit in the Finnish marketplace. And U.S.A., the expansion over there on the facility is ready. Most of the machinery is in, up and running. But some of the ones which are now sailing in late due to the logistic challenge outbound of Asia, they are delayed and will be installed roughly by end of this month and beginning of March. So then we are fully intact on the U.S. marketplace. And as said, we will consider further expansion on the capacity both on the sauna manufacturing as well as the heaters and componentry going forward. And on the productivity KPIs, like the manhours per pieces sold, manhours per euros sold, excellent results in all of the factories. Good job done. Okay. We are not immune to the pandemic. We've been also having cases and incidents with the pandemic, but a very good professional precaution and activity with our team, we've been almost immune to the impact in that respect. On the certain markets, we see positive favorable impacts. And I think on the Scandinavia, partially Finland, a bit on the Central Europe, people have been investing for their homes rebuilding. They've been also activating the plans and maybe upgrading of the second homes and holiday homes. For sure, it's not fully sauna related, but a certain stage during the improvement project bathroom and the related spaces will be on the agenda. We realize that the health and well-being trend is helping us to sell the sauna easier for the new beginners in the sauna world. So that's a positive impact. But on the other hand, Asia markets almost dead, same applies for the Southern Europe, Spain, Italy, France, still very difficult. Arabic markets, very difficult. And Russia, it depends on the region and depends on the -- not even the month, more on the week, how they are performing, so a bit volatility over there. But overall, Harvia and Harvia team, a good job done, who've been able to keep up us safe, healthy and strong and fully operational during 2020. And the same continues this year. Then when having a look on the regional distribution of the top line, especially for the last quarter, I think it's remarkable, even though we've been growing very nicely on the local domestic marketplace, which used to be, in the history, roughly 1/2 of the business, then 1/3 of the business. Now on the last quarter, 18%, meaning that 82% of the business grows outside of Finland. So we are gradually becoming a fully international company in that respect. Germany, a lion's share of the market over there. Central Europe and the rest of the European countries, a healthy portion. And the North American pie is growing, as we speak. But it's, I think, in a way, bit surprising that even though we've been growing so fast, still European markets, together with Germany are so dominant that we foresee quite a bit of further opportunities and leeway on the North American marketplace going forward. Historically, Harvia has been a heater company. We've been trying to make strong steps to become a holistic player in the sauna and spa industry. We've been able to do that. But the acquisition of EOS brought us a sizable part of the heater-related business on that front. And that's why still roughly 1/2 of the business is heater related. On the other hand, sauna is growing quite fast. Control units, thanks to Harvia, Sentiotec and especially EOS taking a big jump forward. And then the only one where we've been struggling, and that's mainly due to the geography, Russia, Arabic countries and Asia steam, steam where we have lost share of sales, but we have not lost market share. So we estimate that we'll be maintaining roughly the market share. And if and when you see the numbers of the other steam generator makers maybe experiencing the same or even worse on the steam marketplace. And I think the reason for the steam, why it's hurt by the COVID, it's mainly installed base and the people who are installing, they're plumbers and electricians. So they've not been able to travel and go to the destination where they do their work. So that's why the activity has been slower than anticipated on the steam. Full year picture, not much different, roughly the same. But on a full year basis, the share of Finland is clearly higher, 25%, rest of the allocation by the market follows the same pattern. And the full year share of the heaters is slightly exceeding the 50%. Then having a look on the last quarter market by market. As said, Finland even though it's not leading the pack on the growth, still clearly ahead of the market, and we've been gaining share, both on the professional as well as on the residential genre. Scandinavia, amazing numbers. Keep in mind that we have a fairly small but professional sales team of 2 people, doing excellent job over there, gaining speed in Sweden, gaining speed in Norway and gradually improving situation in Denmark. And we still have a lot to do over there. Germany, we've been able to improve our physical presence with the showrooms and then adding the EOS offering on top of the one we had. And that in conjunction with the sauna sales amazingly good numbers over there. Rest of the European marketplace following the same pattern. Russia altogether, even though it's been a tough journey, keeping in mind the devaluation of the Russian ruble and I think the end of the year, it's finished with 90 something, and we started with something clearly different, that number. Altogether with Harvia and EOS, a good job done on a steady growth. And keeping that in mind, we also been doing consolidation in our distribution platform. And in the Harvia distribution platform, we've been going down from 3 distributors into 2, gradually by January, we are ready for the 2 distributors on the Harvia. So we've been skipping and focusing more on that one. North America, excellent job on the heaters and componentry and that topped with the performance of almost spa and sauna, you get the nice numbers. And I think here, we've been challenged a bit with the capacity limitations. And then some of you've been maybe monitoring how our web store has been able or not able to offer products for the consumers. We've been, unfortunately, needing to limit the availability of the merchandise. But when we get the machinery up and running, we can come back to business in a full speed. And then the other markets, mainly comprising of the Asia, Arabic countries and the related markets, that's where we book, unfortunately, a bit of a negative development. Full year picture roughly following the same pattern and the same phenomenon, so we're not diving into deeper details. We'll maybe raise up the excellent American performance and then the solid performance on the Central Europe, with both EOS team and Harvia and Sentiotec team doing a good job. Now then full year. This is the last quarter, on the same phenomenon. Sauna, heaters clearly leading the pack and biggest upside on this respect. Sauna rooms, even though we've been delivering with full speed, still not able to catch up, but that's where we have the most limitations. And also having said that, maybe during last quarter, a bit of challenges in supply of the raw materials. And now that's why we've also been having a bit of limitations of supply. And then the full year, on the categories, roughly the same pattern in that respect. But altogether, a nice journey and going close to EUR 110 million in that respect and taking us to the shared #1 position or to #1 position in the industry. Then on the profile of the revenue on the quarterly base, I think it's good to remember that during the first quarter of this year, we did not have the EOS offering and team onboard. We still believe that the quarter number 1 and the quarter number 4 are the strongest for the sauna and spa market. And then we have 2 bit of mediocre quarters in between. And then the same applies roughly for the profitability profile of the company. So I think one could expect that the pattern would follow. When we become more international, the pattern will slightly change and will be more evenly spread, but as we speak, that's roughly the profile going forward. Then maybe just a recap on what we are doing. And our mission is the healing with the heat. And our ultimate mission is to offer people the opportunity to experience sauna and to experience the healing power of the heat. That's what we are doing day-in, day-out. And I think our peers been doing the same. And as a totality, the sauna and spa industry is enjoying a fairly favorable trend. When you combine that to the physical well-being results, I think that's a good favorable thing going forward. And on top of that, we have the mental health, which is a bit more difficult to describe, put into a medical journal, but the ones who've been experiencing it know it, and the word-of-mouth is spreading the word quite fast on the market. And we are the ones who are enjoying that. I think on the traditional sauna, Harvia is stronger than ever, still on the infrared. We are not exactly where we would like to be, and we still have a lot of room to improve. And the same applies for steam. Harvia together with EOS are rather good and okay for the residential steam. For the professional steam, we still have work to do, and especially when considering the full complete project work for the steam, we have a lot to do on that arena. We'll not do a major division on our strategic path with the profitable growth. We'll continue focus on increasing the value of the average purchase. And I think the sign of success on this one is the sale of the complete sauna rooms, and that's what we've been doing. And also individual -- together with the EOS and the team in the Central Europe, we've been able to penetrate into more premium category, get into a big ticket projects. And then on the geography, will continue increasing our presence in the North America, Canada included. And then the Asia market when the pandemic is gradually evading and we all get vaccinated, we can go back to traveling, meeting with the customers, I feel very sure that we can do good improvements over there. And even though Australia, not a big marketplace, still see an opportunity over there. Now with the productivity improvement and with the capacity enhancement over there, I think we have a good game plan how to take us on the next level over there. So next, I will pass to Ari. Thank you, and I will come back when we entertain the questions. Ari, floor is yours.

Thanks. Yes. You certainly noticed already from the previous pictures that actually the growth accelerated a little during Q4. Q4 is really the strongest quarter for Central Europe, as we see from the German figures and other European figures and also in Northern America. And business there is pretty profitable and that we can see also in the profitability of Q4 in financials. So the EBITDA -- adjusted EBITDA improved actually 5% compared to last year from 24% to 28% roughly during Q4, and it improved also the complete year quite much. You see, we also exceeded our financial targets in the adjusted operating profit. And that's nice, and that is reflected, of course, in the earnings per share and many other key figures. What, as a financial guy, I am especially delighted is that we were able to improve our cash flow. So actually, the operating cash -- free cash flow or cash conversion rate, it was quite exactly 100% of the EBITDA. So we were able to finance actually our investments during 2020 or the reduction of the relative net working capital. So the net working capital management went pretty well actually during that year. And that helped also us to improve the cash situation towards the end of the year. Some other key figures, the adjusted return on capital employed, it's really, really high, 73%. One has to remember that we have deducted there the goodwill out of the employed capital. So that's the way how we calculate it. But it's -- that figure has been improving a lot during 2020. And we have got a lot of new colleagues from roughly 400 persons over 600 during the year. And biggest part of the increase comes from EOS Group, but we had also a lot of recruitments, especially in Finland in the heater production. So that -- I was one page late. Now let's go to the financial deeper. The net debt was able to go down quite clearly during the year and the leverage actually went under our long-term targets. The targets are between 1.5x to 2.5x, now we are at 1.1x, and that enables, of course, us the investments to be paid out of the cash flow and pay also quite nicely the dividends, which I'll come back to a bit later. On the right side picture, you see our net finance costs. And actually, the dotted line is the level of costs, which we have quarterly, cash-based, so that what we actually get in and pay out interests and the other deviations from that cash-based interest cost, they are more or like IFRS-related valuation things of financial instruments or discounting interests for the redemption liability of minority and so forth, so more of a calculatory items. But the dotted line shows actually what we are paying out and what we are getting in. That's just for analysts if they follow this. Okay. We increased the level of investments at the end of the year, as Tapio already told. And in some machinery investments, we are still a bit late, that we can increase more the capacity, what we've been able to do now. But this -- a bit higher level of investments goes on now in the beginning of 2021 and throughout the whole year. And actually, the biggest current investment we just decided is this new factory building in U.S., where we have, well, 2.5x as much space as in our current facilities, which have been also improved lately with machinery and repairs. But this gives us much more options and opportunities to grow in future. Probably you can add?

No, not much to add. But I think our team in the U.S. have done a good job, and we were very lucky to find a premise very close to the existing factory in Renick. This is roughly 50 miles apart. And the same team we have over there can potentially move in this one. The building is in an excellent shape. I don't know whether we can disclose, but it's the next ABB building. So it's in a very good shape. And it's all in 1 level, so flooring and everything is perfect. And I think in the first go, and it take a bit of a step back in the history. When we acquired Almost Heaven Saunas, they were on the 3,000 to 5,000 saunas on a given year. We now lifted up the capacity roughly to 7,500. And with the new premise, with the same machinery, a bit of a new layout, a couple of additional machinery can go 10,000 and beyond. And then we still have a bit of a room to expand with rather marginal capital expenditure and potentially doubling the capacity of the U.S. facility. And then I think also at the same time, we are planning to have a bit of a more versatile offering for the U.S. marketplace. And as we are not fully into the infrared business, as we speak, we are considering how to potentially do that. And then also steam some ideas and plans for that going forward. But a good catch, and this is still subject to due diligence. And I think the only one which could potentially kill is the environmental, but we have the first results, it looks good.

So the closing of this investment, final closing is planned end of April, beginning of May, and we will move the part of the production to this building during the summertime to be prepared then for the next year main season in September and beyond. Okay. Then the Harvia's shareholders situation. Now the share of the nominal registered or non-Finnish shareholders is 45%. We have our anchor shareholder from the end of 2019 Onvest Oy with 12.3%. And we have got plenty of new household and private shareholders, as you see from the picture on the right side. So especially during Q4, we have got a lot of new members in the shareholder club, so to say, thank you for joining us. And this has delighted us a lot. Then the financial targets, as we published them, they are still the same, but this plus 5% is excluding, of course, acquisitions and special situations, advanced demand and so forth. But in the long term, our market intelligence says that global sauna market may grow plus 5% annually or something like that. And then profitability, we target, of course, over 20% EBIT level. And now we reached and exceeded it quite nicely. And leverage that has been discussed already earlier, we try to keep somewhere in between 1.5x to 2.5x, but we can also be sometimes outside of that range when making some acquisitions or whatever investments. And the dividend policy has been that we target at least 60% of the group net income in total to be paid out as dividends annually, and we pay dividends twice a year, the total amount. So the dividend proposal of our Board of Directors is really so that we have now the base dividend of EUR 0.39 per share, paid in 2 installments. And then an additional Harvia 70-year celebration dividend of EUR 0.12. So in total, we -- accepted by the Annual General Meeting, we will pay out EUR 0.51 per share, that's EUR 9.6 million in total, roughly, and it is exactly 60% of the group results, net results. So that is the Board proposal currently. So if you have any questions, we are ready to answer. Please, floor is yours.

[Operator Instructions] Our first question is from Maria Wikstrom of Danske Bank.

And congratulations gentlemen for a very good quarter. Do you hear me?

Yes. Loud and clear.

Very well.

Okay. Yes. Okay perfect. Just checking in. Yes, this one might be a difficult for you as well, I mean, to answer. But maybe if I start, I mean, if you could describe a little bit on the trends in the heater market in the beginning of the year. So have the same trends that you saw in Q4 continued in the beginning of the Q1? And then, I mean, you said -- if I expand the question a bit, and you said that you've seen that the demand, especially in Finland, Scandinavia and Central Europe, has been -- they have been growing partly as so many people have been investing in their homes during these COVID times. But how do you see, I mean, the market to normalize? Or do you -- like how we should look at the demand pattern during 2021?

Thank you, Maria. Maybe on the first one, on the trends, and I think we don't see or experience any change on the trends in that respect nor on the heaters, nor on the saunas, in all of the categories. We represent roughly continuously on the same. Then for the tricky part of the question is how the demand will be shaping in the coming 3 to 5 years? And I think no one knows exactly how that's going to play out. But I think the analogy and psychology when people are upgrading their homes, when they upgrade their second homes or they acquire new homes or new holiday homes, usually, most of the people, it's a big investment. They do it at the one go, maybe even go to the bank and take mortgage. But then for the rest, they pay out of pocket or at least try to finance on a sustainable way. The time for the things when they go to from a kitchen to the living room and to the bathroom will take time, and I think it's a multiyear program in that respect. Don't expect any fast change in that respect. Travel will come back. When people are traveling, they will maybe travel more regional and even more domestic. And that's why the hotel and accommodation industry has been prepping up their capabilities of entertaining people. I think that will continue. And I think the sauna trend and the health and wellbeing trend in general will be helping not only Harvia, but everyone in the industry a bit. But what is the totality and the total impact of all of this, very difficult to say. But I don't foresee any sudden changes in that respect. I hope this helps, but it was not a complete answer.

Then I'd like to touch on the transportation situation from China. I think, I mean, what we have heard that there has been some limitation on the available capacity on the sea freight from China, now around the Chinese New Year. So what is the situation on the availability? And then just if I look at the screen prices, I mean they have been skyrocketing for the sea freight. And if I understood correctly, I mean, quite -- some of the low price heaters are transported from the Chinese factories. So how do you, I mean, see this affecting the profitability? And are you able to increase the pricing of the products that are coming from the Chinese factories?

I think your analysis on the current status with the logistics and sea freights is absolutely correct. And the market is really in turmoil, and we are not talking about increases with percentages, they are with multiples and the multiples are 3x to 6x, depending on the case. And the availability is still not guaranteed even though one would be prepared to pay a sky-high price. We are in a fairly good, sustainable situation. Most of the ones we are exporting out of China, customers are paying for the freight and the ones where customer is not paying for the freight, we've been able to adjust and we'll be able to adjust the prices going forward. We expect the situation to last for some time, maybe even still a bit after the Chinese New Year. But then I think everyone is, first of all, forecasting and also hoping that to be settling down. But if not, then I think we have the ability to act on the pricing in that respect. So don't expect any major hiccup or hurts into profitability for this reason.

And then my final question is, I mean, you've been executing, I mean, very successfully in M&A strategy. And now lately, I mean, we've seen private equity interested also in the sauna assets, which I would read that, I mean, it's quite likely that, I mean, some of the prices of the acquired assets will go up. And now at the same time, I mean the -- you went with an organic path in the North America, expanding the factory capacity. So if you could discuss a little bit that has the dynamic changed? And has the organic growth options has become more attractive if, I mean, there are more people -- more parties interested in the available sauna assets that might come to the market?

Very good question. Maybe first on the organic growth and investing on that. I think that's, in a way, a necessity. We've been facing a demand with the current asset base, we cannot fully cope with, and we need to be able to comply with the increased demand, and that's why we've taken that step. And that's an area we know. We know how to make it. We know how to produce, how to market and merchandise our offering. So that's a safe choice. And I think as Ari indicated on the CapEx for the 2021, we'll most likely see a bit of an unusual higher number compared to the historical capital need for the company because the U.S. investment is not the only one we have in the plans, but I think that's all good. On the M&A activity, I think we've also been monitoring and having some on the pulse. Clearly, more activity than in the past. Private equity has been taken actively part into the game. They acquired KLAFS, a Dutch-based private equity Egeria, both of them, don't know the exact valuation, but know roughly, and they've paid a fair -- good price for that. And also in the smaller part, which is maybe not exactly linked with our industry. But in Germany tree, I bought 1 asset, which is basically on the active backyard living top of a region, and they also had an add-on with the Scandinavian player completing the same act in backyard living, and some of that is sauna area where we are supplier for the heaters and equipment. We'll be monitoring the assets, good quality assets. Never go on a fire sale, they're going to be having a fair valuation. But I think still, the valuations show that we have ability to act if and when a suitable asset is in the radar screen.

Yes. We are already active in M&A, if needed. But one thing we have to point out also that Harvia's long-term competitiveness and profitability level doesn't come suddenly, it has taken really, really years and centuries time to develop this level of business model and so forth. So we -- I personally, at least, don't think that it's so very easy to copy that so quickly or to compete with a similar kind of business in short term.

I don't know, Maria, whether we were able to answer your question, but at least we tried.

[Operator Instructions] We have another question from Maria Wikstrom of Danske Bank.

Yes. Okay. Then one more, if there wasn't anybody else in the queue, which is on the very good profitability that you reached in the -- I mean, throughout the year and especially now in the final quarter. Would you say that the biggest driver for the high profitability is the volume, so you have a good leverage on the system, or how would you describe, I mean, the driver in the profitability?

I think for sure, volume helps because that gives you a good overhead recovery. But on the other hand, what we've been doing in the profitability improvement, I think we can tick most of the boxes in that respect that we've been able to do the upselling, we've been able to do the upgrading, we've been able to command a decent price from the marketplace. So it's an outcome of multiple features in that respect, and not only the volume.

Yes. And we actively really improve the profitability all the time, the overall effectiveness, not only in production, but also in supply chain and in our overhead. So it's a continuous process.

But I think one thing. Most of you may remember who've been longer-term with us, we've always been stating that the profitability in the heaters and componentry is clearly higher and in a different league than the sauna. During the journey, we've been also learning how to make saunas more profitable. They are not still yet equally profitable, but they've taken a good step forward.

Perfect. And if there is -- I mean if I have a little bit more time, I'd like to go back to the demand trends in the Scandinavia segment. As now it seems that, I mean, you have a setup in place that enables you to grow in Scandinavia. I mean that hasn't been your home turf, but you have been taking market share how I at least see it at the moment. So can you walk us through a bit of the steps, I mean, that how you can grow the business further from here?

In -- regarding Scandinavia?

Yes.

I think we've been able to first -- in the history, if you take 2 years back, Harvia was mainly in a retail channel, nothing else. And now we've been in the entry level. We've been, first of all, expanding our presence in the retail channel. We have now multiple partners, and we've been able to upgrade the offering. We still don't have the superpremium heaters available, but we have the medium and on the higher price point heaters and equipment and accessories available. And also in terms of accessories, our current coverage on the accessories in Scandinavia is way better than in the Finnish marketplace. And also the demand for the heater-related accessories for the Scandinavian marketplace is clearly bigger and more important for the market than in Finland. And then on top of the retail, which is more the residential customers as well as on the small father-son and one type of installators and builders, we've been able to open the professional channel. The professional channel is still not a lion's share of the business. But gradually, we've been able to creep in. We've been able to offer equipment and solutions, which are comparable, maybe even better than the alternative, which is the local player and gradually gaining share and exposure within the community and I think we continue doing that. And I think we have a very good inroad into the Scandinavian marketplace. And then still not a single heater sold from EOS. And going forward, we still have plans to introduce EOS for the Scandinavian marketplace as well. And we feel that's going to be a fair competition with the local leading brand on the marketplace.

Perfect. And then you touched upon the EOS expansion. Is there any news regarding EOS being sold also in North America?

We are still in the approval process, but we are gradually getting models in. But as I said, when we acquired the company, it's a 1 year to 1.5 years before you get the first approvals. And now we are halfway the journey. In between, we've been able to have our own members into the standardization committee. So we have clearly better insight what to do, how to do it, but still it'll not be speeding up the process. So I think within 0.5 year or 9 months, we're going to see something on that area.

And we do not disclose the figures of separate companies. I have to say that we are really, really happy to see that the basic business of EOS is growing also currently, very strongly.

No further questions at this time. So I'll hand back over to our speakers.

We have 2 questions from Harri Wallenius from Nordea. How much sales have you missed due to the production capacity limitations.

The question was how much...

How much production...

Sales, have you missed due to production capacity limitations?

Very difficult question. And I'm afraid I cannot fully entertain the magnitude. But as we've been also mitigating the -- especially for the U.S., we've been stepping away from any special offers, we've been reducing the number of campaigns and Central Europe, we've been collecting orders. Our order books are thicker than normally. But how much we've been missing sales, I have to say I don't know in due time.

Any cancellations of the orders, but the delivery times, they have prolonged, yes.

Other one from Harri Wallenius. How has the cold Q1 2021 affected sales? Have you experienced a lot of excess demand due to the favorable conditions?