Hirsilinna hirsitalot ja hirsimökit

FIFTIES
Honkarakenne Oyj is the company behind the Honka brand. Company was founded during the fifties. This was the time when Finland was being rebuilt in the aftermath of the WWII. Name of the game was speed and new technologies and materials. To stay with the competition, Honkarakenne took hand hewing and started to turn it into an industrial process.

SIXTIES
Industrialization and use of heavy machinery in the production of round logs cemented Honkarakenne’s position as one of the market leaders in Finland. Industrial manufacturing in turn helped Honkarakenne Oyj to increase productivity and that lead into sales expansion towards export markets. After all, Finland is a small market and wouldn’t suffice as a sole market area, thus next big areas of development were marketing, sales and exports.

SEVENTIES
Sales started to pick up and volumes grew rapidly. Increasing home market saturation and also Finnish mark (currency) devaluations were reasons for internationalization. Japan is the first big foreign market.

EIGHTIES
Stock market listing brings cash for the company to really kick-start international operations. Honkarakenne solidifies their status as a leading log home manufacturer and garners strength for future growth.

NINETIES
This decade sees Honkarakenne to complete their internationalization process. Honka brand is now known on all three main markets in Asia, Europe and North America. Subsidiaries are in charge of local business operations.

Honkarakenne expands outside their traditional business area and starts a subsidiary named Honka Holiday that operates cottage-renting business. Company is looking new markets to increase sales.

YEAR 2003
Honkarakenne agreed to build the world’s biggest log home to Russia’s Sochi. House was to cover 4500 square meters and would have swimming pool, several saunas, restaurants and other luxury amenities. This one log building was just a part of bigger project totaling 20 log house cottages.

Year 2003 was otherwise very challenging for Honkarakenne, as they started to rationalize their operations. They had too many manufacturing locations to be truly efficient and downsized as well as closed down their sawing operations.

Cottage renting business, which had been part of the company since 1996, was separated and it started to operate under the name of Honka Holiday – yet another attempt to streamline organization.

YEAR 2004
This year saw one life-changing decision from Honkarakenne. They introduced Aitokoti brand, a line of log homes, which were designed to fit suburban areas. Vacation home building has seen its better growth days domestically and now growth would be in the area of normal home building. This approach worked and is working well in Finland, which might be the reason, why Honkarakenne tested similar features in Germany.

Year 2005
Year was catastrophically dire for Honkarakenne because their sales plummeted in Germany and slowed in Japan. Traditionally these areas have been very strong for Honkarakenne. Moreover their recent investments on Alajärvi and Karstula factories have taken toll on company’s finances and while slowing sales mean less manufactured log homes – modernized factories have not been utilized to the fullest. Technology investments have also included information and process technologies to optimize production and logistics. place at different locations.

Problems in Germany can be pinpointed to the fact that company walked over their sales network and introduced new concept of selling housing packages. This move was aimed to higher visibility and ease of operation and increasing profit margins. In practice Honkarakenne was trying to turn into homebuilder instead of vacation homebuilder. However, German customers are used to unique and personal housing solutions and resulted mess dwindled sales. Now operations have been returned back to previous and sales have picked up. Year 2006 should therefore be much better.

Year 2006
This year has seen interesting developments at Honkarakenne. They have joint-operation with Finwood to manufacture lightwood storage cabins and other light structures. On the other end of spectrum they invested on TimberHeart and that increases their factory utilization plus they will have a shot for new inroads to get design-oriented customers.

In the United States, Honkarakenne decided to switch gears and instead of their subsidiary leading marketing and sales, they now trust in six independent importers to open the market.

21.07.2006 Honkarakenne issued a profit warning. Turnover isn’t developing as estimated and therefore profit is also going to be lower than expected. However, result is going to be better than year 2005 and because third and fourth quarters are the strongest quarters, they still might reach the goal for this year.

TODAY
Today, Honkarakenne has over 150 distributors, agents and dealers worldwide. Two thirds of the production is exported, and Honkarakenne happens to be the only log home and log cabin manufacturer that operates locally on all three main markets – Asia, Europe and North America.

Honka product lines include pre-designed but customer modified buildings and also totally custom-designed log structures. Company has introduced designer models to attract new customer segments.

Company has been trying to develop project building expertise by taking part into new construction projects with builders and investors. Holiday centers, spa accommodation, hotel lodging or vacation areas. These sorts of projects don’t have stellar profit margins but they do generate lots of turn over so they can be very lucrative for big industrial player. Here they have an advantage because not to many construction companies have such material expertise.

More about Honkarakenne Oyj at their website.

SOURCES FOR THE ARTICLE:
Financial statements
http://helecon3.hse.fi/FI/yrityspalvelin/pdf/2002/Ehonkarakenne2002.pdf
http://helecon3.hse.fi/FI/yrityspalvelin/pdf/2003/Ehonkarakenne2003.pdf

NAN financial statements from 1988 to 1999
http://www.nan.shh.fi/corp/Honkarakenne/index.html

Cooperation with communes, construction companies, builders, investors, developers
http://www.kaupunkiuutiset.com/artikkelit/arkisto/artikkeli.php?artikkeli_id=972
http://www.teijo.fi/lomarakentaminen/honkarakenneoy/
http://www.laatumaa.com/page.asp?Section=10&Item=496
http://english.forestindustries.fi/index.html
http://www.maastorakentajat.com/index.php?id=24
http://www.aitokoti.fi/
http://www.kerimaa.net/cottages.php

Process development
http://www.anilinker.com/anilinker/references/cases/honkarakenne.xhtml

Biggest log home
http://newsfromrussia.com/main/2003/10/15/50517.html

News
http://www.arvopaperi.fi/article/id=18695
http://www.yritysopas.com/uutiset/2003-07-02-Honkarakenne-irtisanoo/

Articles
http://www.yrittajat.fi/sy/home.nsf/www/yrittamisenjuhlaa1986_1990/$file/honkarakenne_oy.pdf
http://www.comfortloghouses.com/Honka%20brochere/Born+in+Finland+20060629.pdf

Yesterday I got mail from Honka log homes company. They had printed several successful case studies from their various business categories and now were sending them around capital area.

I can draw some interesting points from their pamphlet. First of all, they have added Timber Heart on this ad. It is there along with their other independent divisions. You might remember this post that I wrote while back.

Another thing that catches my eye is the recreation and project services. They claim that their service package includes: lot search, design, building permissions, construction, after services and local knowledge. Nice punch of claims, sure sounds nice.

Honkarakenne, holder of Honka log homes brand, has published financial results for year 2005. In short, company took a beating on two important export areas, Germany and Japan, while other markets were doing well. Turnover was nearly 80 million euros and loss bit over one million euros.

Sales to Japan fell primarily because of the weak value of yen. American log home companies now have the advantage in Japan, because dollar is not as strong as euro is when compared to yen.

Germany is totally different matter. Country is part of euro zone and currency fluctuations don’t affect the business. However, images and trends do affect. This is why Honka is in trouble. Company has been promoting the idea of ready-made homes but customers have not embraced the idea. Sales have dropped as marketing investments have supported the new business model. As a concrete example, Germany’s share of Honka sales used to be 20% but now Germany contributes with only 10%. Company is now returning back to basics and supports the sale of unique log homes and log cabins.

Russia remains an interesting market area as country’s building tradition favors massive logs. Honka happens to be an expert in log homes and cabins that are manufactured from massive pine logs. Russia’s economy is also regaining strength, therefore creating possibilities for recreational housing investments – golf courses, company getaways and accommodation cabins being high on the list.

United States gets mentioned only indirectly, “The objectives set for 2005 were met in France, other Central European market areas, and in the United States.” Read the paper at Honka investor page.