Commentary from the management
Harju Elekter's 2024 began with more modest results than in the year before. In
the longer term, however, it was still a strong first quarter. Despite our
efforts to minimise seasonality, the Q1 and Q4 results tend to be weaker than
the Q2 and Q3 results. In this year as well, the significant increase in
production volumes started in March, and based on orders is expected to continue
until the end of autumn.
The biggest contribution to the financial results originated from production in
Lithuania, and from production in Estonia to some extent. The Finnish production
unit has a number of activities ahead to restore its profitability, and we can
be increasingly optimistic about the Swedish unit's return to profitability,
which has taken longer time than anticipated. Amendments to the Finnish national
energy network regulations that govern distribution networks had a significant
economic impact on sales results in Estonia and Finland, resulting in reduced
investments for the current and coming years.
On 11 March this year, the Regulation of the European Parliament and of the
Council banning the use of fluorinated greenhouse gases (SF6) in electrical
equipment from 2026 entered into force. For Harju Elekter, this will very likely
mean that a number of electricity grid contracts will be amended or cancelled in
2025. As equipment manufacturers are only starting up their production of SF6-
free equipment, a shortage situation could emerge in the market, affecting both
the availability of equipment and leading to a sharp increase in prices. This,
in turn, will lead to significant fluctuations in the volume of orders for
complex substations before and after the commissioning date of said equipment.
By today, we have completed the restructuring commenced in the second half of
2022, which transformed the management of the Group and its subsidiaries,
sharpened the focus on core activities, and provided for other important steps
to be ready for the implementation of the new strategic development plan. There
is no development without growth, which is why we will keep looking for
opportunities to continue profitable growth in both existing and new locations.
Revenue and financial results
The Group's revenue in the first quarter was 46.8 million euros, representing a
3.3% growth compared to the same period last year. Sales of electrical equipment
showed stable growth and made a significant contribution to the company's
revenue, amounting to 42.2 million euros and accounting for 90.3% of total
quarterly revenue. The majority of electrical equipment sales consisted of
substations, low-voltage distribution equipment, technical buildings, and
subcontracting services.
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EUR '000 3M 3M +/-
2024 2023
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Revenue 46,775 45,269 3.3%
Gross profit 4,836 5,386 -10.2%
EBITDA 1,941 2,382 -18.5%
Operating profit (EBIT) 976 1,309 -25.4%
Profit for the period 361 749 -51.8%
Earnings per share (EPS) (euros) 0.02 0.04 -50.0%
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The Group's operating expenses in the reporting quarter totaled 45.7 (Q1
2023: 43.8) million euros. The main part of the increase in operating expenses
came from a 5.2% rise in the costs of goods sold and services, which lagged
behind the growth rate of revenue by 1.9 percentage points in the first
quarters.
Marketing expenses decreased by 11.8% to 1.2 million euros, representing 2.6% of
both the Group's operating expenses and revenue. Administrative expenses
decreased by 2.4% to 2.5 million euros compared to previous quarters,
representing 5.5% of the Group's operating expenses and 5.4% of revenue for the
reporting quarter. Labour costs increased by 5.7% compared to previous quarters,
amounting to 10.0 million euros.
While revenue increased, profitability declined compared to the previous year.
The three-month gross profit was 4.8 (2023 Q1: 5.4) million euros, resulting in
a gross profit margin of 10.3% (2023 Q1: 11.9%). Operating profit (EBIT)
amounted to 1.0 (2023 Q1: 1.3) million euros, with an operating margin of 2.1%
(2023 Q1: 2.9%). Net profit for the first quarter was 0.4 (2023 Q1: 0.7) million
euros. Earnings per share for the first quarter were 0.02 (2023 Q1: 0.04) euros.
Core business and markets
The Group's core business, Production, accounted for 94.9% of the revenue of the
quarter. The production segment's revenue increased by 4.2%, amounting to 44.4
million euros.
The Group's largest target markets, Estonia, Finland, Sweden, and Norway,
together accounted for 80.6% of total revenue in the first quarter, representing
a significant increase compared to the previous year (2023 Q1: 75.3%).
Estonia and Finland markets were more modest compared to the previous year. In
the reporting quarter, revenue from Estonia amounted to 4.5 (2023 Q1: 5.0)
million euros, comprising 9.6% (2023 Q1: 10.9%) of consolidated revenue. Sales
of substations and cable distribution cabinets to electricity distribution
sector clients decreased, while rental income from real estate properties
increased. From the Finnish market, revenue amounted to 17.0 million euros,
which is 8.9% less than the previous year. The majority portion of the revenue
decline was due to reduced sales of electrical equipment and electrical works.
Sales of substations to electricity distribution sector customers and electric
vehicle chargers remained modest.
There was a significant growth in the Norwegian market, where revenue doubled to
9.3 million euros, primarily from the sale of low-voltage equipment to maritime
sector customers. The Norwegian market accounted for 19.9% of consolidated
revenue in the reporting quarter. Revenue from the Swedish market also slightly
increased, reaching 6.9 (2023 Q1: 6.5) million euros, indicating stable
development in this market segment.
Investments
During the reporting period, Harju Elekter invested a total of 0.7 (Q1
2023: 0.6) million euros in non-current assets, including 0.4 (2023 Q1: 0.3)
million euros in investment properties, 0.1 (2023 Q1: 0.3) million euros in
property, plant, and equipment and 0.2 (2023 Q1: 0.1) million euros in
intangible assets. The investments primarily focused on extensive renovation and
reconstruction works in the Keila Industrial Park, aimed at meeting the long-
term needs of a tenant, Prysmian Group Baltics. Additionally, investments were
made in production technology equipment and production and process management
systems.
The total value of the Group's long-term financial investments as of the
reporting date was 29.3 (31.12.23: 29.2) million euros.
Shares
The company's share price on the last trading day of the reporting quarter on
the Nasdaq Tallinn Stock Exchange closed at 4.79 euros. As of 31 March 2024, AS
Harju Elekter Group had 11,103 shareholders.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
Unaudited
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EUR '000 31.03.2024 31.12.2023 31.03.2023
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ASSETS
Current assets
Cash and cash equivalents 1,444 1,381 1,028
Trade and other receivables 49,050 38,837 37,627
Prepayments 1,400 1,071 1,945
Inventories 35,900 36,834 44,704
Total current assets 87,794 78,123 85,304
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Non-current assets
Deferred income tax assets 868 731 1,002
Non-current financial investments 29,313 29,244 23,767
Investment properties 28,922 28,856 24,766
Property, plant, and equipment 33,549 34,067 35,042
Intangible assets 7,440 7,354 7,284
Total non-current assets 100,092 100,252 91,861
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TOTAL ASSETS 187,886 178,375 177,165
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LIABILITIES AND EQUITY
Liabilities
Borrowings 22,576 19,387 18,366
Prepayments from customers 20,946 18,870 21,310
Trade and other payables 27,432 23,159 31,888
Tax liabilities 2,978 3,308 3,033
Current provisions 150 140 1,950
Total current liabilities 74,082 64,864 76,547
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Borrowings 23,207 23,481 20,412
Other non-current liabilities 32 32 0
Total non-current liabilities 23,239 23,513 20,412
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TOTAL LIABILITIES 97,321 88,377 96,959
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Equity
Share capital 11,655 11,655 11,523
Share premium 3,306 3,306 2,509
Reserves 23,261 23,055 17,815
Retained earnings 52,343 51,982 48,552
Total equity attributable to the owners of
the parent company 90,565 89,998 80,399
Non-controlling interests 0 0 -193
Total equity 90,565 89,998 80,206
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TOTAL LIABILITIES AND EQUITY 187,886 178,375 177,165
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CONSOLIDATED STATEMENT OF PROFIT AND LOSS
Unaudited
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EUR '000 3M 3M
2024 2023
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Revenue 46,775 45,269
Cost of sales -41,939 -39,883
Gross profit 4,836 5,386
Distribution costs -1,195 -1,356
Administrative expenses -2,517 -2,580
Other income 19 18
Other expenses -167 -159
Operating profit 976 1,309
Finance income 92 75
Finance costs -590 -549
Profit before tax 478 835
Income tax -117 -86
Profit for the period 361 749
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Profit attributable to:
Owners of the parent company 361 781
Non-controlling interests 0 -32
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Earnings per share
Basic earnings per share (euros) 0.02 0.04
Diluted earnings per share (euros) 0.02 0.04
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
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EUR '000 3M 3M
2024 2023
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Profit for the period 361 749
Other comprehensive income
Items that may be reclassified to profit
Impact of exchange rate changes of a foreign subsidiaries 106 -41
Items that will not be reclassified to profit
Gain on sales of financial assets 0 0
Net gain on revaluation of financial assets 70 36
Total comprehensive income for the period 176 -5
Other comprehensive income 537 744
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Total comprehensive income attributable to:
Owners of the Company 537 776
Non-controlling interests 0 -32
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Priit Treial
CFO and Member of the Management Board
+372 674 7400
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