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Financial results, 1-6/2010

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Harju Elekter                     Quarterly report                    05.08.2010

Financial results, 1-6/2010

.                              million EEK               million EUR
Key figures                 1-6/2010  1-6/2009  2009   1-6/2010  1-6/2009  2009
Sales revenue                 264.6     353.7   632.7   16.9      22.6     40.4
EBITDA                         14.8      26.1    48.3    0.9       1.7      3.1
EBIT                            3.9      16.2    28.3    0.2       1.0      1.8
Net profit for the period      18.2      11.1    21.7    1.2       0.7      1.4
incl equity holders of the Parent 18.1    9.7    19.2    1.2       0.6      1.2
EPS (EEK/EUR)                  1.08      0.58    1.14    0.07      0.04    0.07

At the end of the period
Total assets                  740.8      547.2   618.1   47.3      35.0    39.5
Owners' equity                569.6      400.4   480.5   36.4      25.6    30.7

Average number of employees on the current period        427       457     452
Number of employees at the end of the period             446       486     464

Regardless of the present economic situation, the financial results of the
Group were as expected and the Group was profitable. The consolidated sales
revenue of the Group in the second quarter was 130.5 million kroons (8.3
million euros), which was 24% less than the result of the comparable quarter.
The consolidated sales revenue of the H1 2010 was 264.6 million kroons (16.9
million euros), which was 25% less than the result of the comparable period.
The core business of the Group is the production and sales of electrical
distribution systems and control panels as well as other supportive side-
activities (hereinafter „Production“), which was traditionally the largest
share of sales revenues, 86-87% (90%). The sales revenue on production
received from customers outside of the Group decreased by 27% to 112.8
million kroons (7.2 million euros) in second quarter and were 230.5 million
kroons (14.7 million euros) in H1 2010. The main reason for decline was the
market recession in Finland.

Of the markets, the domestic markets (Estonia, Lithuania and Finland) of the
Group's companies prevailed, where 78.3% (93.7%) of the Group's products and
services were sold. 65% (69%) of Group products were sold outside of Estonia.

Sales to the Estonian market decreased by 8.4 million kroons (600,000 euros)
within the reporting quarter and by 18.4 million kroons (1.2 million euros)
for the half-year. The decrease in sales volumes was, on the one hand, caused
by the alterations in the product groups of the energy sector, when on the
domestic market the demand for cheaper products increased and the sales of
compact secondary substations decreased, and, on the other hand, by the
decrease in the sales volumes of metering boards which, in turn, was caused
by the decrease in connections. While up to one-third of the products and
services of the Estonian segment are sold outside of Estonia, the situation
on foreign markets, especially on the Finnish market, had a great effect on
the economic results of the accounting period. The sales revenue of the
Estonian segment decreased by 27 million kroons (1.7 million euros) in  half-
year, with one-third being a result of a decrease in export. The main decline
in realisation on foreign markets was caused by the decrease in sales volumes
of distributing and compact secondary substations in Finland. However, the
supply to Portugal increased by 1.6 times within the half-year.

The recession of the Finnish economy continues, although there are a few
signs of an upturn, mainly regarding export. The domestic investments of
Finland during the accounting period were irrelevant. Finnish metallurgical
and engineering industry enterprises are still struggling. The revenues from
sales to the Finnish market decreased the most - by one-third within the
second quarter and over 40% during the half-year. However, the sales volume
of the Finnish company to the domestic market, compared to the first half of
2009, decreased nearly twice within the half-year. The decrease in sales
volume of the Finnish segment was 27% during the second quarter and 31%
during the half-year. The domestic decrease is partly compensated by the
increase in export to Sweden. Malaysia was added in the second quarter as a
new market. In total, goods with a value of 30 million kroons (2 million
euros) were sold to these markets, accounting for 28% of the sales volumes of
subsidiaries.

In 2009, 60% of the sales revenue of the Lithuanian segment was obtained from
the domestic market and 40% from foreign markets, with the Norwegian and
Danish markets being the largest. This year supplies to those markets have
been modest. Finland, France and the Czech Republic were added as new
markets. In June several major projects were carried out on the Lithuanian
market, as a result of which two-thirds of the sales volumes for the half-
year was earned within the reporting quarter. Almost 80% of the sales revenue
for the half-year was obtained from Lithuanian customers.

During the first 6 months the sales to other states of the European Union
have increased almost twice, including sales to the market of Sweden which
increased 22 million kroons (1.4 million euros). France, Czech Republic and
Malaysia have been added as new markets and the Group has sold during the H1
2010 its products to those markets totally in amount 18.6 million kroons (1.2
million euros). The Group has also sold its products to Latvia, Portugal and
Poland and outside of the European Union to the markets of Belarus, Ukraine,
Russia and Norway.

The expenses regarding sold products and services decreased almost at the
same pace as the sales revenue. Distribution costs and administration
expenses shrank by 3.1 million kroons (200,000 euros) in Q2 and by 4.5
million kroons (290,000 euros) in H1 2010. The administration expenses have
been affected the most by the increase in expenditures on the new software
AX2009. The software was taken into use on 1 October 2009. In conclusion,
business expenses have decreased by 21% in Q2 and by 23% in H1 2010 compared
to the same period of the previous year.

In the second quarter, there was an average of 423 (453) people working in
the Group, included 270 (295) employees in Estonia, 70 (75) employees in
Lithuania and 83 (83) employees in Finland. In H1 2010, the average number of
employees was 427 (457). As at the balance day on 30 June, there were 446
people working in the Group, whish is 18 employees less than on the beginning
of the year and 40 employees less than a year before. During the second
quarter, labour costs decreased by more than 8% compared to the previous
year, reaching 26.0 million kroons (1.7 million euros). During the half-year
employees were paid 52.6 million kroons (3.4 million euros) in salaries,
bonuses and compensation, which was 15.2% lower than during the comparable
period. In H1 2010, the average wage per employee was 20,510 kroons (1,310
euros) and 22,627 kroons (1,450 euros) in the compared period.

The gross profit of the Group was 19.7 million kroons (1.26 million euros) in
Q2 2010 and 37.9 million kroons (2.42 million euros) in H1 2010, decreasing
by 33% and 30% respectively compared to the same periods last year. The gross
profit margin decreased by 2 per cent points up to 15.1% in the second
quarter and by 1 per cent point up to 14.3% in H1 2010. Operating profit of
Q2 2010 was 2.8 million kroons or 177,000 euros (Q2 2009: 9.8 million kroons
or 627,000 euros). Return of sales for the period was 2.1% (5.7%). In Q2 2010
EBITDA was 8.2 million kroons or 525,000 euros (Q2 2009: 14.8 million kroons
or 944,000 euros) and return of sales before depreciation was 6.3% (8.6%). In
H1 2010 EBIT was 3.9 million kroons or 250,000 euros and EBITDA was 14.8
million kroons or 945,000 euros (H1 2009: 16.2 million kroons or 1.04 million
euros and 26.1 million kroons or 1.67 million euros respectively). Return of
sales of H1 2010 was 1.5% (4.6%) and return of sales before depreciation 5.6%
(7.4%). Overall, the consolidated net profit of the Q2 2010 was 10.0 million
kroons or 639,000 euros (Q2 2009: 8.4 million kroons or 535,000 euros), of
which the share of the owners of the parent company was 9.2 million kroons or
587,000 euros. EPS of the reporting period was 0.55 kroons or 0.03 euros (Q2
2009: 0.42 kroons or 0.03 euros). The consolidated net profit of the H12010
was 18.2 million kroons or 1.16 million euros, which is 64.6% more than in
compared period. The share of the owners of the parent company was 18.1
million kroons or 1.16 million euros, increasing more than 87% comparing to
the H1 2009. EPS of the reporting period was 1.08 kroons or 0.07 euros (H1
2009: 0.58 kroons or 0.04 euros).

In H1 2010 the Group invested in real estate, in tangible fixed assets and
in intangible fixed assets, totally 36.4 million kroons or 2.4 million euros
(H1 2009: 6.6 million kroons or 420,000 euros).

During H1 short-term liabilities were increased by 0.2 million kroons or
13,000 euros (H1 2009 were decreased 16.0 million kroons or 1 million euros).
Within the reporting period, 2.9 million kroons or 187,000 euros (H1 2009:
11.2 million kroons or 718,000 euros) worth of a long-term loan were re-paid.
Within the first six months, 2.3 million kroons or 147,000 euros (H1 2009:
1.1 million kroons or 71,000 euros) worth of principal amounts of the
financial lease were repaid.

During first six months, cash and cash equivalents decreased by 16.9 million
kroons (1.1 million euros) and in comparable period 4.2 million kroons
(268,000 euros).

Andres Allikmäe
Chairman of the Board
+372 674 7400

For more information: Internal report 1-6/2010 of Harju Elekter and Mrs.
Karin Padjus, Member of the Board (phone +372 674 7403).

AS HARJU ELEKTER
BALANCE SHEET, 30.06.2010
Consolidated, unaudited

Group
in thousands                             EEK           EUR
ASSETS                                 30.06.1031.12.0930.06.10 31.12.09
Cash and cash equivalents                18 663  35 640    1 193    2 278
Trade receivables and other receivables  86 016  70 238    5 497    4 489
Prepayments                               2 041   2 499      130      160
   Inclusive income tax                     599       0       38        0
Inventories                              94 832  79 352    6 061    5 071
TOTAL CURRENT ASSETS                    201 552 187 729   12 881   11 998
Investments in associates                10 569   9 681      676      619
Other long-term financial investments   235 598 153 172   15 057    9 789
Investment property                     138 297 137 176    8 839    8 768
Property, plant and equipment           149 155 124 575    9 533    7 962
Intangible assets                         5 647   5 815      360      371
Total non-current assets                539 266 430 419   34 465   27 509
TOTAL ASSETS                            740 818 618 148   47 346   39 507
LIABILITIES AND OWNERS' EQUITY
Interest-bearing loans and borrowings   16 120   18 166    1 030    1 161
Trade payables and other payables        87 554  75 890    5 596    4 850
Tax liabilities                           9 298  10 367      594      663
   Inclusive income tax                     620     620       40       39
Short-term provision                      1 148   1 157       73       74
Deferred income                             457   1 564       29      100
TOTAL CURRENT LIABILITIES               114 577 107 144    7 322   6 848
NON-CURRENT LIABILITIES                  33 842   7 016    2 163      448
TOTAL LIABILITIES                       148 419 114 160    9 485    7 296
Share capital                           168 000 168 000   10 737   10 737
Paid-in capital over/under par            6 000   6 000      384      384
Restricted reserves                     233 261 149 760   14 907    9 571
Retained earnings                       162 305 156 770   10 374   10 020
TOTAL OWNERS' EQUITY                    569 566 480 530   36 402   30 712
Non-controlling interests                22 833  23 458    1 459    1 499
TOTAL EQUITY                            592 399 503 988   37 861   32 211
TOT.LIABILIT.AND OWNERS' EQUITY         740 818 618 148   47 346   39 507


INCOME STATEMENT,  1-6/2010
Consolidated,unaudited

EEK'000
GROUP                                  Q2 2010 Q2 2009 1-6/2010 1-6/2009

NET SALES                               130 463171 934   264 575  353 704
Cost of goods sold                     -110 762-142 332 -226 699 -299 332
Gross profit                             19 701  29 602   37 876   54 372
Marketing expenses                       -6 830  -7 894  -13 160  -15 538
Administrative expenses                 -10 028 -12 027  -20 874  -22 952
Other revenue                                77     346      375      662
Other expenses                             -144    -216     -316     -348
Operating profit                          2 776   9 811    3 901   16 196
Net financial incomes/expenses            8 632   3 567   16 723    8 021
Income/loss(-) from subsidiaries          1 592    -581      888   -8 126
Profit from normal operations            13 000  12 797  21 512    16 091
Corporate Income tax                     -3 004  -4 432   -3 326   -5 039
Profit after taxes, incl                  9 996   8 365   18 186   11 052
Attributable to:
    Equity holders of the parent          9 189   7 059   18 145    9 696
    Non-controlling interests               807   1 306       41    1 356
Basic  earnings per share  (EEK)           0,55    0,42     1,08     0,58
Diluted earnings per share (EEK)           0,54    0,42     1,07     0,58

EUR'000
GROUP                                  Q2 2010 Q2 2009 1-6/2010 1-6/2009

NET SALES                                 8 338  10 989   16 909   22 606
Cost of goods sold                       -7 079  -9 097  -14 488  -19 131
Gross profit                              1 259   1 892    2 421    3 475
Marketing expenses                         -437    -504     -841     -993
Administrative expenses                    -641    -769   -1 334   -1 467
Other revenue                                 5      22       24       42
Other expenses                               -9     -14      -20      -22
Operating profit                            177     627      250    1 035
Net financial incomes/expenses              552     228    1 069      512
Income/loss(-) from subsidiaries            102     -37       57     -519
Profit from normal operations               831     818    1 376    1 028
Corporate Income tax                       -192    -283     -213     -322
Profit after taxes, incl                    639     535    1 163      706
Attributable to:
    Equity holders of the parent            587     451    1 160      619
    Non-controlling interests                52      84        3       87
Basic earnings per share  (EUR)            0,03    0,03     0,07     0,04
Diluted earnings per share  (EUR)          0,03    0,03     0,07     0,04

Karin Padjus
Financial manager
+372 674 7403