Börsiteade

Pealkiri

Harju Elekter Group financial results, 1-12/2024

Teade

The fourth-quarter results of Harju Elekter continued to be affected by low
order volumes. Although the decline in orders could be foreseen as early as the
spring of 2024, it had a larger-than-expected impact on fourth-quarter revenue,
which declined significantly. The decline in revenue presented a challenge in
terms of covering overhead costs and maintaining profitability. However, further
reductions in overhead costs, in particular staff costs, would have affected
competence and limited opportunities for the sustainable growth of business
volumes. Nevertheless, the group continues to operate in savings mode, carefully
considering each expense and investment.

On  the  positive  side,  the  volume  of  sales  orders increased in the fourth
quarter.  As previously predicted,  its impact will  not be noticeable until the
peak production season, which will be in the second and third quarters of 2025.
Therefore,  the low season  in economic results  is expected to  continue in the
first quarter.

Although the results of the preceding financial year fall short of expectations,
it  should  be  noted  that  the  group  has  managed  to exceed the revenue and
operating  profit of 2024 on only two occasions in the past. However, this is no
reason  to be satisfied. It  is the priority of  the Management Board to improve
performance  results in the coming years. The new strategic plan approved by the
Supervisory  Board at the beginning  of 2025 creates the necessary prerequisites
for  achieving  this  objective,  considering  both  market  trends  and  growth
opportunities for electrification.

The Management Board of Harju Elekter will propose the distribution of dividends
in  the notice for calling  a general meeting, based  on the business volumes at
the beginning of the year and the forecast for 2025.

Revenue and financial results

The  fourth quarter was challenging for the Group, but the stability achieved in
the  preceding months helped  to maintain a  positive result for  the full year.
Quarterly  revenue decreased  by 41% year-on-year,  amounting to  30.0 (2023 Q4:
50.7) million   euros,   reflecting  the  stabilization  of  order  volumes  and
adaptation to changing market conditions. The revenue for the reporting year was
174.7 (2023:  209.0) million euros.  Although the  revenue decreased,  the Group
maintained a strong market position despite a challenging economic environment.

                                      Q4     Q4              12M     12M
                                                                          +/-
 (EUR´000)                          2024   2023     +/-     2024    2023
-------------------------------------------------------------------------------
 Revenue                          29,963 50,737   -40.9% 174,712 209,014 -16.4%

 Gross profit                      1,778  4,218   -57.8%  20,899  23,588 -11.4%

 EBITDA                             -724  1,920  -137.7%  10,358  12,444 -16.7%

 Operating profit (-loss) (EBIT)  -1,726    758  -327.7%   6,408   8,078 -20.7%

 Profit (-loss) for the period    -2,303    135 -1805.9%   3,175   5,160 -38.5%

 Earnings per share (EPS) (euros)  -0.12   0.01 -1300.0%    0.17    0.28 -39.3%
-------------------------------------------------------------------------------

The  Group's operating  expenses decreased  across all  cost categories in 2024
compared  to the  previous year,  primarily due  to the  decline in  revenue and
corresponding  cost savings. In the fourth quarter, expenses decreased by 37.8%
to  31.4 (2023 Q4: 50.4) million euros. The largest reduction came from the cost
of   sales,   which   decreased   by  39.4% to  28.2 million  euros.  Meanwhile,
distribution  costs  declined  by  15.2%, amounting  to  1.1 million  euros, and
administrative  expenses  dropped  by  20.4% to  2.1 million euros. On an annual
basis,  total operating expenses amounted  to 167.7 (2023: 200.9) million euros,
marking  a 16.5% decline. The  decrease in expenses  was slightly lower than the
drop  in revenue, as certain fixed costs remained despite the reduction in sales
volumes.

Depreciation  expenses  for  fixed  assets  declined  by  13.8% in the reporting
quarter,  reaching 1.0 million euros, and by 9.5% annually, totaling 4.0 million
euros.  This decrease was  due to the  alignment and revaluation of depreciation
periods for fixed assets within the group. However, lower order volumes led to a
slight  increase in the  share of depreciation  costs in operating expenses. The
labour  cost  ratio  to  revenue  increased  to  28.5% (2023  Q4:  20.6%) in the
reporting   quarter   and   to   21.4% (2023:   19.1%) annually.  Comparing  the
quarters labour  costs  decreased  by  18.6% and on  yearly bases by 6.6% due to
workforce   adjustments  in  the  production  units  in  Estonia,  Finland,  and
Lithuania.   Labour costs amounted  to 8.5 (2023 Q4:  10.5) million euros in the
fourth quarter and 37.3 (2023: 39.9) million euros annually.

The  gross profit  for the  fourth quarter  was 1,778 (2023  Q4: 4,218) thousand
euros,  and the  gross profit  margin was  5.9% (2023 Q4:  8.3%). Operating loss
(EBIT)  for  the  fourth  quarter  was  -1,726  (2023 Q4 operating profit: 758)
thousand euros, leading to an operating margin of -5.8% (2023 Q4: 1.5%). The net
loss was -2,303 (2023 Q4 net profit: 135) thousand euros, and net loss per share
was  -0.12  (2023  Q4:  0.01) euros.  The  results were mainly influenced by the
slower  adjustment of  production costs  to lower  order volumes,  especially as
sales volumes have grown rapidly in recent years.

For the full year, the Group achieved a positive result, although weaker fourth-
quarter  figures reduced overall profitability compared to the previous year. In
2024, gross  profit  was  20,899 (2023:  23,588) thousand  euros,  and the gross
profit  margin improved to 12.0% (2023: 11.3%). Operating profit (EBIT) amounted
to  6,408 (2023: 8,078) thousand euros, and  net profit was 3,175 (2023: 5,160)
thousand  euros. Net profit per share  was 0.17 (2023: 0.28) euros. Although the
volume  of work  and the  number of  orders decreased  in the second half of the
year,  the normalization  of the  market establishes  the prerequisites for more
stable growth in the future. Compared to 2023, the results were also affected by
the  fact that last year's settlement of the dispute over the framework contract
for hermetic distribution transformers led to higher profitability, lessening of
previous reserves, and a short-term rise in profits.

Core business and markets

Sales  of  electrical  equipment,  which  constitute  the  group's  main area of
business,  reached 26.6 (2023 Q4: 46.7) million  euros in the reporting quarter,
representing  a 43.0% decrease. For  the full year,  the revenue from electrical
equipment totaled 161.2 (2023: 194.7) million euros, a 17.2% decline compared to
the  previous  year.  The  main  reasons  for  the  decline were the decrease in
outsourcing  service orders  due to  the cooling  of the  global economy and the
decline in demand in the substation market due to regulatory changes.

The   Group's   four   main   target   markets-Estonia,   Finland,  Sweden,  and
Norway-accounted  for 85.6% (2023 Q4:  78.4%) of total revenue  in the reporting
quarter.  Year-over-year,  revenue  growth  was  recorded only in Estonia, being
23.0 (2023:  20.9) million  euros,  while  other  key  markets  showed  signs of
stabilization following high activity levels in previous years.

In Estonia, revenue remained at the previous year's level in the fourth quarter,
reaching  5.3 (2023 Q4: 5.2) million  euros. Growth was  mainly driven by higher
sales  of compact substations to  electricity distribution network customers, as
well  as a low  comparison base from  mid-2023, when the new framework agreement
was still gaining momentum.

In Finland, revenue for the last quarter was 12.4 (2023 Q4: 19.6) million euros,
marking  a  36.7% decline  compared  to  the  previous year. On an annual basis,
revenue fell by 19.7%, amounting to 66.9 (2023: 83.3) million euros. The decline
was  primarily due to lower demand in  the compact substation segment, which was
affected  by regulatory  changes in  the electricity  network sector, as well as
weak  market conditions for electric vehicle  chargers and the Group's exit from
the solar panel resale segment.

In  Norway, revenue decreased by 42.9% in the fourth quarter, reaching 3.3 (2023
Q4: 5.7) million euros. Over the full year, revenue declined by 22.1%, amounting
to  26.3 (2023: 33.8) million  euros. The  decline was  primarily due  to a high
comparison  base from  the previous  year, when  the Lithuanian  production unit
experienced  near maximum capacity  workload due to  the project-based nature of
the sector.

In  Sweden, a similar trend was observed  as in other Scandinavian markets, with
revenue  declining by 49.2% in the fourth  quarter to 4.7 (2023 Q4: 9.2) million
euros.  Annual  revenue  amounted  to  26.0 (2023: 32.5) million euros. The main
reason  for the decline  was a change  in the business  strategy, which involved
discontinuing EPC projects, or turnkey solutions, and shifting focus to factory-
made solutions.

Investments

During  the reporting year,  Harju Elekter invested  a total of 3.8 (2023: 6.9)
million  in non-current assets, including  1.8 (2023: 5.2) million in investment
properties,  0.9 (2023: 1.4) million in property, plant, and equipment, and 1.1
(2023:  0.4) million euros in intangible assets. The investments included large-
scale  renovation and reconstruction work at the Keila industrial park, aimed at
meeting  the needs of the  long-term tenant. Additionally, production technology
assets  were  acquired,  and  production  and  process  management  systems were
developed.

As  of  the  reporting  date,  the  value  of  the  Group's  long-term financial
investments was 27.7 (31.12.23: 29.2) million euros. In the second quarter, most
of  the listed securities were sold. The  fair value of securities declined both
in  the reporting quarter and throughout the  year, decreasing by a total of 71
thousand euros.

Share

The  company's share price on  the last trading day  of the reporting quarter on
the Nasdaq Tallinn Stock Exchange closed at 4.58 euros.

 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 Unaudited
-------------------------------------------------------------------------------
 (EUR´000)                                            31.12.2024 31.12.2023
----------------------------------------------------------------------------
 ASSETS

 Current assets

 Cash and cash equivalents                                 3,773      1,381

 Trade and other receivables                              29,606     38,837

 Prepayments                                               2,096      1,071

 Inventories                                              19,845     36,834

 Total current assets                                     55,320     78,123

 Non-current assets

 Deferred income tax assets                                  687        731

 Non-current financial investments                        27,717     29,244

 Investment properties                                    29,432     28,856

 Property, plant, and equipment                           32,420     34,067

 Intangible assets                                         8,121      7,354

 Total non-current assets                                 98,377    100,252



 TOTAL ASSETS                                            153,697    178,375
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 LIABILITIES AND EQUITY

 Liabilities

 Borrowings                                                9,839     19,387

 Prepayments from customers                               11,600     18,870

 Trade and other payables                                 17,472     23,159

 Tax liabilities                                           3,260      3,308

 Current provisions                                          270        140

 Total current liabilities                                42,441     64,864

 Borrowings                                               20,184     23,481

 Other non-current liabilities                                39         32

 Total non-current liabilities                            20,223     23,513

 Total liabilities                                        62,664     88,377



 Equity

 Share capital                                            11,655     11,655

 Share premium                                             3,306      3,306

 Reserves                                                 23,135     23,055

 Retained earnings                                        52,937     51,982

 Total equity attributable to the owners of the
 parent company                                           91,033     89,998



 TOTAL LIABILITIES AND EQUITY                            153,697    178,375
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  CONSOLIDATED STATEMENT OF PROFIT AND LOSS

  Unaudited
-----------------------------------------------------------


 (EUR´000)                            Q4 2024 Q4 2023 12M 2024 12M 2023
-----------------------------------------------------------------------
 Revenue                               29,963  50,737  174,712  209,014

 Cost of sales                        -28,185 -46,519 -153,813 -185,426

 Gross profit                           1,778   4,218   20,899   23,588

 Distribution costs                    -1,069  -1,260   -4,710   -5,320

 Administrative expenses               -2,116  -2,657   -9,213  -10,112

 Other income                              93     495      281      314

 Other expenses                          -412     -38     -849     -392

 Operating profit (-loss)              -1,726     758    6,408    8,078

 Finance income                             5     456      116       97

 Finance costs                           -613    -624   -2,436   -2,103

 Profit (-loss) before tax             -2,334     590    4,088    6,072

 Income tax                                31    -455     -913     -912

 Profit (-loss) for the period         -2,303     135    3,175    5,160
-----------------------------------------------------------------------
 Earnings per share

 Basic earnings per share (euros)       -0.12    0.01     0.17     0.28

 Diluted earnings per share (euros)     -0.12    0.01     0.17     0.28
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  CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


  Unaudited


  (EUR´000)                                   Q4 2024 Q4 2023 12M 2024 12M 2023
-------------------------------------------------------------------------------
 Profit (-loss) for the period                 -2,303     135    3,175    5,160

 Other comprehensive income

 Items that may be reclassified to profit
 or loss

     Impact of exchange rate changes of a
 foreign subsidiaries                              98    -212      108     -139

 Items that will not be reclassified to
 profit or loss

 Gain on sales of financial assets                  0       0      185        0

 Revaluation of financial assets                   -6  -3,266      -71    5,516

 Total comprehensive income (-loss) for the
 period                                            92  -3,478      222    5,377

 Other comprehensive income (-loss)            -2,211  -3,343    3,397   10,537
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Priit Treial
CFO and Member of the Management Board
+372 674 7400

[email protected] (mailto:[email protected])