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Harju Elekter Group financial results, 1-6/2024

Harju Elekter Group financial results, 1-6/2024

The Group’s results for the second quarter of 2024 were strong, as predicted. After a weak start to the year, we achieved historically high operating profit in the second quarter. The correct direction of the Group is also validated by the 7.8% operating profit margin, which gives us the opportunity to increase profitability to the desired level, promote business in a sustainable manner, and distribute profits to owners in the future.

The largest contributors to the financial results were once again the business units in Lithuania and Estonia, and, as could be expected during the high season, profitability was also restored in Finland. We will continue with the targeted strengthening of the team, completion of the delayed projects, and increasing the volume of new orders to improve the results in Sweden.

Despite the positive first half of the year, the orders volumes are showing signs of stabilisation, thus we don’t expect business volume growth in the second half of the year. The reduced orders from the Finnish distribution networks continue to affect us both this year and in the upcoming years, although we have been able to partially replace these orders with new customers and projects. The number of inquiries indicates strong investments in the electrification sector and an increase in workload regarding the orders for next year.

Revenue and financial results

The Group’s results for the second quarter and the first half of the year show that the company’s revenue has remained at the same level compared to the previous year, but there has been a significant increase in profit and efficiency. These are the company’s best second-quarter and six-month results over the years, surpassing previous revenue records in both periods. The revenue for the reporting quarter was 56.8 (2023 Q2: 56.8) million euros, and for the first half of the year, it reached 103.6 (2023 6M: 102.0) million euros. 

EUR’000 Q2Q2+/-6M6M+/-
  20242023 20242023 
Revenue 56,80156,7620.1%103,577102,0301.5%
Gross profit 8,1726,61123.6%13,00811,9968.4%
EBITDA 5,4503,24368.1%7,3895,62531.3%
Operating profit/loss (-) (EBIT) 4,4502,168105.3%5,4253,477-56.0%
Profit/loss (-) for the period 3,467884292.2%3,8271,633-134.4%
Incl. attributable to owners of the parent company 3,467982253,0%3,8271,763117,1%
Earnings per share (EPS) (euros) 0.190.05280.0%0.210.10-110.0%

The Group’s operating expenses decreased by 3.7% compared to the previous quarters, reaching 52.2 (2023 Q2: 54.2) million euros. The most significant reduction was due to a decrease in the cost of sales by 1.5 million, totaling 48.6 million euros, and a reduction in administrative expenses by 0.5 million euros, amounting to 2.2 million euros. In the first half of the year, operating expenses totaled 97.8 (2023 6M: 98.0) million euros. The cost of sales increased by 0.5 million over the six months, reaching 90.6 million euros, with the increase primarily occurring in the first quarter.

Distribution costs, labour costs, and depreciation of non-current assets remained at the same level as the previous year, totaling 1.3 million, 1.0 million, and 10.6 million euros, respectively, in the second quarter. Distribution costs and administrative expenses decreased by a combined 0.7 million euros over the six months, totaling 2.5 million and 4.7 million euros, respectively. Labour costs increased by 0.4 million compared to the first six months, totaling 20.6 million euros. The increase in labour costs was largely influenced by a significant reduction in the number of employees at the Estonian and Lithuanian production units, which included severance payments and compensations. 

Gross profit reached 8.2 (2023 Q2: 6.6) million euros, with a gross profit margin of 14.4% (2023 Q2: 11.6%). Operating profit (EBIT) doubled to 4.5 (2023 Q2: 2.2) million euros, resulting in an operating margin of 7.8% (2023 Q2: 3.8%). Net profit for the second quarter was 3.5 (2023 Q2: 0.9) million euros, and the net profit margin was 6.1% (2023 Q2: 1.6%).  The reason for the increase in profitability is the resolution of supply chain difficulties we experienced last year and the optimisation of the number of employees, which has enabled us to increase production efficiency. Also, the factories were operating at near maximum capacity and production was more efficient than last year.

During the first half of the year, the Group earned revenue of 103.6 (2023 6M: 102.0) million euros, which remained quite similar to the results from the same period last year, increasing by 1.5%. The six-month gross profit was 13.0 (2023 6M: 12.0) million euros.

Core business and markets

The Group’s core segment, production, did not contribute to revenue growth. In the second quarter, the production segment generated 54.3 (2023 Q2: 54.0) million euros, and for the first six months, it reached 98.7 (2023 6M: 96.6) million euros. The largest growth in sales was in the Lithuanian production unit, which focuses on developing electrical distribution and frequency inverter equipment and solutions for the maritime and industrial sectors. The production segment accounted for 95.3% of the Group’s revenue for the quarter and the half-year. 

In the reporting quarter, revenue from Estonia was 6.9 (2023 Q2: 5.6) million euros, which was 24% higher than the previous year. For the first six months of the year, revenue grew more modestly by 8.1%, reaching 11.4 (2023 6M: 10.5) million euros. The increase in revenue in Estonia was mainly due to higher sales of compact substations to electrical distribution network customers.

Revenue from Finland was 20.6 (2023 Q2: 24.5) million euros in the second quarter and 37.5 (2023 6M: 43.1) million euros for the first six months, representing a decrease of 16% and 13%, respectively, compared to the previous year. The decline in revenue in Finland was due to lower demand for compact substations, resulting from changes in utility price control methods implemented at the beginning of 2024.

Revenue from Sweden was relatively stable, reaching 8.7 (2023 Q2: 9.1) million euros in the second quarter and 15.6 (2023 6M: 15.6) million euros for the first six months. The modest decrease in sales in Sweden was due to changes in the business model and the decision to stop selling EPC projects (turnkey solutions) and focus on factory products. The Swedish market accounted for 15% (2023 Q2: 16% and 2023 6M: 15%) of the Group’s consolidated revenue for the quarter and the half-year. 

Revenue from Norway decreased to 8.0 (2023 Q2: 11.5) million euros compared to the second quarter of the previous year due to a reduction in sales of drive cabinets and MCC-s (Motor control centers) to maritime sector contractual clients. This decline was mainly due to a high comparison base, caused by overcapacity at the Lithuanian production unit in 2023 and a lower volume of orders this year. For the first six months, revenue from Norway was 17.3 (2023 6M: 15.5) million euros. The Norwegian market accounted for 14.0% (2023 Q2: 20.2%) of the Group’s revenue for the quarter and 16.7% (2023 6M: 15.2%) for the half-year. 

Investments

During the reporting period, Harju Elekter invested a total of 1.5 (2023 6M: 2.6) million euros in non-current assets, including 0.7 (2023 6M: 2.1) million euros in real estate investments, 0.4 (2023 6M: 0.4) million euros in property, plant, and equipment, and 0.4 (2023 6M: 0.1) 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, Prysmian Group Baltics. Additionally, production technology equipment was 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. During the reporting quarter, most of the listed securities were sold, generating a total of 1.6 million euros from their sale, with a realized profit of 0.2 million euros. 

Share

The company’s share price on the last trading day of the reporting quarter on the Nasdaq Tallinn Stock Exchange closed at 4.74 euros. As of 30 June 2024, AS Harju Elekter Group had 11,025 shareholders.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION    
Unaudited    
EUR ‘00030.06.202431.12.202330.06.2023 
ASSETS     
Current assets     
Cash and cash equivalents           1,632           1,381            2,339  
Trade and other receivables48,655 38,837 38,447  
Prepayments1,173 1,071 2,143  
Inventories28,745 36,834 46,747  
Total current assets80,205 78,123 89,676  
Non-current assets    
Deferred income tax assets722 731 985  
Non-current financial investments27,715 29,244 32,593  
Investment properties28,901 28,856 26,314  
Property, plant, and equipment33,275 34,067 33,919  
Intangible assets7,576 7,354 7,267  
Total non-current assets98,189 100,252 101,078  
TOTAL ASSETS178,394 178,375 190,754  
LIABILITIES AND EQUITY    
Liabilities    
Borrowings17,272 19,387 20,768  
Prepayments from customers13,495 18,870 18,769  
Trade and other payables27,970 23,159 32,034  
Tax liabilities4,598 3,308 4,219  
Current provisions185 140 1,980  
Total current liabilities63,520 64,864 77,770  
Borrowings23,207 23,481 23,780  
Other non-current liabilities54 32  
Total non-current liabilities23,261 23,513 23,780  
TOTAL LIABILITIES86,781 88,377 101,550  
Equity    
Share capital11,655 11,655 11,523  
Share premium3,306 3,306 2,509  
Reserves23,063 23,055 26,843  
Retained earnings53,589 51,982 48,620  
Total equity attributable to the owners of the parent company91,613 89,998 89,495  
Non-controlling interests-291  
Total equity91,613 89,998 89,204  
TOTAL LIABILITIES AND EQUITY178,394 178,375 190,754  

CONSOLIDATED STATEMENT OF PROFIT AND LOSS      
Unaudited      
       
EUR ‘000Q2Q26M6M  
 2024202320242023  
Revenue56,801 56,762 103,577 102,030   
Cost of sales-48,629 -50,151 -90,569 -90,034   
Gross profit8,172 6,611 13,008 11,996   
Distribution costs-1,328 -1,313 -2,524 -2,668   
Administrative expenses-2,227 -2,711 -4,744 -5,291   
Other income75 181 94 199   
Other expenses-242 -600 -409 -759   
Operating profit/loss (-)4,450 2,168 5,425 3,477   
Finance income   11 -7 104 68   
Finance costs-540 -1,021 -1,131 -1,570   
Profit/loss (-) before tax3,921 1,140 4,398 1,975   
Income tax-454 -256 -571 -342   
Profit/loss (-) for the period3,467 884 3,827 1,633   
Profit /loss (-) attributable to:      
     Owners of the parent company3,467 982 3,827 1,763   
     Non-controlling interests-98 -130   
Earnings per share      
    Basic earnings per share (euros)0.19 0.05 0.21 0.10   
    Diluted earnings per share (euros)0.19 0.05 0.21 0.10   

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME      
Unaudited      
       
EUR ‘000Q2Q26M6M 
 2024202320242023 
Profit/loss (-) for the period3,467 884 3,827 1,633  
Other comprehensive income (loss)     
Items that may be reclassified to profit or loss     
    Impact of exchange rate changes of a foreign subsidiaries-46 164 60 123  
Items that will not be reclassified to profit or loss     
    Gain on sales of financial assets185 185  
    Net gain/loss (-) on revaluation of financial assets-141 8,830 -72 8,866  
Total comprehensive income (loss) for the period-2 8,994 173 8,989  
Other comprehensive income (loss)3,465 9,878 4,000 10,622  
Total comprehensive income (loss) attributable to:     
     Owners of the Company3,465 9,976 4,000 10,752  
     Non-controlling interests-98 -130  
        

Priit Treial
CFO and Member of the Management Board
+372 674 7400

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