Correction: Harju Elekter Group financial results, 1-6/2024
In today's stock exchange announcement and financial report (page 7),in the table reflecting the main indicators, there was an error in the column of the change in operating profit and net profit.
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
Q2
Q2
+/-
6M
6M
+/-
2024
2023
2024
2023
Revenue
56,801
56,762
0.1%
103,577
102,030
1.5%
Gross profit
8,172
6,611
23.6%
13,008
11,996
8.4%
EBITDA
5,450
3,243
68.1%
7,389
5,625
31.3%
Operating profit/loss (-) (EBIT)
4,450
2,168
105.3%
5,425
3,477
56.0%
Profit/loss (-) for the period
3,467
884
292.2%
3,827
1,633
134.4%
Incl. attributable to owners of the parent company
3,467
982
253,0%
3,827
1,763
117,1%
Earnings per share (EPS) (euros)
0.19
0.05
280.0%
0.21
0.10
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 '000
30.06.2024
31.12.2023
30.06.2023
ASSETS
Current assets
Cash and cash equivalents
1,632
1,381
2,339
Trade and other receivables
48,655
38,837
38,447
Prepayments
1,173
1,071
2,143
Inventories
28,745
36,834
46,747
Total current assets
80,205
78,123
89,676
Non-current assets
Deferred income tax assets
722
731
985
Non-current financial investments
27,715
29,244
32,593
Investment properties
28,901
28,856
26,314
Property, plant, and equipment
33,275
34,067
33,919
Intangible assets
7,576
7,354
7,267
Total non-current assets
98,189
100,252
101,078
TOTAL ASSETS
178,394
178,375
190,754
LIABILITIES AND EQUITY
Liabilities
Borrowings
17,272
19,387
20,768
Prepayments from customers
13,495
18,870
18,769
Trade and other payables
27,970
23,159
32,034
Tax liabilities
4,598
3,308
4,219
Current provisions
185
140
1,980
Total current liabilities
63,520
64,864
77,770
Borrowings
23,207
23,481
23,780
Other non-current liabilities
54
32
0
Total non-current liabilities
23,261
23,513
23,780
TOTAL LIABILITIES
86,781
88,377
101,550
Equity
Share capital
11,655
11,655
11,523
Share premium
3,306
3,306
2,509
Reserves
23,063
23,055
26,843
Retained earnings
53,589
51,982
48,620
Total equity attributable to the owners of the parent company
91,613
89,998
89,495
Non-controlling interests
0
0
-291
Total equity
91,613
89,998
89,204
TOTAL LIABILITIES AND EQUITY
178,394
178,375
190,754
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
Unaudited
EUR '000
Q2
Q2
6M
6M
2024
2023
2024
2023
Revenue
56,801
56,762
103,577
102,030
Cost of sales
-48,629
-50,151
-90,569
-90,034
Gross profit
8,172
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 income
75
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 tax
3,921
1,140
4,398
1,975
Income tax
-454
-256
-571
-342
Profit/loss (-) for the period
3,467
884
3,827
1,633
Profit /loss (-) attributable to:
Owners of the parent company
3,467
982
3,827
1,763
Non-controlling interests
0
-98
0
-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 '000
Q2
Q2
6M
6M
2024
2023
2024
2023
Profit/loss (-) for the period
3,467
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 assets
185
0
185
0
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 Company
3,465
9,976
4,000
10,752
Non-controlling interests
0
-98
0
-130
Priit Treial CFO and Member of the Management Board +372 674 7400
