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   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   
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 -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 -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 '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  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 Company 3,465  9,976  4,000  10,752   
     Non-controlling interests -98  -130   
               

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

Attachment

  • HEG Interim report Q2 2024

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