Harju Elekter Group consolidated financial results, 1-9/2021

·10 min read

Harju Elekter’s last quarter showed a strong recovery in sales volumes and orders, but full operation was held back by the global shortage of raw materials. Uncertainty in the supply of raw materials that have become more expensive leads to the need for constant rescheduling, which is inefficient and costly. This has an impact on the Group’s financial results and profitability. Harju Elekter continues with investments to come out of the crisis stronger than when we entered it. In order to expand the business, Harju Elekter decided to invest in new factories in Sweden. The Group sees market potential in Sweden and investments help to increase the competitiveness of our Swedish company in different business areas. Harju Elekter is deeply engaged in becoming a major player in the Swedish electrification and automation market.

Revenue, Expenses, and Profit

The revenue of the Group was 42.2 (Q3 2020: 37.4) million euros in the third quarter, increasing by 12.9% compared to the comparable period. In the reporting quarter revenue increased in all areas of business activity, but the main contribution came from the sale of electrical equipment, which was 35.2 (Q3 2020: 31.7) million euros. This is mainly due to the increase in the volume of orders in the framework contracts. The revenue for the nine months decreased by 2.0% to 109.2 (9M 2020: 111.4) million euros compared to the comparable period. The manufacturing and sale of electrical equipment decreased the most, amounting to 91.0 (2020 9m: 95.0) million euros. At the same time, the revenue from the electrical works in the shipbuilding sector increased by 1.4 million to 4.3 million euros in a nine-month comparison. Fulfilling orders depends to a large extent on the global situation, where the availability of materials and components has deteriorated.

EUR’000

Q3

Q3

+/-

9m

9m

+/-

2021

2020

Q3/Q3

2021

2020

9m/9m

Revenue

42,168

37,360

12.9%

109,195

111,372

-2.0%

Gross profit

5,026

5,234

-4.0%

13,177

15,625

-15.7%

EBITDA

2,158

2,913

-25.9%

5,281

7,939

-33.5%

EBIT

1,183

2,002

-40.9%

2,350

5,211

-54.9%

Profit for the period

931

1,694

-45.0%

1,716

4,369

-60.7%

Incl. attributable to owners of the parent company

915

1,691

-45.9%

1,710

4,398

-61.1%

Earnings per share (euros)

0.05

0.10

-46.5%

0.10

0.25

-61.3%

The total operating expenses for the reporting quarter were 41.0 (Q3 2020: 35.5) million euros. Costs of sales, which accounted for 89.7% of operating expenses, was 37.1 (Q3 2020: 32.1) million euros. Labour costs increased with quarterly and nine-year comparison, amounting to 7.3 (Q3 2020: 6.6) and 22.3 (9M 2020: 20.0) million euros, respectively. Labour costs were impacted by the hiring of new staff, by the increase in additional work, and by the constant readiness to continue the production cycle. The increase in labour costs and average wages is affected by wage pressures due to workforce shortages in all markets and by the rising share of Finnish and Swedish employees in the Group, as wages in Scandinavian countries are significantly higher than in Estonia and Lithuania.

The gross profit for the reporting quarter was 5,026 (Q3 2020: 5,234) thousand euros and the gross profit margin was 11.9% (Q3 2020: 14.0%). Quarterly operating profit (EBIT) amounted to 1,183 (Q3 2020: 2,002) thousand euros. The operating margin for the second quarter was 2.8% (Q3 2020: 5.4%).

The net profit for the reporting quarter was 931 (Q3 2020: 1,694) thousand euros of which the share of the owners of the parent company was 915 (Q3 2020: 1,691) thousand euros. The earnings per share were 0.05 (Q3 2020: 0.10) euros. While in the previous quarters there were problems with the sheet metal deficit and price increase, then in the reporting quarter the price of electricity increased and the supply difficulties of several other materials and main components and the pressure of rising price increased. Profitability was also affected by higher labour costs due to the hiring of new specialists.

Core Business and Markets

The Group's core business, Production, accounted for 87.7% of the Group's revenue in the reporting quarter as well as in the nine months. Postponement of orders from previous quarters to the third quarter increased the Production segment’s revenue year-on-year by 4.9 million euros to 37.0 million euros. In a nine-month comparison, the revenue of the Production segment remained at the same level, being 95.8 (9M 2020: 95.3) million euros.

Sales to the Estonian market remained practically at the same level in the reporting quarter, totalling 7.5 (Q3 2020:7.6) million euros in a year-on-year comparison. The revenue increased by 2.5 million euros to 19.5 million euros in nine-month comparison, accounting for 17.8% (9M 2020: 15.3%) of the Group revenue. Revenue was mainly earned from the production of prefabricated substations and retail and project-based sale of electrical products.

The Group's revenue in Finland was 20.0 million euros in the reporting quarter. This is 3.6 million euros more than in the previous year and a historically a record result in the Finnish market when comparing third quarters. Production of the Finnish power grid companies comprised the greater part of the sales volume. In a nine-month comparison, the revenue of the Finnish market was lower than in the previous period, being 53.0 (9M 2020: 54.9) million euros. This was mostly affected by the decrease in orders caused by the snowy and cold winter, commencing with new long-term orders, but also some supply difficulties and shortage in materials. During the nine months, 48.6% (9M 2020: 49.3%) of the Group's products and services were sold to the Group's largest market, Finland.

The revenue earned from the Swedish market decreased slightly compared to both the reporting quarters and the nine months, amounting 5.8 (Q3 2020: 6.6) and 17.2 (Q3 2020: 17.5) million euros, respectively. The production and supply of substations for new framework contracts has been started. Sweden, the third largest market in the Group, accounted for 15.8% (9M 2020: 15.7%) of revenue in the nine months. The Group sees market potential in Sweden and is making investments to increase the revenue.

Sales to the Norway market are gradually recovering. In the third quarter, the Group sold products and services worth 5.1 (Q3 2020: 4.2) million euros to the Norwegian market. During the nine months, 9.0 million euros were earned from the Norwegian market, which was 5.0 million euros less than in the same period of the previous year. The decrease in Norwegian revenue was due to record high orders in the reference period, as well as the slow pace of recovery in the maritime industry. The Norwegian market accounted for 8.2% (9M 2020: 12.5%) of the nine-month revenue.

Investments

During the reporting period, the Group invested a total of 5.0 (9M 2020: 4.1) million euros in non-current assets, incl 0.5 (9M 2020: 2.1) million euros in investment properties, 4.0 (9M 2020: 1.8) million euros in property, plant, and equipment and 0.5 (9M 2020: 0.2) million euros in intangible assets. The Group directed the majority of the investments during the reporting period, i.e. 2.5 million euros, to the fourth phase of expansion of the Lithuanian subsidiary. The total cost of the investment was 5.5 million euros. In addition, Harju Elekter launched the preparations for the construction of the production and storage complex in the Allika Industrial Park, Laohotell III, and made investments in production technology and in solar power plants. As of the reporting date, the total value of the Group's non-current financial investments was 21.3 (31.12.20: 11.9) 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 7.98 euros. As at 30 September 2021, AS Harju Elekter had 8,939 shareholders. The number of shareholders increased during the reporting quarter by 986.

Additional 278,675 shares were issued under the framework of the stock option plan for the employees of Harju Elekter and as of 2 August 2021, a total of 18,018,555 shares of AS Harju Elekter are traded.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Unaudited

EUR'000

30 September

2021

31 December 2020

ASSETS

Current assets

Cash and cash equivalents

997

2,843

Trade and other receivables

32,467

27,226

Prepayments

1,601

820

Inventories

26,150

18,856

Total current assets

61,215

49,745

Non-current assets

Deferred income tax assets

572

514

Non-current financial investments

21,321

11,918

Investment properties

23,369

23,605

Property. plant and equipment

24,750

22,494

Intangible assets

7,467

7,199

Total non-current assets

77,479

65,730

TOTAL ASSETS

138,694

115,475

LIABILITIES AND EQUITY

Liabilities

Borrowings

12,585

12,056

Prepayments from customers

4,958

4,182

Trade and other payables

23,830

15,837

Tax liabilities

2,870

2,871

Current provisions

93

34

Total current liabilities

44,336

34,980

Borrowings

12,252

7,032

Other non-current liabilities

63

66

Total non-current liabilities

12,315

7,098

TOTAL LIABILITIES

56,651

42,078

Equity

Share capital

11,352

11,176

Share premium

1,601

804

Reserves

14,807

6,709

Retained earnings

54,427

54,858

Total equity attributable to the owners of the parent company

82,187

73,547

Non-controlling interests

-144

-150

Total equity

82,043

73,397

TOTAL LIABILITIES AND EQUITY

138,694

115,475


CONSOLIDATED STATEMENT OF PROFIT AND LOSS

Unaudited

EUR'000

Q3

Q3

9m

9m

2021

2020

2021

2020

Revenue

42,168

37,360

109,195

111,372

Cost of sales

-37,142

-32,126

-96,018

-95,747

Gross profit

5,026

5,234

13,177

15,625

Distribution costs

-1,469

-1,150

-3,999

-3,639

Administrative expenses

-2,393

-2,225

-7,048

-7,119

Other income

39

167

400

494

Other expenses

-20

-24

-180

-150

Operating profit

1,183

2,002

2,350

5,211

Finance income

3

8

71

116

Finance costs

-95

-122

-252

-269

Profit before tax

1,091

1,888

2,169

5,058

Income tax

-160

-194

-453

-689

Profit for the period

931

1,694

1,716

4,369

Profit attributable to:

Owners of the parent company

915

1,691

1,710

4,398

Non-controlling interests

16

3

10

-29

Earnings per share

Basic earnings per share (EUR)

0.05

0.10

0.10

0.25

Diluted earnings per share (EUR)

0.05

0.10

0.10

0.25


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Unaudited

EUR'000

Q3

Q3

9m

9m

2021

2020

2021

2020

Profit for the period

931

1,694

1,716

4,369

Other comprehensive income

Items that may be reclassified to profit or loss

Impact of exchange rate changes of a foreign subsidiaries

-8

-2

-13

-16

Items that will not be reclassified to profit or loss

Gain on sales of financial assets

0

0

265

80

Net gain/loss (-) on revaluation of financial assets

49

98

8,369

-747

Total comprehensive income for the period

41

96

8,621

-683

Other comprehensive income

972

1,790

10,337

3,686

Total comprehensive income attributable to:

Owners of the Company

956

1,787

10,331

3,715

Non-controlling interests

16

3

6

-29

Tiit Atso
Chairman of the Board
+372 674 7400

Attachment


Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting