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Harju Elekter Group financial results, 1-6/2022

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HARJU ELEKTER AS
HARJU ELEKTER AS

In terms of profitability, the second quarter of 2022 turned out to be the most difficult in the history of Harju Elekter. Persistent supply chain problems, in particular in the form of rising material prices and shortages involving several components, affected the profitability. The Group was forced to critically reassess all ongoing works, agreements, and their potential profitability for the coming periods. In addition to the increase in production costs, several projects turned out to be more complex and unprofitable than originally planned, exacerbated by the inefficiencies arising from supply constraints and rising fees for skilled labour.

We have taken a number of steps to cope with the challenges posed by world events. We will continue to reorganise production to ensure efficiency in the face of disrupted supply chains. The relief obtained from framework contract price negotiations has not yet fully been reflected in second quarter results and is more likely to be seen in the second half of the year. On the positive side, the order book is covered for a long period, which is also characterised by continued growth in revenues. The green transition trend and the pressure to ramp up electrification continue to intensify, accelerating investment in electricity networks to ensure reliability and modernisation.

Financial Results

The consolidated revenue for the second quarter of 2022 was 41.9 (Q2 2021: 36.3) million euros, and the revenue for the first half of the year was 79.2 (6M 2021: 67.0) million euros. Comparing both periods, revenue increased in most business areas. Manufacturing and sales of electrical equipment accounted for the majority of the increase, rising by 4.9 million euros in the reporting quarter in yearly comparison and 9.8 million euros in the six-month comparison.

EUR’000

 

Q2

Q2

+/-

6M

6 M

+/-

 

 

2022

2021

 

2022

2021

 

Revenue

 

41,914

36,310

15.4%

79,235

67,028

18.2%

Gross profit

 

963

4,306

-77.6%

3,949

8,151

-51.6%

EBITDA

 

-1,953

1,638

-219.2%

-2,022

3,124

-164.7%

Operating profit/loss (-) (EBIT)

 

-3,048

651

-568.2%

-4,174

1,168

-457.4%

Profit/loss (-) for the period

 

-3,197

488

-755.1%

-4,491

785

-672.1%

Incl. attributable to owners of the parent company

 

-3,209

485

-761.6%

-4,517

795

-668.2%

Earnings per share (EPS) (euros)

 

-0.18

0.03

-700%

-0.25

0.04

-725.0%

The Group's operating expenses increased by 26.5% during quarterly and 6 months comparison. The operating expenses in total for the reporting quarter were 45.2 (Q2 2021: 35.8) million euros, and for the first half of the year 83.6 (6M 2021: 66.0) million euros. The majority of the increase in operating expenses was due to the increase in the cost of sales, up 28% in the comparison of both periods. The increased costs of goods and services sold exceeded the growth rate of revenue by 12.6 percentage points. The increase in distribution costs and administrative expenses was lower than the increase in revenue. Distribution costs increased by 0.2 million to 1.5 million euros quarter-on-quarter, making up 3.4% of the Group's operating expenses and 3.6% of revenue. Administrative expenses increased by 0.3 million euros to 2.8 million euros quarter-on-quarter, accounting for 6.1% of the Group's operating expenses and 6.6% of revenue. The total distribution costs for the first half of the year were 2.9 and administrative expenses were 5.4 million euros. Labour costs increased with quarterly and half-yearly comparison, being 9.1 (Q2 2021: 7.6) and 17.9 (6M 2021: 14.9) million euros, respectively. A majority of the growth in labour costs and average wages was attributed to the significant increase in staff and wage pressure due to labour shortages in all markets.

The gross profit for the Q2 was 963 (Q2 2021: 4,306) thousand euros and the gross profit margin was 2.3% (Q2 2021: 11.9%). The consolidated operating loss (EBIT) was -3,048 (Q2 2021: operating profit 651) thousand euros. The operating margin for the second quarter was -7.3% (Q2 2021: 1.8%). The net loss for the Q2 was -3,197 (Q2 2021: net profit 488) thousand euros of which the share of the owners of the parent company was -3,209 (Q2 2021: 485) thousand euros. The earnings per share were -0.18 euros (Q2 2021: 0.03) in the second quarter. The gross profit for the first half of the year was 3,949 (6M 2021: 8,151) thousand euros and the gross profit margin was 5.0% (6M 2021: 12.2%). During the first six months, the operating loss (EBIT) was -4,174 (6M 2021: operating profit 1,168) thousand euros. In total, the Group's net loss for the first half of the year was -4,491 (6M 2021: net profit 785) thousand euros and earnings per share was -0.25 (6M 2021: 0.04) euros.

Core Business and Markets

The Group's core business, production, accounted for 89.3% of the Group's consolidated revenue. Thanks to the growth in sales volumes of companies manufacturing electrical equipment and the support of large-scale special-order work, the sales volume of the production segment increased by 18.3% to 37.4 million euros in the reporting quarter.

Sales of the reporting quarter to the Estonian market remained at the same level as last year, being 6.9 million euros. In six months, revenue increased by 15.1% to 13.8 million euros. The increase was mainly due to the increase in sales of hermetic distribution transformers and distribution cabinets. The Estonian market accounted for 16.4% (Q2 2021: 19.0%) of the consolidated revenue in the reporting quarter.

In the comparison of markets, the sales growth was the highest for the Finnish market. In the reporting quarter, revenue was 3.7 million euros more than the year before, totaling 22.1 million euros. In six months, 38.8 (6M 2021: 33.0) million euros were earned from the Finnish market. The majority of the sales volume in the reporting quarter consisted of the sale of substations to Finnish electricity network companies. The lower-than-usual six-month revenue in the previous year were mainly affected by a decrease in orders due to the snowy and cold winter, the start of new long-term orders, as well as some supply constraints and material shortages. In the reporting quarter, more than half, or 52.6% (Q2 2021: 50.6%) of Harju Elekter's products and services were sold to the Group's largest market.

Sales to the Swedish market decreased by 43% compared to the reporting quarters and by 19% compared to six months, being 3.5 and 9.3 million euros, respectively. The benchmark for the Swedish market was high, as the Swedish subsidiary had more projects underway than usual in the local market in the same period last year. Sweden accounted for 8.3% (Q2 2021: 16.9%) of the consolidated revenue of the reporting quarter.

Order volumes in the shipping sector in Norway are recovering. During the reporting quarter, 2.9 million euros worth of Group products and services were sold on the Norwegian market, which was 45% more than in the same period of the previous year. Compared to six months, revenue doubled to 7.4 million euros. Revenue increases in both periods are due to low order volume in the comparison periods. The Norwegian market accounted for 6.9% (Q2 2021: 5.5%) of the quarter's revenue.

Investments

During the reporting period, the Group invested a total of 2.2 (6M 2021: 3.9) million euros in non-current assets, incl 1.2 (6M 2021: 0.2) million euros in investment properties, 0.7 (6M 2021: 3.5) million euros in property, plant, and equipment and 0.3 (6M 2021: 0.2) million euros in intangible assets. Most of the investments during the reporting period were directed to the construction of the Laohotell III production and warehouse complex, in the Allika Industrial Park, which today is filled with tenants. In addition, investments were made in production technology equipment and production and process management systems.

The value of the Group's non-current financial investments totaled 23.6 (31.12.21: 25.2) million euros as of the reporting date. The main change were the partial sale of securities and the decrease in fair value of 0.9 million euros in the first half of the year. A total of 1.3 (6M 2021: 1.0) million euros was received from the partial sale of listed securities during the first half of the year, of which the realized profit was 0.32 (6M 2021: 0.27) million euros. Harju Elekter increased its stake in the technology company IGL-Technologies Oy from 5.5% to 10% by 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 5.43 euros. As of 30 June 2022, AS Harju Elekter had 9,842 shareholders. The number of shareholders increased during the reporting quarter by 97.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

 

Unaudited

 

 

 

 

 

EUR'000

30.06.2022

31.12.2021

30.06.2021

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

629

574

1,576

 

 

Trade and other receivables

31,134

33,689

27,215

 

 

Prepayments

1,729

1,844

1,366

 

 

Inventories

38,185

27,437

24,623

 

 

Total current assets

71,677

63,544

54,780

 

 

Non-current assets

 

 

 

 

 

Deferred income tax assets

762

690

575

 

 

Non-current financial investments

23,596

25,222

21,259

 

 

Investment properties

24,647

23,903

23,328

 

 

Property, plant and equipment

25,794

26,654

24,879

 

 

Intangible assets

7,711

7,544

7,224

 

 

Total non-current assets

82,510

84,013

77,265

 

 

TOTAL ASSETS

154,187

147,557

132,045

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Liabilities

 

 

 

 

 

Borrowings

20,398

16,912

15,292

 

 

Prepayments from customers

8,558

4,659

1,919

 

 

Trade and other payables

27,615

24,490

22,208

 

 

Tax liabilities

3,525

3,156

2,946

 

 

Current provisions

551

35

73

 

 

Total current liabilities

60,647

49,252

42,438

 

 

Borrowings

14,158

11,426

9,469

 

 

Other non-current liabilities

33

33

65

 

 

Total non-current liabilities

14,191

11,459

9,534

 

 

TOTAL LIABILITIES

74,838

60,711

51,972

 

 

Equity

 

 

 

 

 

Share capital

11,352

11,352

11,176

 

 

Share premium

1,601

1,601

804

 

 

Reserves

17,913

18,716

15,173

 

 

Retained earnings

48,595

55,315

53,080

 

 

Total equity attributable to the owners of the parent company

79,461

86,984

80,233

 

 

Non-controlling interests

-112

-138

-160

 

 

Total equity

79,349

86,846

80,073

 

 

TOTAL LIABILITIES AND EQUITY

154,187

147,557

132,045

 

 


CONSOLIDATED STATEMENT OF PROFIT AND LOSS

 

 

 

 

 

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

EUR'000

Q2

Q2

6M

6M

 

 

 

 

2022

2021

2022

2021

 

 

 

Revenue

41,914

36,310

79,235

67,028

 

 

 

Cost of sales

-40,951

-32,004

-75,286

-58,877

 

 

 

Gross profit

963

4,306

3,949

8,151

 

 

 

Distribution costs

-1,515

- 1,315

-2,866

-2,529

 

 

 

Administrative expenses

-2,764

-2,437

-5,429

-4,654

 

 

 

Other income

322

188

378

360

 

 

 

Other expenses

-54

-91

-206

-160

 

 

 

Operating profit/loss (-)

-3,048

651

-4,174

1,168

 

 

 

Finance income

34

51

74

68

 

 

 

Finance costs

-111

-60

-230

-158

 

 

 

Profit/loss (-) before tax

-3,125

642

-4,330

1,078

 

 

 

Income tax

-72

-154

-161

-293

 

 

 

Profit/loss (-) for the period

-3,197

488

-4,491

785

 

 

 

Profit /loss (-) attributable to:

 

 

 

 

 

 

 

Owners of the parent company

-3,209

485

-4,517

795

 

 

 

Non-controlling interests

12

3

26

-10

 

 

 

Earnings per share

 

 

 

 

 

 

 

Basic earnings per share (euros)

-0.18

0.03

-0.25

0.04

 

 

 

Diluted earnings per share (euros)

-0.18

0.03

-0.25

0.04

 

 

 


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

 

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

EUR'000

Q2

Q2

6M

6M

 

 

 

 

2022

2021

2022

2021

 

 

 

Profit/loss (-) for the period

-3,197

488

-4,491

785

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

Items that may be reclassified to profit or loss

 

 

 

 

 

 

 

Impact of exchange rate changes of a foreign subsidiaries

-86

19

-65

-4

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

 

 

 

 

Gain on sales of financial assets

169

221

320

265

 

 

 

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

-336

7,954

-858

8,319

 

 

 

Total comprehensive income for the period

-253

8,194

-603

8,580

 

 

 

Other comprehensive income

-3,450

8,682

-5,094

9,365

 

 

 

Total comprehensive income attributable to:

 

 

 

 

 

 

 

Owners of the Company

-3,462

8,680

-5,120

9,375

 

 

 

Non-controlling interests

12

2

26

-10

 

 

 

 

 

 

 

 

 

 

 

Tiit Atso
Chairman of the Board
+372 674 7400

 

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