Commentary from the Management
Harju Elekter’s orders and sales volumes, which started to increase in the second half of the year, continued to grow strongly in the fourth quarter. Sales volumes in the last quarter increased by more than 7 million euros, or by a fifth, year-on-year, helping to exceed both the revenue of 2020 and the 150-million-euro mark. Revenue of 152 (2020: 147) million euros exceeds the turnover record achieved by the Group last year.
Despite the growth of volumes, the year as a whole continues to be characterised by shortages of raw materials and components, record prices and low availability which, in turn, led to constant rescheduling in production and delays in customer orders. Although the sheet metal shortage had largely eased by the fourth quarter, the fall in raw material prices could not yet be felt and, combined with the readjustments in production mentioned above, it was not possible to achieve satisfactory profitability.
The objective for 2022 is to achieve sustainable profitability, which will be possible thanks to the downward trend in raw material prices, improved component availability and strong customer relationships. Effective work by the sales department in price negotiations with customers also provides an opportunity for improvement. Obstacles and risks include the ongoing pandemic situation, tensions between major economies and growing competition for skilled labour which, in turn, is creating strong wage pressures.
Revenue, Expenses, and Profit
The revenue of the Group was 43.6 (Q4 2020: 35.2) million euros in the fourth quarter, increasing by 23.6% compared to the comparable period. Revenue increased in all areas of business activity, but the main contribution came from the sale of electrical equipment, which was 35.6 (Q4 2020: 30.2) million euros. This was mainly due to the increase in the volume of orders from the framework contracts. Despite serious challenges, Harju Elekter’s revenue for the year grew by 4.2% year-on-year, to 152.8 (2020: 146.6) million euros, exceeding previous record sales volumes. The revenue from electrical works in the shipbuilding sector increased the most, totaling 6.0 (2020: 4.2) million euros. The revenue of electrical equipment increased by 1.5 million to 126.7 million euros in a year comparison.
| EUR’000 | Q4 | Q4 | +/- | 12m | 12m | +/- | |
| 2021 | 2020 | Q/Q | 2021 | 2020 | 12m/12m | ||
| Revenue | 43,561 | 35,243 | 23.6% | 152,757 | 146,614 | 4.2% | |
| Gross profit | 4,703 | 5,585 | -15.8% | 17,880 | 21,209 | -15.7% | |
| EBITDA | 1,939 | 2,400 | -19.2% | 7,221 | 10,340 | -30.2% | |
| Operating profit (EBIT) | 853 | 1,335 | -36.1% | 3,202 | 6,546 | -51.1% | |
| Profit for the period | 894 | 1,159 | -22.9% | 2,610 | 5,528 | -52.8% | |
| Incl. attributable to owners of the parent | 888 | 1,165 | -23.8% | 2,598 | 5,563 | -53.3% | |
| Earnings per share (EPS) (euros) | 0.05 | 0.07 | -23.8% | 0.15 | 0.31 | -53.3% |
The Group’s core business, Production, accounted for 87.4% of the Group’s revenue in the reporting quarter and in twelve months. The revenue of the production segment increased both by quarter and by year: 7.4 million to 37.7 million euros and by 8.0 million to 133.5 million euros, respectively. The biggest challenges for manufacturing companies came from supply shortages of missing components that were required in projects. A number of large orders were pending, and production cycles had to be reorganised on an ongoing basis.
Sales to the Estonian market remained practically at the same level in the reporting quarter, totalling 6.5 million euros. Revenue increased by 2.5 million to 26.0 million euros in year comparison, accounting for 17.0% (2020: 16.0%) of the Group’s revenue. The growth mainly came from the production and supply of prefabricated substations.
The Group’s revenue in Finland was 17.9 million euros in the reporting quarter (Q4 2020: 13.8). The increase in revenue in the last quarter was affected by the postponement of orders from the beginning of the year to the second half of the year, due to both the cold winter at the beginning of the year and supply difficulties resulting from material shortages. All in all, year-on-year revenue in the Finnish market increased by 2.2 million, to 70.9 million euros. During the reporting year, 46.4% (2020: 46.9%) of the Group’s products and services were sold to the Group’s largest market, Finland.
The revenue earned from the Swedish market increased both in the reporting quarter and yearly comparison, amounting to 10.4 (Q4 2020: 9.1) and 27.6 (2020: 26.5) million euros, respectively. In the second half of the year, the production and supply of substations for new framework contract continued at an accelerated pace. Sweden is the Group’s second largest market, accounting for 18.1% of the Group’s revenue during the year as well as in the previous period. The Group sees market potential in Sweden and is making investments to increase the business activity.
Sales to the Norwegian market continued to recover in the fourth quarter. The Group sold products and services worth 4.2 (Q4 2020: 2.8) million euros to the Norwegian market. In 2021, the Norwegian market generated revenues of 13.2 million euros (2020: 16,7). 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 8.6% (2020: 11.4%) of the reporting year revenue.
Investments
During 2021, the Group invested a total of 7.7 (2020: 8.1) million euros in non-current assets, incl 1.3 (2020: 3.1) million euros in investment properties, 5.7 (2020: 4.6) million euros in property, plant, and equipment and 0.7 (2020: 0.3) 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 expansion of the Lithuanian plant, which was completed in the summer. The total cost of the investment was 5.5 million euros. In addition, preparations for the construction of the production and storage complex in the Allika Industrial Park, Laohotell III, were launched and investments were made in production technology and in solar power plants. In connection with the expansion of the production of the Elektra electric vehicle chargers in Finland, an additional production area of 1,140 m2 was acquired in the reporting quarter in Ulvila, near the current production facilities. As of the reporting date, the total value of the Group’s non-current financial investments was 25.2 (31.12.20: 11.9) million euros. The net gain on the revaluation of financial assets in the reporting quarter was 3.9 million euros and in the reporting year 12.3 million euros. During 2021 one million euros was received from the partial sale of securities, of which the realized profit was 0.3 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 7.44 euros. As at 31 December 2021, AS Harju Elekter had 9,387 shareholders. The number of shareholders increased during the reporting quarter by 448 members.
Dividend Proposal
In coordination with the Supervisory Board, the Group’s Management Board will propose to pay dividends to the shareholders 0.14 euros per share, totalling 2.5 million euros and representing 97% of consolidated net profit in 2021.
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||
| Unaudited | ||||
| EUR’000 | 31
December 2021 |
31
December 2020 |
||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | 574 | 2,843 | ||
| Trade and other receivables | 33,689 | 27,226 | ||
| Prepayments | 1,844 | 820 | ||
| Inventories | 27,437 | 18,856 | ||
| Total current assets | 63,544 | 49,745 | ||
| Non-current assets | ||||
| Deferred income tax assets | 690 | 514 | ||
| Non-current financial investments | 25,222 | 11,918 | ||
| Investment properties | 23,903 | 23,605 | ||
| Property, plant, and equipment | 26,654 | 22,494 | ||
| Intangible assets | 7,544 | 7,199 | ||
| Total non-current assets | 84,013 | 65,730 | ||
| TOTAL ASSETS | 147,557 | 115,475 | ||
| LIABILITIES AND EQUITY | ||||
| Liabilities | ||||
| Borrowings | 16,912 | 12,056 | ||
| Prepayments from customers | 4,659 | 4,182 | ||
| Trade and other payables | 24,490 | 15,837 | ||
| Tax liabilities | 3,156 | 2,871 | ||
| Current provisions | 35 | 34 | ||
| Total current liabilities | 49,252 | 34,980 | ||
| Borrowings | 11,426 | 7,032 | ||
| Other non-current liabilities | 33 | 66 | ||
| Total non-current liabilities | 11,459 | 7,098 | ||
| TOTAL LIABILITIES | 60,711 | 42,078 | ||
| Equity | ||||
| Share capital | 11,352 | 11,176 | ||
| Share premium | 1,601 | 804 | ||
| Reserves | 18,716 | 6,709 | ||
| Retained earnings | 55,315 | 54,858 | ||
| Total equity attributable to the owners of the parent company | 86,984 | 73,547 | ||
| Non-controlling interests | -138 | -150 | ||
| Total equity | 86,846 | 73,397 | ||
| TOTAL LIABILITIES AND EQUITY | 147,557 | 115,475 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||||
| Unaudited | ||||||||
| EUR’000 | Q4 | Q4 | 12m | 12m | ||||
| 2021 | 2020 | 2021 | 2020 | |||||
| Profit for the period | 894 | 1,159 | 2,610 | 5,528 | ||||
| Other comprehensive income | ||||||||
| Items that may be reclassified to profit or loss | ||||||||
| Impact of exchange rate changes of a foreign subsidiaries | -44 | 128 | -57 | 112 | ||||
| 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 | 3,900 | 3,669 | 12,269 | 2,922 | ||||
| Total comprehensive income for the period | 3,856 | 3,797 | 12,477 | 3,114 | ||||
| Other comprehensive income | 4,750 | 4,956 | 15,087 | 8,642 | ||||
| Total comprehensive income attributable to: | ||||||||
| Owners of the Company | 4,744 | 4,962 | 15,075 | 8,677 | ||||
| Non-controlling interests | 6 | -6 | 12 | -35 | ||||
Harju Elekter Interim Report Q4 2021
Tiit Atso
Chairman of the Management Board
+372 674 7400
