Harju Elekter Group financial results, 1-3/2020

29.04.2020 Reports Market Announcements

Commentary from the Management

Harju Elekter began the year with ambitious plans and goals. Market information and customer estimates were optimistic, in addition, extensive procurement contracts carried over from previous periods. Business activity was already active in all fields at the beginning of the year, key personnel within the Group were actively communicating with customers and partners, and development teams were utilised to the maximum. As with all businesses around the world, a new reality also hit our companies in four countries at the end of the quarter. The explosive spread of the coronavirus (Covid-19) around the world brought along the implementation of an emergency situation both in Estonia and in all of our markets. It is important to note that both we and our partners were able to quickly adapt our activity plans to the crisis that had developed, and we proceeded with what were essentially our original plans and budgets. Different measures were implemented to ensure the sustainability of business activities, and communication methods with partners were significantly changed; factories received strict rules of control and virus protection. Remote working, constant monitoring of the situation and operative information exchange became important.

All in all, Q1 economic results for the Group were good, and the coronavirus pandemic did not have a direct impact on the results. Production resources were operating under load, supply chains were operational, customers continued with orders, and we managed to avoid our employees falling ill with the virus. The consolidated unaudited revenue of Q1 2020 increased by 19.5% compared to the comparable period and was 35.0 (Q1 2019: 29.3) million euros. Consolidated operating profit (EBIT) was 1,053 thousand euros, surpassing the y-o-y figure threefold, and the net profit was 703 (Q1 2019: 165) thousand euros, and earnings per share (EPS) was 0.04 (Q1 2019: 0.01) euros.

Key indicators

Change y-o-y January – March Year
(thousand euros) 2020 2019 2019
Revenue 19.5% 34,998 29,283 143,397
Gross profit 30.0% 4,923 3,788 18,244
EBITDA 66.5% 1,943 1,167 6,791
EBIT 243.1% 1,053 307 3,273
Profit for the period 326.3% 703 165 2,367
incl attributed to Owners of the Company 300.2% 728 182 2,460

Revenue and profit

The consolidated revenue of the Group was 35.0 million euros in Q1 2020. Despite the low point in the economy, revenue increased in all of the Group’s production companies. In the comparison of the reporting quarter, consolidated revenue increased by 19.5%, including the sale of electrical equipment increased the most: 4.7 million euros. The revenue earned from the sale of electrical equipment comprised 96.7% of the sales volume of the Production segment and 86.4% of the consolidated revenue. The remaining 13.6% of the revenue of the Group was earned from the sale of metal products, project and retail sale of electrical goods, leasing out industrial real estate, and electrical works in the shipbuilding sector. The Group is yet to observe any increased uncertainty in the revenue trends of the following quarters caused by the coronavirus pandemic, but potential surprises certainly cannot be ruled out in this regard. Despite the overall difficult situation, the Group’s customers under framework agreements have started the year with estimated volumes, and orders have been received for the major part of volumes planned for the first half of the year.

The consolidated gross profit for the reporting quarter was 4,923 (Q1 2019: 3,788) thousand euros, the gross margin was 14.1% (Q1 2019: 12.9%). Consolidated operating profit (EBIT) for the first quarter was 1,053 (Q1 2019: 307), three times higher than in the same period last year. The operating margin for the first quarter was 3.0%. The consolidated net profit for the reporting quarter was 703 (Q1 2019: 165) thousand euros of which the share of the owners of the Parent company amounted to 728 (Q1 2019: 182) thousand euros. Earnings per share (EPS) was 0.04 (Q1 2019: 0.01) euros in the first quarter. While the low profitability of the comparable period was affected by the increase in production input prices and wages, as well as the underload of production due to the lower than expected order volume of Finnish electricity networks, then in the reporting quarter the Group has taken a significant step forward towards improving profitability.


The Group’s Estonian companies continue to contribute to the home market activities by participating in procurements, selling electrical equipment for retail and project sales, and offering different industrial rental spaces for corporate customers. Sales to the Estonian market increased 80 thousand euros to 3.6 (Q1 2019: 3.5) million euros in the quarterly comparison, accounting for 10.3% (Q1 2019: 12.0%) of the consolidated revenue for the reporting quarter. Servicing the new framework procurement of Elektrilevi OÜ has energetically begun, and the first substations have been delivered to the customer. The sale of HETR-series power distribution and metering cabinets has also increased.

The Finnish market contributed the most to the increase in consolidated revenue in this reporting period; in the comparison of quarters, sales increased by 3.3 million euros to 19.5 million euros. A total of 55.6% (Q1 2019: 55.1%) of Harju Elekter’s products and services were sold to the Group’s largest market in Q1. Production of the Finnish power grid companies comprised the greater part of the sales volume. In Q1, 350 substations were realised on the Finnish market, which is 4% more than in the previous year. The Group has reached the delivery of the first projects in Finland with the solutions of the HECON product line, that was developed within the Group, and where customers have provided positive feedback.

Norway is the second largest Group market, accounting for 15.5% of the Group’s revenue. The revenue earned in the reporting quarter was 5.4 million euros, increasing by 1.4 million euros compared to the first quarter of 2019. The majority of the sales volume on the Norwegian market originated from the sale of products directed at the shipbuilding sector.

The share of the Swedish market in the consolidated revenue grew in the reporting period by 1.6 percentage points to 14.3%, remaining a close third after Norway among markets.  In the reporting quarter, the revenue earned from the Swedish market was 5.0 million euros, which is 1.3 million euros more than in the comparable period. The growth was primarily ensured by the increase in sale of substations in Sweden. As at the end of the quarter, 85% of the orders in the framework agreement entered into in 2018 with E.ON Energidistribution AB, the largest distribution company in Sweden, had been delivered. In addition, ten compact substations were delivered to the Ellevio AB network on the Swedish market in the reporting period, which is a record result for the Estonian production company.

In a quarterly comparison, sales to the Netherlands market decreased by 0.3 million euros to 1.2 million euros, accounting for 3.6% (Q1 2019: 5.4%) of the consolidated revenue for the reporting quarter.

Business segments

The Group’s operations are divided into three segments – Production, Real estate and Other activities. The activities in the Production segment are design, sale, production and after-sale service of electricity distribution, switching and transformation equipment as well as automatics, process management and engine control equipment. The Real estate segment covers development, project management, leasing and other related services of industrial real estate property to leasing partners and Group companies. Other activities encompass all other non-segmented operating areas where each area is not large enough to form a separate segment. Such activities are, for example, management of financial investments, retail and project sale of electrical goods and electricity installation works for shipbuilding.

Traditionally, the largest part of the revenue, 89.4% (Q1 2019: 87.3%), was generated by Production, which is the main business activity of the Group. Supported by the increase in sales volumes of the companies of the Group that manufacture electrical equipment, the sales volume of the production segment increased by 22.3% to 31.3 million euros in three months.

The revenue of the Real estate segment has been stable and has mostly been affected by changes in rental premises, and changes in rent prices to some extent. In Q1, rental income from the rental premises of Keila, Allika and Haapsalu Industrial Parks was earned in the amount of 0.83 million euros, making up 2.4% (Q1 2019: 3.0%) of the total revenue of the Group. We estimate a slight decline in rental income for subsequent quarters, to ensure the tenants’ coping with the difficult situation.

The revenue of Other activities was 2.9 million euros in the Q1 and significant change has not occurred compared to the reference period. The revenue of the project sales of electrical goods mainly originated from customers in the power network and other infrastructure fields, construction companies and the public sector; revenue of electrical installation works originated from the shipbuilding sector.

Operating expenses

The total operating expenses for the reporting quarter were 33.9 (Q1 2019: 28.9) million euros. The principal part of the cost increase is attributable to the higher amount of cost of sales: 4.6 million euros in the quarterly comparison. The increase in the cost of sale provided was surpassed by sales growth by 1.5 percentage points, increasing the gross profit margin by 1.2 percentage points, compared to the Q1 2019 figures. Other operating expenses increased by 0.5 million euros compared to the comparable period. The largest growth – 17.3% – was in administrative expenses. The share of administrative expenses in the Group’s revenue comprised 7.3% (Q1 2019: 7.5%) of the revenue in the reporting period, remaining at the same level in the Group’s business expenses compared to Q1 of the previous year, i.e., at 7.5%. Distribution costs have decreased by 0.1 million to 1.3 million euros compared to the comparable quarter, accounting for 3.9% of the Group’s total operating expenses. The share of distribution expenses in the Group’s revenue has decreased by 0.4 percentage points to 3.7% year-on-year comparison. In summary, the increase of business expenses in Q1 was 2.0 percentage points smaller than the increase in revenue.

The increase in sales volumes and the expansion of production in the Lithuanian subsidiary has brought along the requirement for additional workforce and utilisation of overtime, as well. In addition, the costs of the share option program were reflected as labour costs in the amount of 59 (Q1 2019: 44) thousand euros in the reporting quarter. Labour costs increased by 0.3 to 6.6 million euros year-on-year comparison. The ration of labour costs to the Group’s revenue continued to decrease year-on-year comparison, being 19.0% (Q1 2019: 21.8%).

Depreciation of non-current assets was included in expenses in the first quarter in the total amount of 0.9 million euros, which is not significantly higher than in the first quarter of 2019.


As of the end of the reporting period, the Group had 797 employees, being 53 employees more than a year ago. The change was caused by a significant increase in production volume in the Lithuanian subsidiary. During the reporting year, the Group employed an average of 776 people, which was an average of 43 employees more than in the comparable period. In the reporting quarter, 5.0 (Q1 2019: 5.1) million euros were paid to the employees in salaries and remuneration. Average wages per Group employee was 2,130 (Q1 2019: 2,303) euros.


In the reporting period, the Group invested a total of 1.1 (Q1 2019: 1.9) million euros in non-current assets, incl. 0.7 (Q1 2019: 0.2) million euros in investment properties, 0.4 (Q1 2019: 1.6) million euros in property, plant and equipment and 0.03 (Q1 2019: 0.1) million euros in intangible assets. In Q1, preparations began for the fourth stage of construction for the production and office building in Lithuania. In addition, investments were made in the construction of a production facility in the Allika Industrial Park, and plots of land were purchased. Major investments are knowingly directed into the upcoming quarters, observing the general state of the world. Investments are made in unavoidable areas, which are directly necessary to organise production and perform contracts.

Main events in the first quarter

  • The Supervisory Board of AS Harju Elekter decided at its meeting held on March 16, 2020 to appoint the current member of the Management Board, Tiit Atso, as Chairman of the Management Board as of May 4, 2020. The current Chairman of the Management Board Andres Allikmäe will take the position of Head of Business Development at AS Harju Elekter, following the expiration of his Management Board member contract at 3 May 2020. The Management Board of AS Harju Elekter will continue with two members – Tiit Atso (Chairman of the Board) and Aron Kuhi-Thalfeldt (Member of the Board).
  • In order to simplify the coordination of sales and marketing activities and the management of Finnish subsidiaries, Harju Elekter decided to merge its subsidiaries Finnkumu Oy and Kiinteistö Oy Ulvilan Sammontie 9 with Satmatic Oy in 2020. The next step is to transfer all real estate properties located in Finland to Harju Elekter Kiinteistö Oy.
  • In the first quarter, the Swedish subsidiary of Harju Elekter, SEBAB AB, won three significant procurement wins for the supply of its products to the Swedish energy distribution sector. The total volume of the projects is 5.7 million euros, and deliveries will take place this year, mainly in the first half of the year.
  • AS Harju Elekter Elektrotehnika received a follow-up order for the delivery of data warehouse substations, which were delivered in 2019 to Singapore.
  • In Saue municipality, near Allika Industrial Park, two plots of land with a total area of 14.6 ha were purchased. The properties were acquired for the purpose of building solar power plants as well as possible real estate developments.
  • At the beginning of February, Harju Elekter Group participated in the largest electrical trade fair of the year Sähkö, Tele, Valo & AV, in Jyväskylä, Finland. The Group’s companies converged on a common stand where they showcased a wide variety of the Group’s products and services, including the HECON line system of the MCC, developed in the Group for 2500–4000 A solutions, and substation models designed to be suitable for Nordic requirements.

The share

The company’s share price on the last trading day of the reporting quarter on the Nasdaq Tallinn Stock Exchange closed at 3.61 euros.

Andres Allikmäe
Chairman of the Management Board
+372 674 7400

For more information: Tiit Atso, CFO, +372 674 7400 or Interim report 1-3/2020

ASSETS           31.03.20           31.12.19
Cash and cash equivalents       3,978    4,878
Trade receivables and other receivables    24,035   22,958
Prepayments       1,421      1,166
Inventories 22,620 19,010
Deferred income tax asset 494 472
Non-current financial investments 8,631 10,494
Investment property 21,743 21,259
Property, plant and equipment 20,180 20,402
Intangible assets 7,205 7,260
TOTAL ASSETS 110,307 107,899
Interest-bearing loans and borrowings 8,320 11,305
Advances from customers 2,479 2,212
Trade payables and other payables 21,527 16,448
Tax liabilities 3,412 2,959
Short-term provision 217 34
Interest-bearing loans and borrowings 7,900 7,901
Other long-term liabilities 63 64
Share capital 11,176 11,176
Share premium 804 804
Reserves 2,088 3,412
Retained earnings 52,461 51,699
TOTAL OWNERS’ EQUITY 66,529 67,091
Non-controlling interests -140 -115
TOTAL EQUITY 66,389 66,976
EUR’000 Q1 2020 Q1 2019
Revenue 34,998 29,283
Cost of sales -30,075 -25,495
Gross profit 4,923 3,788
Distribution costs -1,308 -1,208
Administrative expenses -2,561 -2,183
Other income 52 48
Other expenses -53 -138
Operating profit 1,053 307
Finance income 37 101
Finance costs -102 -43
Profit before tax 988 365
Income tax expense -285 -200
Profit for the period, attributable to 703 165
owners of the Company 728 182
non-controlling interests -25 -17
Basic earnings per share  (EUR) 0.04 0.01
Diluted earnings per share  (EUR) 0.04 0.01

Interim report 1-3/2020

Tiit Atso
+372 674 7400