Harju Elekter Group financial results, 1-6/2022

27.07.2022 Reports Market Announcements

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 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  
           

Interim Report of Harju Elekter Group Q2 2022

Tiit Atso
Chairman of the Board
+372 674 7400