Comments from management
Harju Elekter's 2024 started with more modest results than the previous year. But in the long run, it was still a strong first quarter. Despite our efforts to minimize seasonality, our first and fourth quarter results tend to be lower than our second and third quarter results. This year, a significant increase in production began in March, and based on orders, it is expected to continue until the end of autumn.
The largest contribution to the financial results comes from production in Lithuania and, to some extent, in Estonia. The Finnish production sector has a number of activities going forward to restore profitability, and we may become increasingly optimistic about the return to profitability of the Swedish production sector, which has taken longer than expected. Amendments to Finland's National Energy Grid Regulation, which governs the electricity distribution grid, have had a significant economic impact on sales performance in Estonia and Finland, resulting in reduced investments now and in the coming years.
On 11 March this year, a regulation of the European Parliament and of the Council of Europe banning the use of fluorinated greenhouse gases (SF6) in electrical equipment from 2026 came into force. For Harju Elekter, this means that many grid contracts are very likely to be amended or canceled in 2025. Since equipment manufacturers have just started producing SF6-free equipment, a shortage situation may emerge in the market and affect both. The availability of equipment decreases, leading to a sharp increase in prices. As a result, the amount of orders received for complex substations will fluctuate significantly before and after the start date of the relevant equipment.
To date, the Company has completed the restructuring that began in the second half of 2022. This has transformed the management of the Group and its subsidiaries, strengthened its focus on core activities and put in place other important steps to prepare for the implementation of the new strategy. development plan. There is no development without growth. As such, we continue to look for opportunities for profitable growth in both existing and new locations.
Revenue and financial performance
Group revenue for the first quarter was 46.8 million euros, an increase of 3.3% year-on-year. Sales of electrical equipment showed steady growth, reaching 42.2 million euros, accounting for 90.3% of the total quarterly revenue and contributing significantly to the company's revenue. The majority of electrical equipment sales consist of substations, low-voltage distribution equipment, technical buildings, and subcontracted services.
|
000 euros |
3M |
3M |
+/- |
|
|
2024 |
2023 |
|||
|
revenue |
46,775 |
45,269 |
3.3% |
|
|
gross profit |
4,836 |
5,386 |
-10.2% |
|
|
EBITDA |
1,941 |
2,382 |
-18.5% |
|
|
Operating profit (EBIT) |
976 |
1,309 |
-25.4% |
|
|
Net income |
361 |
749 |
-51.8% |
|
|
Earnings per share (EPS) (Euro) |
0.02 |
0.04 |
-50.0% |
Group operating expenses totaled €45.7 million (Q1 2023: €43.8 million) in the reporting quarter. The increase in operating expenses was primarily due to a 5.2% increase in cost of goods and services sold, which was 1.9 percentage points behind first-quarter revenue growth.
Marketing expenses decreased by 11.8% to €1.2 million and accounted for 2.6% of both Group operating expenses and revenues. Administrative expenses decreased by 2.4% quarter-on-quarter to €2.5 million and accounted for 5.5% of the Group's operating expenses and 5.4% of revenue in the reporting quarter. Personnel costs increased by 5.7% compared to the previous quarter, reaching 10 million euros.
Although sales increased, profit margins decreased compared to the previous year. Gross profit for the three months amounted to €4.8 million (Q1 2023: €5.4 million), with a gross profit margin of 10.3% (Q1 2023: 11.9%). Operating profit (EBIT) was EUR 1 million (Q1 2023: EUR 1.3 million) and operating margin was 2.1% (Q1 2023: 2.9%). Net income for the first quarter was EUR 0.4 million (Q1 2023: EUR 0.7 billion). Earnings per share for the first quarter amounted to EUR 0.02 (Q1 2023: 0.04).
Core business and market
Manufacturing, the group's core business, accounted for 94.9% of revenue for the quarter. Manufacturing revenue increased by 4.2% to €44.4 million.
The Group's largest target markets, Estonia, Finland, Sweden and Norway, together accounted for 80.6% of total revenue in the first quarter, a significant increase compared to the previous year (Q1 2023: 75.3%) .
The Estonian and Finnish markets were subdued compared to the previous year. In the reporting quarter, revenue from Estonia amounted to EUR 4.5 million (Q1 2023: EUR 5 million) and accounted for 9.6% (Q1 2023: 10.9%) of consolidated revenue. Sales of substations and cable switchboards to customers in the power distribution sector decreased, but rental income from real estate increased. Revenue from the Finnish market amounted to 17 million euros, down 8.9% year-on-year. The majority of the decrease in sales was due to a decrease in sales of electrical equipment and electrical work. Sales of substations and electric vehicle chargers for customers in the electricity distribution sector remained at a low level.
Significant growth was seen in the Norwegian market, where revenue doubled to €9.3 million, mainly due to the sale of low-voltage equipment to customers in the maritime sector. The Norwegian market accounted for 19.9% of his consolidated revenue in the reporting quarter. Revenues from the Swedish market also increased slightly, reaching €6.9 million (Q1 2023: €6.5 million), demonstrating the stable development of this market segment.
investment
During the reporting period, Harju Elekter generated a total of EUR 0.7 million, including EUR 0.4 million (Q1 2023: 0.3) in investment property and EUR 0.1 million (Q1 2023: 0.3) in investment property. (Q1 2023: 0.6) of non-current assets invested. Property, plant and equipment and intangible assets of EUR 0.2 million (Q1 2023: 0.1) million. The investment primarily focused on extensive renovation and reconstruction works at Keila Industrial Park, aimed at meeting the long-term needs of tenant Prysmian Group Baltics. Additionally, investments were made in production technology equipment, production and process control systems.
The Group's total long-term financial investments at the reporting date amounted to EUR 29.3 million (31.12.23: 29.2) million.
stock
On the last trading day of the quarter on the Nasdaq Tallinn Stock Exchange, the company's stock price closed at 4.79 euros. As of March 31, 2024, AS Harju Elekter Group had 11,103 shareholders.
|
Consolidated statement of financial position |
||||
|
unaudited |
||||
|
000 euros |
2024.03.31 |
2023.12.31 |
2023.03.31 |
|
|
assets |
||||
|
current assets |
||||
|
cash and cash equivalents |
1,444 |
1,381 |
1,028 |
|
|
Trade and other receivables |
49,050 |
38,837 |
37,627 |
|
|
advance payment |
1,400 |
1,071 |
1,945 |
|
|
stock |
35,900 |
36,834 |
44,704 |
|
|
Total current assets |
87,794 |
78,123 |
85,304 |
|
|
non-current assets |
||||
|
Deferred tax asset |
868 |
731 |
1,002 |
|
|
illiquid financial investments |
29,313 |
29,244 |
23,767 |
|
|
investment property |
28,922 |
28,856 |
24,766 |
|
|
Tangible fixed assets |
33,549 |
34,067 |
35,042 |
|
|
intangible assets |
7,440 |
7,354 |
7,284 |
|
|
Total fixed assets |
100,092 |
100,252 |
91,861 |
|
|
Total assets |
187,886 |
178,375 |
177,165 |
|
|
debt and equity |
||||
|
liabilities |
||||
|
Borrowed money |
22,576 |
19,387 |
18,366 |
|
|
Advance payment from customer |
20,946 |
18,870 |
21,310 |
|
|
Trade and other payables |
27,432 |
23,159 |
31,888 |
|
|
tax liability |
2,978 |
3,308 |
3,033 |
|
|
Current regulations |
150 |
140 |
1,950 |
|
|
Total current liabilities |
74,082 |
64,864 |
76,547 |
|
|
Borrowed money |
23,207 |
23,481 |
20,412 |
|
|
Other fixed liabilities |
32 |
32 |
0 |
|
|
Total fixed liabilities |
23,239 |
23,513 |
20,412 |
|
|
Total debt |
97,321 |
88,377 |
96,959 |
|
|
capital |
||||
|
share capital |
11,655 |
11,655 |
11,523 |
|
|
capital surplus |
3,306 |
3,306 |
2,509 |
|
|
reserves |
23,261 |
23,055 |
17,815 |
|
|
retained earnings |
52,343 |
51,982 |
48,552 |
|
|
Total capital attributable to owners of the parent company |
90,565 |
89,998 |
80,399 |
|
|
non-controlling interest |
0 |
0 |
-193 |
|
|
Total capital |
90,565 |
89,998 |
80,206 |
|
|
Total debt and equity |
187,886 |
178,375 |
177,165 |
|
Consolidated income statement |
||||||
|
unaudited |
||||||
|
000 euros |
3M |
3M |
||||
|
2024 |
2023 |
|||||
|
revenue |
46,775 |
45,269 |
||||
|
Cost of sales |
-41,939 |
-39,883 |
||||
|
gross profit |
4,836 |
5,386 |
||||
|
distribution cost |
-1,195 |
-1,356 |
||||
|
Management fee |
-2,517 |
-2,580 |
||||
|
Other income/income |
19 |
18 |
||||
|
Other costs |
-167 |
-159 |
||||
|
Operating income |
976 |
1,309 |
||||
|
financial income |
92 |
75 |
||||
|
financial costs |
-590 |
-549 |
||||
|
Pre-tax profit |
478 |
835 |
||||
|
income tax |
-117 |
-86 |
||||
|
Net income |
361 |
749 |
||||
|
Attribution of profits: |
||||||
|
Owner of parent company |
361 |
781 |
||||
|
non-controlling interest |
0 |
-32 |
||||
|
Earnings per share |
||||||
|
Basic earnings per share (euros) |
0.02 |
0.04 |
||||
|
Diluted earnings per share (Euro) |
0.02 |
0.04 |
|
Consolidated statement of comprehensive income |
||||
|
unaudited |
||||
|
000 euros |
3M |
3M |
||
|
2024 |
2023 |
|||
|
Net income |
361 |
749 |
||
|
Other comprehensive income |
||||
|
Items that may be reclassified to profit |
||||
|
Impact of exchange rate fluctuations on overseas subsidiaries |
106 |
-41 |
||
|
Items not reclassified to profit |
||||
|
Gain on sale of financial assets |
0 |
0 |
||
|
Gains and losses on revaluation of financial assets |
70 |
36 |
||
|
Total comprehensive income for the period |
176 |
-Five |
||
|
Other comprehensive income |
537 |
744 |
||
|
Total comprehensive income attributable to: |
||||
|
our owner |
537 |
776 |
||
|
non-controlling interest |
0 |
-32 |
||
Pritt Trail
CFO and management committee members
+372 674 7400
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