Harju Elekter Group financial results, 1-12/2024
The fourth-quarter results of Harju Elekter continued to be affected by low
order volumes. Although the decline in orders could be foreseen as early as the
spring of 2024, it had a larger-than-expected impact on fourth-quarter revenue,
which declined significantly. The decline in revenue presented a challenge in
terms of covering overhead costs and maintaining profitability. However, further
reductions in overhead costs, in particular staff costs, would have affected
competence and limited opportunities for the sustainable growth of business
volumes. Nevertheless, the group continues to operate in savings mode, carefully
considering each expense and investment.
On the positive side, the volume of sales orders increased in the fourth
quarter. As previously predicted, its impact will not be noticeable until the
peak production season, which will be in the second and third quarters of 2025.
Therefore, the low season in economic results is expected to continue in the
first quarter.
Although the results of the preceding financial year fall short of expectations,
it should be noted that the group has managed to exceed the revenue and
operating profit of 2024 on only two occasions in the past. However, this is no
reason to be satisfied. It is the priority of the Management Board to improve
performance results in the coming years. The new strategic plan approved by the
Supervisory Board at the beginning of 2025 creates the necessary prerequisites
for achieving this objective, considering both market trends and growth
opportunities for electrification.
The Management Board of Harju Elekter will propose the distribution of dividends
in the notice for calling a general meeting, based on the business volumes at
the beginning of the year and the forecast for 2025.
Revenue and financial results
The fourth quarter was challenging for the Group, but the stability achieved in
the preceding months helped to maintain a positive result for the full year.
Quarterly revenue decreased by 41% year-on-year, amounting to 30.0 (2023 Q4:
50.7) million euros, reflecting the stabilization of order volumes and
adaptation to changing market conditions. The revenue for the reporting year was
174.7 (2023: 209.0) million euros. Although the revenue decreased, the Group
maintained a strong market position despite a challenging economic environment.
Q4 Q4 12M 12M
+/-
(EUR´000) 2024 2023 +/- 2024 2023
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Revenue 29,963 50,737 -40.9% 174,712 209,014 -16.4%
Gross profit 1,778 4,218 -57.8% 20,899 23,588 -11.4%
EBITDA -724 1,920 -137.7% 10,358 12,444 -16.7%
Operating profit (-loss) (EBIT) -1,726 758 -327.7% 6,408 8,078 -20.7%
Profit (-loss) for the period -2,303 135 -1805.9% 3,175 5,160 -38.5%
Earnings per share (EPS) (euros) -0.12 0.01 -1300.0% 0.17 0.28 -39.3%
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The Group's operating expenses decreased across all cost categories in 2024
compared to the previous year, primarily due to the decline in revenue and
corresponding cost savings. In the fourth quarter, expenses decreased by 37.8%
to 31.4 (2023 Q4: 50.4) million euros. The largest reduction came from the cost
of sales, which decreased by 39.4% to 28.2 million euros. Meanwhile,
distribution costs declined by 15.2%, amounting to 1.1 million euros, and
administrative expenses dropped by 20.4% to 2.1 million euros. On an annual
basis, total operating expenses amounted to 167.7 (2023: 200.9) million euros,
marking a 16.5% decline. The decrease in expenses was slightly lower than the
drop in revenue, as certain fixed costs remained despite the reduction in sales
volumes.
Depreciation expenses for fixed assets declined by 13.8% in the reporting
quarter, reaching 1.0 million euros, and by 9.5% annually, totaling 4.0 million
euros. This decrease was due to the alignment and revaluation of depreciation
periods for fixed assets within the group. However, lower order volumes led to a
slight increase in the share of depreciation costs in operating expenses. The
labour cost ratio to revenue increased to 28.5% (2023 Q4: 20.6%) in the
reporting quarter and to 21.4% (2023: 19.1%) annually. Comparing the
quarters labour costs decreased by 18.6% and on yearly bases by 6.6% due to
workforce adjustments in the production units in Estonia, Finland, and
Lithuania. Labour costs amounted to 8.5 (2023 Q4: 10.5) million euros in the
fourth quarter and 37.3 (2023: 39.9) million euros annually.
The gross profit for the fourth quarter was 1,778 (2023 Q4: 4,218) thousand
euros, and the gross profit margin was 5.9% (2023 Q4: 8.3%). Operating loss
(EBIT) for the fourth quarter was -1,726 (2023 Q4 operating profit: 758)
thousand euros, leading to an operating margin of -5.8% (2023 Q4: 1.5%). The net
loss was -2,303 (2023 Q4 net profit: 135) thousand euros, and net loss per share
was -0.12 (2023 Q4: 0.01) euros. The results were mainly influenced by the
slower adjustment of production costs to lower order volumes, especially as
sales volumes have grown rapidly in recent years.
For the full year, the Group achieved a positive result, although weaker fourth-
quarter figures reduced overall profitability compared to the previous year. In
2024, gross profit was 20,899 (2023: 23,588) thousand euros, and the gross
profit margin improved to 12.0% (2023: 11.3%). Operating profit (EBIT) amounted
to 6,408 (2023: 8,078) thousand euros, and net profit was 3,175 (2023: 5,160)
thousand euros. Net profit per share was 0.17 (2023: 0.28) euros. Although the
volume of work and the number of orders decreased in the second half of the
year, the normalization of the market establishes the prerequisites for more
stable growth in the future. Compared to 2023, the results were also affected by
the fact that last year's settlement of the dispute over the framework contract
for hermetic distribution transformers led to higher profitability, lessening of
previous reserves, and a short-term rise in profits.
Core business and markets
Sales of electrical equipment, which constitute the group's main area of
business, reached 26.6 (2023 Q4: 46.7) million euros in the reporting quarter,
representing a 43.0% decrease. For the full year, the revenue from electrical
equipment totaled 161.2 (2023: 194.7) million euros, a 17.2% decline compared to
the previous year. The main reasons for the decline were the decrease in
outsourcing service orders due to the cooling of the global economy and the
decline in demand in the substation market due to regulatory changes.
The Group's four main target markets-Estonia, Finland, Sweden, and
Norway-accounted for 85.6% (2023 Q4: 78.4%) of total revenue in the reporting
quarter. Year-over-year, revenue growth was recorded only in Estonia, being
23.0 (2023: 20.9) million euros, while other key markets showed signs of
stabilization following high activity levels in previous years.
In Estonia, revenue remained at the previous year's level in the fourth quarter,
reaching 5.3 (2023 Q4: 5.2) million euros. Growth was mainly driven by higher
sales of compact substations to electricity distribution network customers, as
well as a low comparison base from mid-2023, when the new framework agreement
was still gaining momentum.
In Finland, revenue for the last quarter was 12.4 (2023 Q4: 19.6) million euros,
marking a 36.7% decline compared to the previous year. On an annual basis,
revenue fell by 19.7%, amounting to 66.9 (2023: 83.3) million euros. The decline
was primarily due to lower demand in the compact substation segment, which was
affected by regulatory changes in the electricity network sector, as well as
weak market conditions for electric vehicle chargers and the Group's exit from
the solar panel resale segment.
In Norway, revenue decreased by 42.9% in the fourth quarter, reaching 3.3 (2023
Q4: 5.7) million euros. Over the full year, revenue declined by 22.1%, amounting
to 26.3 (2023: 33.8) million euros. The decline was primarily due to a high
comparison base from the previous year, when the Lithuanian production unit
experienced near maximum capacity workload due to the project-based nature of
the sector.
In Sweden, a similar trend was observed as in other Scandinavian markets, with
revenue declining by 49.2% in the fourth quarter to 4.7 (2023 Q4: 9.2) million
euros. Annual revenue amounted to 26.0 (2023: 32.5) million euros. The main
reason for the decline was a change in the business strategy, which involved
discontinuing EPC projects, or turnkey solutions, and shifting focus to factory-
made solutions.
Investments
During the reporting year, Harju Elekter invested a total of 3.8 (2023: 6.9)
million in non-current assets, including 1.8 (2023: 5.2) million in investment
properties, 0.9 (2023: 1.4) million in property, plant, and equipment, and 1.1
(2023: 0.4) million euros in intangible assets. The investments included large-
scale renovation and reconstruction work at the Keila industrial park, aimed at
meeting the needs of the long-term tenant. Additionally, production technology
assets were acquired, and production and process management systems were
developed.
As of the reporting date, the value of the Group's long-term financial
investments was 27.7 (31.12.23: 29.2) million euros. In the second quarter, most
of the listed securities were sold. The fair value of securities declined both
in the reporting quarter and throughout the year, decreasing by a total of 71
thousand euros.
Share
The company's share price on the last trading day of the reporting quarter on
the Nasdaq Tallinn Stock Exchange closed at 4.58 euros.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
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(EUR´000) 31.12.2024 31.12.2023
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ASSETS
Current assets
Cash and cash equivalents 3,773 1,381
Trade and other receivables 29,606 38,837
Prepayments 2,096 1,071
Inventories 19,845 36,834
Total current assets 55,320 78,123
Non-current assets
Deferred income tax assets 687 731
Non-current financial investments 27,717 29,244
Investment properties 29,432 28,856
Property, plant, and equipment 32,420 34,067
Intangible assets 8,121 7,354
Total non-current assets 98,377 100,252
TOTAL ASSETS 153,697 178,375
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LIABILITIES AND EQUITY
Liabilities
Borrowings 9,839 19,387
Prepayments from customers 11,600 18,870
Trade and other payables 17,472 23,159
Tax liabilities 3,260 3,308
Current provisions 270 140
Total current liabilities 42,441 64,864
Borrowings 20,184 23,481
Other non-current liabilities 39 32
Total non-current liabilities 20,223 23,513
Total liabilities 62,664 88,377
Equity
Share capital 11,655 11,655
Share premium 3,306 3,306
Reserves 23,135 23,055
Retained earnings 52,937 51,982
Total equity attributable to the owners of the
parent company 91,033 89,998
TOTAL LIABILITIES AND EQUITY 153,697 178,375
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CONSOLIDATED STATEMENT OF PROFIT AND LOSS
Unaudited
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(EUR´000) Q4 2024 Q4 2023 12M 2024 12M 2023
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Revenue 29,963 50,737 174,712 209,014
Cost of sales -28,185 -46,519 -153,813 -185,426
Gross profit 1,778 4,218 20,899 23,588
Distribution costs -1,069 -1,260 -4,710 -5,320
Administrative expenses -2,116 -2,657 -9,213 -10,112
Other income 93 495 281 314
Other expenses -412 -38 -849 -392
Operating profit (-loss) -1,726 758 6,408 8,078
Finance income 5 456 116 97
Finance costs -613 -624 -2,436 -2,103
Profit (-loss) before tax -2,334 590 4,088 6,072
Income tax 31 -455 -913 -912
Profit (-loss) for the period -2,303 135 3,175 5,160
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Earnings per share
Basic earnings per share (euros) -0.12 0.01 0.17 0.28
Diluted earnings per share (euros) -0.12 0.01 0.17 0.28
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
(EUR´000) Q4 2024 Q4 2023 12M 2024 12M 2023
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Profit (-loss) for the period -2,303 135 3,175 5,160
Other comprehensive income
Items that may be reclassified to profit
or loss
Impact of exchange rate changes of a
foreign subsidiaries 98 -212 108 -139
Items that will not be reclassified to
profit or loss
Gain on sales of financial assets 0 0 185 0
Revaluation of financial assets -6 -3,266 -71 5,516
Total comprehensive income (-loss) for the
period 92 -3,478 222 5,377
Other comprehensive income (-loss) -2,211 -3,343 3,397 10,537
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Priit Treial
CFO and Member of the Management Board
+372 674 7400
[email protected] (mailto:[email protected])