Harju Elekter's Q3 financial results continue to be profitable. A strong profit is Harju Elekter's most important sustainability objective, without which it will not be possible to meet the growing expectations of stakeholders. The third quarter saw a number of important and successful events: the appointment of managing directors for subsidiaries in Sweden and Finland; winning the procurement contract with Elektrilevi for supplying substations for the next five years; and exiting the wholesale and retail business in Estonia. Although the individual project contracts signed by our Swedish subsidiary a few years ago have proven to be more unprofitable than expected, the potential of the Swedish market and the demand for our products are sufficient to continue our efforts of starting up a factory in Sweden and reaching profitability in the coming quarters and years. Evaluating Harju Elekter's overall financial position and the developments resulting from the restructuring of the Group's management structure, Harju Elekter can be satisfied with the results as it celebrates its 55th year of operation.
Revenue and financial results
The Group's revenue for the reporting quarter was 56.2 (2022 Q3: 46.1) million euros, growing by 22.1% compared to the comparable period. Nine-month revenue increased by 26.3% compared to the comparable period, being 158.3 (2022 9M: 125.3) million euros. The majority of the increase in revenue came from the sale of electrical equipment, increasing by 11.7 million euros year-on-year. In the comparison of nine months, the revenue of electrical equipment increased by 39.4 million euros.
| EUR'000 | Q3 | Q3 | +/- | 9 M | 9 M | +/- | |
| 2023 | 2022 | 2023 | 2022 | ||||
| Revenue | 56,247 | 46,081 | 22.1% | 158,277 | 125,315 | 26.3% | |
| Gross profit | 7,378 | 5,803 | 27.1% | 19,372 | 9,751 | 98.7% | |
| EBITDA | 4,899 | 3,182 | 54.0% | 10,524 | 1,161 | 806.5% | |
| Operating profit/loss (-) (EBIT) | 3,846 | 1,691 | 127.4% | 7,323 | -2,482 | 395.0% | |
| Profit/loss (-) for the period | 3,393 | 1,406 | 141.3% | 5,026 | -3,085 | 262.9% | |
| Earnings per share (EPS) (euros) | 0.18 | 0.08 | 137.5% | 0.27 | -0.17 | 258.8% |
The Group's operating expenses totaled 52.4 (2022 Q3: 44.3) in the reporting quarter and 150.4 (2022 9M: 127.8) million in nine months. The majority of the increase in operating expenses was caused by the increase in the costs of sales, which in both periods was below the growth rate of revenue, by 0.8 in the quarter and by 6.1 percentage points in the nine-month comparison.
Distribution costs in the reporting quarter were 1.4 (2022 Q3: 1.3) and administration expenses 2.2 (2022 Q3: 2.7) million euros. The total distribution costs for the nine months were in the same order of magnitude as the year before - 4.1 million euros, and administrative expenses were 7.5 (2022 9M: 8.2) million euros.
Labour costs increased in both periods, being 9.3 (2022 Q3: 7.5) and 29.5 (2022 9M: 25.3) million euros, respectively. The majority of the increase in labour costs originates from staff growth, and the growth in average wages was influenced by wage pressure from the overall economy.
The gross profit for the reporting quarter was 7,378 (2022 Q3: 5,803) thousand euros and the gross margin was 13.1% (2022 Q3: 12.6%). Operating profit (EBIT) was 3,846 (2022 Q3: 1,691) thousand euros. The operating margin of the third quarter was 6.8% (2022 Q3: 3,7%). The net profit for the reporting quarter was 3,393 (2022 Q3: 1,406) thousand euros. Net profit per share in the third quarter was 0.18 (2022 Q3: 0.08) euros.
The gross profit for the nine months was 19,372 (2022 9M: 9,751) thousand euros and the gross margin was 12.2% (2022 9M: 7.8%). During the nine months, operating profit (EBIT) was 7,323 (2022 9M: operating loss -2,482) and net profit 5,026 (2022 9M: net loss -3,085) thousand euros. Net profit per share was 0.27 (2022 9M: net loss per share -0.17) euros.
Core business and markets
During the reporting quarter, the Group's core activity - production - accounted for 95.2% (2022 Q3: 89.3%) of its revenue. The revenue of the production segment increased by 30.1% in the reporting quarter and 34.9% compared to nine months, being 53.6 and 150.1 million euros, respectively.
The Group's largest target markets are Estonia, Finland, Sweden, and Norway, where a total of 81.7% (2022 Q3: 92.6%) of the Group's products and services were sold in the reporting quarter.
In the third quarter, 5.1 (2022 Q3: 8.9) million euros were earned from Estonia, which was 3.8 million euros less than a year earlier. Compared to nine months, the revenue decreased by 7.0 million to 15.6 million euros. The decrease in revenue in both periods is mostly related to the termination of the retail and project-based sale of electrical products in Estonia and the decrease in sales of electrical equipment to contractual customers.
Revenue from the Finnish market in the third quarter was 20.5 (2022 Q3: 21.8) million euros in the third quarter and 63.7 (2022 9M: 60.6) million in nine months. The majority of the increase in revenue came from the sale of automation equipment and low-voltage switchgears to key customers. During the reporting quarter, 36.5% (2022 Q3: 47.3%) of Harju Elekter products and services were sold to the Group's largest market.
The revenue of the Swedish market increased due to the rise in the sale of substations and the growth of project business, being 7.7 (2022 Q3: 6.4) in the reporting quarter and 23.3 (2022 9M: 15,8) million in the nine months. Sweden accounted for 13.7% (2022 Q3: 14.0%) of the revenue of the reporting quarter.
Revenue from the Norwegian market was 12.6 (2022 Q3: 5.5) in the reporting quarter and 28.1 (2022 9M: 12.9) million euros in nine months. The Norwegian market accounted for 22.4% (2022 Q3: 12.0%), of the revenue of the reporting quarter, growing into the second largest market after Finland.
Investments
During the reporting period, Harju Elekter Group invested a total of 5.0 (2022 9M: 3.1) million euros in non-current assets, incl 4.2 (2022 9M: 1.6) in investment properties, 0.6 (2022 9M: 1.1) in property, plant, and equipment and 0.2 (2022 9M: 0.4) million euros in intangible assets. Most of the investments during the reporting period were made in the construction of the production building to be rented out to Reimax Electronics OÜ in the Allika Industrial Park, scheduled to be completed by the end of the year. In addition, investments were made in other real estate objects, production technology equipment, and production and process management systems.
The value of the Group's non-current financial investments totalled 32.5 (31.12.22: 23.7) million euros as of the reporting date. Due to the revaluation of financial assets performed in the second quarter, the estimated fair value of OÜ Skeleton Technologies Group's investment increased by 8.8 million euros to 30.6 million euros. The fair value didn't change in the third quarter.
Share
The company's share price on the last trading day of the reporting quarter on the Nasdaq Tallinn Stock Exchange closed at 5.0 euros. As of 30 September 2023, AS Harju Elekter Group had 11,269 shareholders. The number of shareholders increased during the reporting quarter by 95 members.
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||
| Unaudited | ||||
| EUR '000 | 30.09.2023 | 31.12.2022 | 30.09.2022 | |
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | 596 | 9,152 | 504 | |
| Trade and other receivables | 42,522 | 31,612 | 34,069 | |
| Prepayments | 1,818 | 1,126 | 1,497 | |
| Inventories | 40,183 | 37,068 | 43,809 | |
| Total current assets | 85,119 | 78,958 | 79,879 | |
| Non-current assets | ||||
| Deferred income tax assets | 994 | 1 008 | 756 | |
| Non-current financial investments | 32,509 | 23,731 | 23,707 | |
| Investment properties | 28,146 | 24,756 | 24,754 | |
| Property, plant, and equipment | 33,590 | 35,740 | 25,490 | |
| Intangible assets | 7,315 | 7,244 | 7,372 | |
| Total non-current assets | 102,554 | 92,479 | 82,079 | |
| TOTAL ASSETS | 187,673 | 171,437 | 161,958 | |
| LIABILITIES AND EQUITY | ||||
| Liabilities | ||||
| Borrowings | 19,839 | 24,385 | 20,667 | |
| Prepayments from customers | 18,675 | 16,827 | 8,021 | |
| Trade and other payables | 28,343 | 24,502 | 32,720 | |
| Tax liabilities | 3,618 | 3,478 | 3,881 | |
| Current provisions | 60 | 2,103 | 535 | |
| Total current liabilities | 70,535 | 71,295 | 65,824 | |
| Borrowings | 23,743 | 20,732 | 14,222 | |
| Other non-current liabilities | 0 | 0 | 32 | |
| Total non-current liabilities | 23,743 | 20,732 | 14,254 | |
| TOTAL LIABILITIES | 94,278 | 92,027 | 80,078 | |
| Equity | ||||
| Share capital | 11,655 | 11,523 | 11,523 | |
| Share premium | 3,306 | 2,509 | 2,509 | |
| Reserves | 26,580 | 17,768 | 17,756 | |
| Retained earnings | 51,854 | 47,771 | 50,291 | |
| Total equity attributable to the owners of the parent company | 93,395 | 79,571 | 82,079 | |
| Non-controlling interests | 0 | -161 | -199 | |
| Total equity | 93,395 | 79,410 | 81,880 | |
| TOTAL LIABILITIES AND EQUITY | 187,673 | 171,437 | 161,958 |
| CONSOLIDATED STATEMENT OF PROFIT AND LOSS | ||||||||
| Unaudited | ||||||||
| EUR '000 | Q3 | Q3 | 9 M | 9 M | ||||
| 2023 | 2022 | 2023 | 2022 | |||||
| Revenue | 56,247 | 46,081 | 158,277 | 125,315 | ||||
| Cost of sales | -48,869 | -40,278 | -138,905 | -115,564 | ||||
| Gross profit | 7,378 | 5,803 | 19,372 | 9,751 | ||||
| Distribution costs | -1,392 | -1,264 | -4,060 | -4,128 | ||||
| Administrative expenses | -2,164 | -2 728 | -7,455 | -8,157 | ||||
| Other income | 24 | 0 | 223 | 342 | ||||
| Other expenses | 0 | -120 | -757 | -290 | ||||
| Operating profit/loss (-) | 3,846 | 1,691 | 7,323 | -2,482 | ||||
| Finance income | 3 | 0 | 71 | 74 | ||||
| Finance costs | -340 | -146 | -1,910 | -377 | ||||
| Profit/loss (-) before tax | 3,509 | 1,545 | 5,484 | -2,785 | ||||
| Income tax | -116 | -139 | -458 | -300 | ||||
| Profit/loss (-) for the period | 3,393 | 1,406 | 5,026 | -3,085 | ||||
| Profit /loss (-) attributable to: | ||||||||
| Owners of the parent company | 3,393 | 1,493 | 5,026 | -3,024 | ||||
| Non-controlling interests | 0 | -87 | 0 | -61 | ||||
| Earnings per share | ||||||||
| Basic earnings per share (euros) | 0.18 | -0.08 | 0.27 | -0.17 | ||||
| Diluted earnings per share (euros) | 0.18 | -0.08 | 0.27 | -0.17 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||
| Unaudited | ||||||
| EUR '000 | Q3 | Q3 | 9 M | 9 M | ||
| 2023 | 2022 | 2023 | 2022 | |||
| Profit/loss (-) for the period | 3,393 | 1,406 | 5,026 | -3,085 | ||
| Other comprehensive income (loss) | ||||||
| Items that may be reclassified to profit or loss | ||||||
| Impact of exchange rate changes of a foreign subsidiaries | -49 | -96 | 74 | -161 | ||
| Items that will not be reclassified to profit or loss | ||||||
| Gain on sales of financial assets | 0 | 0 | 0 | 320 | ||
| Net gain/loss (-) on revaluation of financial assets | -83 | 112 | 8,782 | -746 | ||
| Total comprehensive income (loss) for the period | -132 | 16 | 8,856 | -587 | ||
| Other comprehensive income (loss) | 3,261 | 1,422 | 13,882 | -3,672 | ||
| Total comprehensive income (loss) attributable to: | ||||||
| Owners of the Company | 3,261 | 1,412 | 13,882 | -3,708 | ||
| Non-controlling interests | 0 | 10 | 0 | 36 | ||
Priit Treial
CFO and Member of the Management Board
+372 674 7400
