Harju Elekter

Quarterly Report • Apr 27, 2022

Company AS Harju Elekter Group

Type Company Release

Category Management interim statement or quaterly financial report

Disclosure time 27 Apr 2022 08:00:00 +0300

Attachments:

• HE Interim Report Q1 2022.pdf (http://oam.fi.ee/en/download?id=6376)

• HE vahearuanne I kv 2022.pdf (http://oam.fi.ee/en/download?id=6377)

Currency

Title

Harju Elekter Group financial results, 1-3/2022

The year began for Harju Elekter on an optimistic note with a record order book, the possible stabilisation of material prices, and price negotiations for framework agreements. Nevertheless, the quarter was a difficult one and successive global challenges caused an adverse effect on the first-quarter results of Harju Elekter. The war does not have a direct impact on the operations of Harju Elekter, as our target markets have always been the Nordic and the Western European countries. At the same time, we can see indirect effects. Rising energy prices, continuing increases in material and key component prices, supply chain disruptions and rising inflation as a result of the ongoing crises in the world, are all factors that are inevitably having an impact on the company's profitability. Despite strong sales growth, the quarter ended with a loss. We could not fill orders with enough efficiency nor pass the increase in material prices fully to the customers. In order to keep the production units running steadily, to increase the lower-than-expected security of supply in the first quarter and to prepare for the fulfilment of record orders for the full year, the Group is committed to maintaining higher material stocks and entering into larger-scale agreements with suppliers in the coming periods.

Revenue, Expenses, and Profit

The consolidated revenue for the first quarter of 2022 was 37.3 (Q1 2021: 30.7) million euros, which increased by 21.5% compared to the comparable period. At the same time, revenue increased in all of the Group's largest target markets: Estonia, Finland, Sweden and Norway. The growth was ensured by long-term and large-scale contracts concluded at the beginning of last year.

------------------------------------------------------------------------------- EUR'000 3 months 3 months +/-

-------------------------------------------------------------------------------	2022	2021
Revenue	37,321	30,717	21.5%
Gross profit	2,986	3,844	-22.3%
EBITDA	-68		1,485 -104.6%
Operating profit/loss (-) (EBIT)	-1,125		516 -318.0%
Profit/loss (-) for the period	-1,294		297 -535.7%
Incl. attributable to owners of the parent company	-1,308		310 -521.9%
Earnings per share (EPS) (euros)	-0.07		0.02 -450.0%
-------------------------------------------------------------------------------

The total operating expenses for the reporting quarter were 38.4 (Q1 2021: 30.3) million euros. The majority of the 26.6% increase in operating expenses was due to an increase in the cost of sales: 7.5 million euros year on year. The increased costs of goods and services sold exceeded the growth rate of revenue by 6.3 percentage points. The Group's distribution costs increased by 0.1 million euros to 1.4 million euros, accounting for 3.5% of the Group's operating expenses and 3.6% of revenue. Administrative expenses increased by 0.4 million to 2.7 million euros, accounting for 7.0% of the Group's operating expenses and 7.1% of revenue for the reporting quarter. However, the increase in distribution and administrative expenses was lower than the increase in revenue. Labour costs increased with quarterly comparison, amounting to 8.7 (Q1 2021: 7.3). A majority of the growth in labour costs and average wages was attributed to the significant increase in staff and wage pressure due to labour shortages in all markets.

The gross profit for the Q1 was 2,986 (Q1 2021: 3,844) thousand euros and the gross profit margin was 8.0% (Q1 2021: 12.5%). The consolidated operating loss (EBIT) was -1,125 (Q1 2021: operating profit 516) thousand euros. The operating margin for the first quarter was -3.0% (Q1 2021: 1.7%). The net loss for the Q1 was -1294 (Q1 2021: net profit 297) thousand euros of which the share of the owners of the parent company was -1308 (Q1 2021: 310) thousand euros. The earnings per share were -0.07 euros in the first quarter.

Core Business and Markets

The Group's core business, production, accounted for 87.7% of the Group's consolidated revenue. Thanks to the growth in sales volumes of companies manufacturing electrical equipment, the sales volume of the production segment increased by 20.3% to 32.7 million euros in the reporting quarter.

Sales to the Estonian market increased by 36.1% to 6.9 (Q1 2021: 5.1) million euros year-on-year. The increase was mainly due to the increase in sales of

hermetic distribution transformers and distribution cabinets. The Estonian market accounted for 18.5% (Q1 2021: 16.5%) of the consolidated revenue in the reporting quarter.

The Finnish market generated revenue of 16.7 (Q1 2021: 14.6) million euros. The majority of the sales volume in the reporting quarter consisted of the sale of substations to Finnish electricity network companies. The planned sales volume of project sales in the reporting quarter was not achieved due to some component shortages and production stoppages caused by illness. During the reporting year, 44.7% (Q1 2021: 47,5%) of the Group's products and services were sold to the Group's largest market, Finland.

Sales to the Swedish market increased by 9% compared to the reporting quarters, amounting to 5.8 (Q1 2021: 5.3) million euros. Operating volumes have stabilised; targeted work continued. Sweden accounted for 15.6% (Q1 2021: 17.4%) of consolidated revenue in the reporting quarter, this time remaining the third largest market.

During the quarter, the Group's products and services worth 4.5 (Q1 2021: 1.9) million euros were sold to the Norwegian market, which was 141.2% more than in the same period of the previous year. The change in revenue is due to the low order volume in the comparison period. Looking at the longer term, it can be stated that the order volumes of the shipping sector have returned to the average level. The Norwegian market accounted for 12.1% (Q1 2021: 6.1%) of quarterly sales.

Investments

During the first quarter, the Group invested a total of 1.5 (Q1 2021: 2.1) million euros in non-current assets, incl 1.0 million euros in investment properties, 0.4 (Q1 2021: 2.0) million euros in property, plant, and equipment and 0.1 (Q1 2021: 0.1) 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, and to production technology equipment.

Non-current financial investments increased by 0.8 million euros to 24.4 million euros during the reporting period. The main changes were the partial sale of securities and the decrease in the fair value of 0.5 million euros in the first quarter. A total of 665 thousand euros was received from the partial sale of listed securities in the reporting quarter, of which the realized profit was 0.2 million euros. In the comparable period, 0.2 million euros were received from the sale of listed securities, of which the realized profit was 43 thousand euros. In the reporting quarter, Harju Elekter Oy increased its holding in technology company IGL-Technologies Oy from 5,5% to 10%.

Share

The company's share price on the last trading day of the reporting quarter on

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
---------------------------------------------------------------------------- EUR'000		31 March 2022 31 December 2021
---------------------------------------------------------------------------- ASSETS
Current assets
Cash and cash equivalents	286	574
Trade and other receivables	35,663	33,689
Prepayments	3,119	1,844
Inventories	37,692	27,437
Total current assets	76,760	63,544
---------------------------------------------------------------------------- Non-current assets
Deferred income tax assets	776	690
Non-current financial investments	24,410	25,222
Investment properties	24,603	23,903
Property, plant and equipment	26,303	26,654
Intangible assets	7,659	7,544
Total non-current assets	83,751	84,013
---------------------------------------------------------------------------- TOTAL ASSETS	160,511	147,557
----------------------------------------------------------------------------

the Nasdaq Tallinn Stock Exchange closed at 6.92 euros. As of 31 March 2021, AS Harju Elekter had 9,745 shareholders. The number of shareholders increased

LIABILITIES AND EQUITY

Liabilities

Borrowings 21,354 16,912

Prepayments from customers	6,681	4,659
Trade and other payables	31,063	24,490
Tax liabilities	3,663	3,156
Current provisions	51	35
Total current liabilities	62,812	49,252
---------------------------------------------------------------------------- Borrowings	12,401	11,426
Other non-current liabilities	33	33
Total non-current liabilities	12,434	11,459
---------------------------------------------------------------------------- TOTAL LIABILITIES	75,246	60,711
---------------------------------------------------------------------------- Equity
Share capital	11,352	11,352
Share premium	1,601	1,601
Reserves	18,278	18,716
Retained earnings	54 158	55 315
Total equity attributable to the owners of the parent company	85,389	86,984
Non-controlling interests	-124	-138
Total equity ----------------------------------------------------------------------------	85,265	86,846
TOTAL LIABILITIES AND EQUITY ----------------------------------------------------------------------------	160,511	147,557

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

Unaudited

------------------------------------------------------------------- EUR'000	3 months	3 months
-------------------------------------------------------------------	2022	2021

Revenue	37,321	30,717
Cost of sales	-34,335	-26,873
Gross profit	2,986	3,844
Distribution costs	-1,350	-1,214
Administrative expenses	-2,665	-2,217
Other income	56	172
Other expenses	-152	-69
Operating profit/loss (-)	-1,125	516
Finance income	39	17
Finance costs	-119	-98
Profit/loss (-) before tax	-1,205	435
Income tax	-89	-138
Profit/loss (-) for the period	-1,294	297
------------------------------------------------------------------- Profit/loss (-) attributable to:
Owners of the parent company	-1,308	310
Non-controlling interests	14	-13
------------------------------------------------------------------- Earnings per share
Basic earnings per share (EUR)	-0.07	0.02
Diluted earnings per share (EUR) -------------------------------------------------------------------	-0.07	0.02
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
--------------------------------------------------------------------------
EUR'000		3 kuud 3 kuud

2022 2021

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-------------------------------------------------------------------------- Profit/loss (-) for the period	-1,294	297
Other comprehensive income
Items that may be reclassified to profit or loss
Impact of exchange rate changes of a foreign subsidiaries	20	-23
Items that will not be reclassified to profit or loss
Gain on sales of financial assets	151	43
Net gain/loss (-) on revaluation of financial assets	-521	365
Total comprehensive income for the period	-350	385
Other comprehensive income	-1,644	682
-------------------------------------------------------------------------- Total comprehensive income attributable to:
Owners of the Company	-1,658	695
Non-controlling interests --------------------------------------------------------------------------	14	-13

Tiit Atso Chairman of the Board +372 674 7400