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 | ||
| 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% |
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 | ||||||||
| (EUR'000) | 31.12.2024 | 31.12.2023 | ||||||
| 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 | ||||||
| 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 | ||||||
| CONSOLIDATED STATEMENT OF PROFIT AND LOSS | ||||||
| Unaudited |
| (EUR'000) | Q4 2024 | Q4 2023 | 12M 2024 | 12M 2023 | |
| 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 | |
| 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 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||
| Unaudited |
| (EUR'000) | Q4 2024 | Q4 2023 | 12M 2024 | 12M 2023 | |
| 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 |
Priit Treial
CFO and Member of the Management Board
+372 674 7400
priit.treial@harjuelekter.com
