OREANDA-NEWS. August 10, 2010. Regardless of the present economic situation, the financial results of the Group were as expected and the Group was profitable. The consolidated sales revenue of the Group in the second quarter was 130.5 million kroons (8.3 million euros), which was 24% less than the result of the comparable quarter, reported the press-centre of Harju Elekter.

The consolidated sales revenue of the H1 2010 was 264.6 million kroons (16.9 million euros), which was 25% less than the result of the comparable period. The core business of the Group is the production and sales of electrical distribution systems and control panels as well as other supportive side- activities (hereinafter „Production“), which was traditionally the largest share of sales revenues, 86-87% (90%).

The sales revenue on production received from customers outside of the Group decreased by 27% to 112.8 million kroons (7.2 million euros) in second quarter and were 230.5 million kroons (14.7 million euros) in H1 2010. The main reason for decline was the market recession in Finland.

Of the markets, the domestic markets (Estonia, Lithuania and Finland) of the Group's companies prevailed, where 78.3% (93.7%) of the Group's products and services were sold. 65% (69%) of Group products were sold outside of Estonia.

Sales to the Estonian market decreased by 8.4 million kroons (600,000 euros) within the reporting quarter and by 18.4 million kroons (1.2 million euros) for the half-year. The decrease in sales volumes was, on the one hand, caused by the alterations in the product groups of the energy sector, when on the domestic market the demand for cheaper products increased and the sales of compact secondary substations decreased, and, on the other hand, by the decrease in the sales volumes of metering boards which, in turn, was caused by the decrease in connections.

While up to one-third of the products and services of the Estonian segment are sold outside of Estonia, the situation on foreign markets, especially on the Finnish market, had a great effect on the economic results of the accounting period. The sales revenue of the Estonian segment decreased by 27 million kroons (1.7 million euros) in  half-year, with one-third being a result of a decrease in export.

The main decline in realisation on foreign markets was caused by the decrease in sales volumes of distributing and compact secondary substations in Finland. However, the supply to Portugal increased by 1.6 times within the half-year.

The recession of the Finnish economy continues, although there are a few signs of an upturn, mainly regarding export. The domestic investments of Finland during the accounting period were irrelevant. Finnish metallurgical and engineering industry enterprises are still struggling. The revenues from sales to the Finnish market decreased the most - by one-third within the second quarter and over 40% during the half-year.

However, the sales volume of the Finnish company to the domestic market, compared to the first half of 2009, decreased nearly twice within the half-year. The decrease in sales volume of the Finnish segment was 27% during the second quarter and 31% during the half-year. The domestic decrease is partly compensated by the increase in export to Sweden. Malaysia was added in the second quarter as a new market. In total, goods with a value of 30 million kroons (2 million euros) were sold to these markets, accounting for 28% of the sales volumes of subsidiaries.

In 2009, 60% of the sales revenue of the Lithuanian segment was obtained from the domestic market and 40% from foreign markets, with the Norwegian and Danish markets being the largest. This year supplies to those markets have been modest. Finland, France and the Czech Republic were added as new markets. In June several major projects were carried out on the Lithuanian market, as a result of which two-thirds of the sales volumes for the half-year was earned within the reporting quarter. Almost 80% of the sales revenue for the half-year was obtained from Lithuanian customers.

During the first 6 months the sales to other states of the European Union have increased almost twice, including sales to the market of Sweden which increased 22 million kroons (1.4 million euros). France, Czech Republic and Malaysia have been added as new markets and the Group has sold during the H1 2010 its products to those markets totally in amount 18.6 million kroons (1.2 million euros). The Group has also sold its products to Latvia, Portugal and Poland and outside of the European Union to the markets of Belarus, Ukraine, Russia and Norway.

The expenses regarding sold products and services decreased almost at the same pace as the sales revenue. Distribution costs and administration expenses shrank by 3.1 million kroons (200,000 euros) in Q2 and by 4.5 million kroons (290,000 euros) in H1 2010. The administration expenses have been affected the most by the increase in expenditures on the new software AX2009. The software was taken into use on 1 October 2009. In conclusion, business expenses have decreased by 21% in Q2 and by 23% in H1 2010 compared to the same period of the previous year.

In the second quarter, there was an average of 423 (453) people working in the Group, included 270 (295) employees in Estonia, 70 (75) employees in Lithuania and 83 (83) employees in Finland. In H1 2010, the average number of employees was 427 (457). As at the balance day on 30 June, there were 446 people working in the Group, whish is 18 employees less than on the beginning of the year and 40 employees less than a year before.

During the second quarter, labour costs decreased by more than 8% compared to the previous year, reaching 26.0 million kroons (1.7 million euros). During the half-year employees were paid 52.6 million kroons (3.4 million euros) in salaries, bonuses and compensation, which was 15.2% lower than during the comparable period. In H1 2010, the average wage per employee was 20,510 kroons (1,310 euros) and 22,627 kroons (1,450 euros) in the compared period.

The gross profit of the Group was 19.7 million kroons (1.26 million euros) in Q2 2010 and 37.9 million kroons (2.42 million euros) in H1 2010, decreasing by 33% and 30% respectively compared to the same periods last year. The gross profit margin decreased by 2 per cent points up to 15.1% in the second quarter and by 1 per cent point up to 14.3% in H1 2010. Operating profit of Q2 2010 was 2.8 million kroons or 177,000 euros (Q2 2009: 9.8 million kroons or 627,000 euros). Return of sales for the period was 2.1% (5.7%).

In Q2 2010 EBITDA was 8.2 million kroons or 525,000 euros (Q2 2009: 14.8 million kroons or 944,000 euros) and return of sales before depreciation was 6.3% (8.6%). In H1 2010 EBIT was 3.9 million kroons or 250,000 euros and EBITDA was 14.8 million kroons or 945,000 euros (H1 2009: 16.2 million kroons or 1.04 million euros and 26.1 million kroons or 1.67 million euros respectively). Return of sales of H1 2010 was 1.5% (4.6%) and return of sales before depreciation 5.6% (7.4%).

Overall, the consolidated net profit of the Q2 2010 was 10.0 million kroons or 639,000 euros (Q2 2009: 8.4 million kroons or 535,000 euros), of which the share of the owners of the parent company was 9.2 million kroons or 587,000 euros. EPS of the reporting period was 0.55 kroons or 0.03 euros (Q2 2009: 0.42 kroons or 0.03 euros). The consolidated net profit of the H12010 was 18.2 million kroons or 1.16 million euros, which is 64.6% more than in compared period. The share of the owners of the parent company was 18.1 million kroons or 1.16 million euros, increasing more than 87% comparing to the H1 2009. EPS of the reporting period was 1.08 kroons or 0.07 euros (H1 2009: 0.58 kroons or 0.04 euros).

In H1 2010 the Group invested in real estate, in tangible fixed assets and in intangible fixed assets, totally 36.4 million kroons or 2.4 million euros (H1 2009: 6.6 million kroons or 420,000 euros).

During H1 short-term liabilities were increased by 0.2 million kroons or 13,000 euros (H1 2009 were decreased 16.0 million kroons or 1 million euros). Within the reporting period, 2.9 million kroons or 187,000 euros (H1 2009: 11.2 million kroons or 718,000 euros) worth of a long-term loan were re-paid. Within the first six months, 2.3 million kroons or 147,000 euros (H1 2009: 1.1 million kroons or 71,000 euros) worth of principal amounts of the financial lease were repaid.

During first six months, cash and cash equivalents decreased by 16.9 million kroons (1.1 million euros) and in comparable period 4.2 million kroons (268,000 euros).