ONTENTS - Harju Elekter€¦ · in 2014; this year’s growth is expected to be 3.0%. The whole year was strongly affected and made unstable by the Russian- Ukrainian conflict, along

2005 2006 2007 2008 2009 2010 2011 2012 20142013

2014 Annual Report

ONTENTS

Contents 2

InformationtotheShareholders 3

AddressbytheChairmanoftheSupervisoryBoard/Rightdecisionsandpromptreactiontochanges 4

AddressbytheManagingDirector/CEO/HarjuElekterGroup,onitswaytothefuture 6

Organisation 8

OverviewoftheEconomicEnvironment 9

Year2014 11

BusinessResults 14

BusinessSegments 21

OtherFinancialInvestments 34

Personnel 36

InvestmentsandDevelopment 39

QualityManagementandEnvironmentalPolicy 42

CorporateTargetfor2015 45

ShareandShareholders 47

SocialResponsibilityandCharity 52

CorporateGovernance 58

InformationAbouttheSupervisoryandManagementBoards 60

Pleasefindtheyear2014auditedannualreportofASHarjuElekterhere 62

http://www.harjuelekter.ee/sites/default/files/public/pdfid/HE_aastaaruanne2014_eng.pdf

3ContentsAs Harju Elekter Annual Report 2014

NFORMATION TO THE SHAREHOLDERSAnnualGeneralMeeting

The AGM of shareholders of Harju Elekter will take place on May 14 2015, at 10 a.m. at the hall of the Keila Culture Centre, Keskväljak 12, Keila.

DividendsTheManagementBoardofHarjuElektermakesaproposaltopay

adividendof€0.15pershareforthefinancialyear2014.Thelist

ofshareholderswhaareentitelestodividendswillbeclosedon

May28,2014at11.59p.m.Thedividendswillbetransferredto

thebankaccountsofshareholdersonJune3,2015.

Contact for InvestorsMOONIKAVETEVOOLCorporatecommunicationandinvestorrelationsmanagerTel+3726712761,[email protected],Paldiskistr31,76606Keila,Estonia

ThePublicationofFinancialReportsin2015HarjuElekterinformsyouthatintheyear2015,theconsolidated

financialresultsofASHarjuElekterwillbepublishedasfollows:

2015 1Qresults 29.04.2015

2015 2Qresults 05.08.2015

2015 3Qresults 04.11.2015

Aftertheirreleasethroughthestockexchangeinformationsys-

temallHarjuElekter’sannouncementsarealsoavailableon

company’sinternethomepageathttp://www.harjuelekter.ee.For

announcementsbyemail,pleasesignoncompany’shomepage.


AddressbytheChairmanoftheSupervisoryBoard

The 46th year of operation of AS Harju Elekter was active and eventful, with the positive greatly outweighing the negative. The less pleasant side the last year brought along the Russian-Ukrainian conflict and its side effects. Although the consequences of the conflict on the Harju Elekter Group are not extensive, it affects considerably the European automobile industry and is one of the reasons for production decline in the factories of PKC Eesti, the Group’s largest long-term lessee.

ight decisions and prompt reaction to changes

Endel PallaChairmanoftheSupervisoryBoard


EndelPalla

ChairmanoftheSupervisoryBoard

Almost5%oftheconsolidatedsalesrevenueofASHarju

Elekterisearnedfrommanagementandrentingoutofindus-

trialrealestate,thereforetheclosingofthePKCEesti’sfactory

inHaapsaluwasequallyproblematicforboth,theGroupandthe

townofHaapsalu.Thedownturninconstructionactivitiesin

Estoniaalsocontinued,decreasingtheordersfortheGroup’s

construction-relatedproducts,includingthepublicprocurement

ofsubstationsbyEestiEnergiaJaotusvõrk.

TheGroup’sSupervisoryBoardandmanagementwereableto

reactpromptlytothechangesintheexternalenvironmentand

takeactionanddecisionstocompensateforthedeclineinthe

Estonianmarketthroughincreasingsalesoutsidethecountry,in

theadjacentmarketsofSwedenandFinland.Thedecisionmade

inJunetopurchaseFinnkumuOy,thelargestFinnishproducerof

prefabricatedsubstations,madetheGroupthenumberoneseller

ofsubstationsinFinlandandalsoraisedconsiderablythesales

revenue.Attheendoftheyear,thenewlyacquiredFinnkumuOy

wasdeclaredthebestenterpriseinFinland.

InJulywedecidedtoselltothecoreinvestorourlong-term34%

holdingintheassociatedcompanyASDrakaKeilaCables,onthe

onehandinordertoensurethecontinuanceanddevelopmentof

cableproductioninEstoniaandontheotherhandtosecureavail-

ablefundstofinancethepurchaseofFinnkumuOy.

ThesharesofASHarjuElekterhavebeenlistedontheTallinn

StockExchangesince1997.Eventhoughtheyear2014saw

someturmoilontheworldstockmarketsandtheTallinnStock

Exchangedropped8%,thecompany’ssharewasoneofthefew

thatmanagedtoincreaseitsprice(by3.3%).Theclosingpriceof

thesharewas2.79euros.However,intherapidlychangingeco-

nomicenvironmentthefactthatoursharesaredividendshares

hasbecomeevenmoreimportantthanthefluctuationoftheir

price.ASHarjuElekterhaspaiddividendstoitsshareholders

theentiretimeithasbeenlistedonthestockexchangeandthe

continuallyhighnumberofshareholdersshowsthatthetrust-

worthinessandthesoliddividendpolicyofthecompanyisgreatly

valued.

On behalf of the Supervisory Board I would like to thank all our

customers, partners, shareholders and employees. We wish to

remain a responsible employer, a committed partner to our cus-

tomers and a stable payer of dividends to our shareholders.

AddressbytheChairmanoftheSupervisoryBoard


AddressByTheManagingDirector/CEO

Recently we have witnessed a number of historically, politically and undoubtedly also economically crucial changes and events. The view that we are about to achieve a balance in the world has been replaced by an understanding that nothing is for granted any more. Values, agreements or security now lack a clear scale. Everything that has happened and is happening does not provide us any certainty of what to expect from the future.

arju Elekter Group, on its way to the future

Andres Allikmäe ManagingDirector/CEO


TheHarjuElekterGrouphasbaseditsbusinessactivitiesofallof

itscompaniesandinfollowingthewishesandexpectationsofits

customersandpartnersonafirmground,whichhasallowedus

toendtheeventfulyear2014beyondtheexpectations.Thelast

financialyearismainlycharacterisedbystepstakentosetthe

stageforfuturedevelopment.OneofFinland’slargestmanu-

facturersofprefabricatedsubstations,FinnkumuOy,joinedthe

Group;thesaleofourshareholdingintheassociatedcompany

DrakaKeilaCablesgaveusastrategicoptiontocontinueand

increasecableproductionintheKeilaIndustrialPark;thedevelop-

mentofthefirstrealestateprojectwasstartedattheAllikaIndus-

trialParkacquiredduringthefinancialyear.Atthesametimewe

activelyreorganisedourbusinessactivitiesrelatedtoSweden

andpaidintenseattentiontomarketing.TheactivitiesoftheHarju

ElekterGroupwerenoticedandvalued,asdemonstratedbythe

specialacknowledgementsandawardsbothtothesubsidiaries

aswellastheGroupasawhole.

Regardlessofcomplicationsonmarketsandfiercecompetitionwe

wereabletoincreasetheGroup’ssalesvolumeby5%,bringing

ittothethirdbestresultthroughoutthehistoryofthecompany–

50.6millioneuros.SalesoutsideEstoniagrewtoarecord70%of

salesrevenue.Operatingprofitincreased28%,reaching2.2million

euros,andextraordinaryfinancialincomecontributedtoaremark-

able89%growthinournetprofit,to9.8millioneuros.Throughout

theentirefinancialyeartheGroupwasverywellfinanced.Investors

andshareholdersshouldbewellsatisfiedwithoursolidbalance

sheet.However,todaywehavetoadmitthatinspiteoftheout-

standingeconomicperformancethesharepriceandmarketcap-

italisationofASHarjuElekterremainssometensofpercentbelow

theequityfiguresasaresultofpassivetradingonNASDAQTallinn.

TheGroup’ssalesaregeographicallyratherdiverse.Itscompanies’

economicactivitieshaveadvancedmostintheFinnishsegment,

whichasaresultoflocalsalesaswellastheGroup’scompa-

nies’salestoFinlandgrewby26%,achievinga58%shareinthe

Group’ssalesvolumes.

ThestrengthoftheHarjuElekterGrouphasalwaysbeenconduct-

ingbusinessinasustainableandforward-lookingway,recognis-

ingourresponsibilitytowardssociety.Weconsistentlysupportthe

engineeringeducationattheTallinnUniversityofTechnologyas

wellaselectricityrelatedcooperationandsecurityaspectswithin

theprofessionalassociationEETEL.Youthsportsandrecrea-

tionalactivitiesatthecompany’slocationsarealsonotforgotten.

Westrivetobeadvisersandopinionleadersintheworldwearein

interaction.ASHarjuElektercaresaboutimprovingpeople’swel-

fare,butalsoaboutmoregeneraldecisionsconcerningthechoices

andsecurityofsociety.

To round up the successful financial year I would like to thank our

customers for their trust, all the Group’s employees for their hard

work and our shareholders for their support and advice.

AndresAllikmäe

ManagingDirector/CEO

AddressByTheManagingDirector/CEO


ASHarjuElekterhasbeenmanufacturing

electricalequipmentsince1968.TheGroup’smain

incomecomesfromenergydistributionequipment

(substations,cabledistributionandfuseboxes)and

automaticcontrolboardsfortheenergysector,

industryandinfrastructure.70%oftheproducts

aremarketedoutsideEstonia.

RGANISATION

Strategical Investments

SIA ENERGOKOMPLEKSSMV/LV equipment salesorganisation in Riga

Harju Elekter

AS HARJU ELEKTER ELEKTROTEHNIKAManufacturer of electrical equipment for energy distribution, industrial and construction sectors, located in Keila

RIFAS UABManufacturer of automatic equipment and distribution units, located in Panevežys

PKC GROUP OyjManufacturer of wiring systems

AS HARJU ELEKTER TELETEHNIKAManufacturer of telecom and fibreoptic products, located in Keila

SATMATIC OYManufacturer of industrial control and automation devices, located in Ulvila and in Kerava

Automatikos Iranga 51%A company which deals with design in Panevežys

HARJU ELEKTER AB/ Suspended for an unspecified term since 1.4.2014 /

Sales office in Stockholm

Finnkumu Oy 100%Finnish leading prefabri-cated substation manufacturer in Kurikka

100% 14%

5%100%

100%

63%

90%

Subsidiaries

MissionTobewell-knownandacceptedmanufacturerof

MV/LVelectricalequipmentandautomationsolutions

intheBalticSearegionbyrespondingtotheclients’

needswithoutdelaywithcompetenceandqualityand

byofferingaddedvalueandreliabilitytopartnersin

co-operationprojects.

GoalTobesuccessfuloveralongperiodoftime,

toincreasethecompany’scapitalandgenerate

revenuefortheowners,aswellasthepartners,

andtoprovidemotivatingwork,incomeand

developmentopportunitiesfortheemployees.


VERVIEW OF THE ECONOMIC ENVIRONMENTGlobaleconomyAccordingtotheWorldBanktheglobaleconomygrewby2.6%

in2014;thisyear’sgrowthisexpectedtobe3.0%.Thewhole

yearwasstronglyaffectedandmadeunstablebytheRussian-

Ukrainianconflict,alongwiththesanctionsimposed,whichin

turnweretheindirectcauseofexchangeratefluctuations.The

exchangerateoftheeuroagainstthedollarandthatoftherou-

bleagainsttheeuroandthedollarbothfellconsiderably.Besides

that,themostimportanteventinfluencingtheglobaleconomy

wasundoubtedlythedecreaseinoilpricesfromthepeakprice

ofUSD115perbarrelinJunetoaroundUSD60perbarrelbythe

endoftheyear.Atthesametime,thelowrawmaterialpricesena-

bledtheUSeconomytorecoverandtheweakeningoftheeuro

hadanadditionalpositiveinfluenceontheeconomyandexport

competitivenessoftheEurozone.Fromamongthecountriesof

theworld,economicgrowthwasfastest(7.4%)inChina.The

world’slargestenergyexporterRussiafaceditsfirsteconomic

recessionsince2009,mainlyduetothedeclineinproduction

andinvestmentatatimewhentherewerealreadyproblemswith

therouble.Inflationremainedlow,reachingitslowestlevelin

severaldecades.

Euro-areaContrarytoexpectations,2014didnotbringaboutarevivalinthe

economyoftheEurozone.PartiallybecauseoftheUkrainiancri-

sisandthesanctionswarwithRussia,althoughtheintroduction

ofnegativeinterestratesforcommercialbanksbytheEuropean

CentralBankwasnotabletoboosttheeconomyasintended

either.Industrieswerenotproducing,domesticconsumption

remainedlowandforeignmarketshadbeenlost(e.g.Russiaas

regardsagriculturalproductsandconsumergoodsorChinaas

regardsindustrialequipmentandmachine-tools).Privatesector

continuedtopursuesavings,whichsuppressedbothgrowthand

inflation.Ontopofthattherewereseverallocalissues,suchas

thecallingofextraordinaryelectionsinGreece,economicstagna-

tioninItalyorthedangerouslyhighburdenofdebtinFrance.The

situationwasalsonotgoodfortheEuropeangrowthengineGer-

many,whoseeconomyhascometoahalt,orforEstonia’sclos-

estneighbours.TheeconomicsituationofEstonia’smaintrading

partnersdidnotimprovewiththeyear,rathertheopposite.The

sanctionswereahardhitforFinlandwhohasnotbeenableto

breakoutoftherecessionandwhoseeconomicgrowthbarely

madeitintothepositive.Sweden’seconomicgrowthdidnotmeet

expectationseither,butitwassignificantlyfasterthanthatof


Finlandandanalystsanticipateittocontinue.Thereare,however,

somepositivesigns–theweakeningoftheeurostrengthensthe

exportcompetitivenessoftheentireEurozone,lowerpricesofoil

andmineralresourcesstimulateconsumption(Estoniaandthe

EUarebothnetimporters),interestratesandinflationremainat

extremelylowlevels.

EstoniaandBalticcountriesThedriversofeconomicgrowthintheBalticStateshavebeen

broadlythesame:domesticdemand,supportfromtheEU,

increasedproductivityoftheworkforceandforeigntrade.The

slightlyfastergrowthofLithuaniawaslargelytheresultofaposi-

tivereactiontothedecisiontojointheEurozoneandtheOECDin

2015.InLatvia,thegrowthwassupportedbytheintroductionof

theeuroasthecommoncurrencyinJanuary2014.Estonia’seco-

nomicgrowthin2014was2.1%,theLatvianandLithuanianeco-

nomiesgrew2.3%and2.9%,respectively.

Themainrisksassociatedwiththeeconomicdevelopmentof

EstoniawererelatedtotheRussian-Ukrainianconflict,aswell

asuncertaintyintheEurozoneandthestandstilloftheFinnish

economy.Estonia’seconomicgrowthin2014waspositively

influencedbythemanufacturingindustry,energyandretailtrade

sectors,whilevalueaddeddecreasedinconstruction,transport

andstorage.Regardlessoftheweakexternalclimateexports

increased(excepttoRussia),mainlysupportedbythegrowthof

salesinthemanufacturingindustry.Alargepartoftheindustrial

sector’sgrowthwasgeneratedbytheproductionofelectronic

equipment.Theshareofemployeecompensationinthe

economyincreased,stimulatingconsumptionandretailtrade.

Therapidgrowthofemployeecompensationisreflectedin

socialtaxreceipts,whichgrewmorethan8%withintheyear.

Atthesametime,companies’profitsdroppedandinvestments

decreased,asindicatedbythedeclineinbothvalueaddedofthe

constructionsectorandtheimportsofcapitalgoods.Thereduc-

tionininvestmentsismainlyattributabletotheenergysector.

OverviewOfTheEconomicEnvironment


Since 1.4.2014, the Supervisory Board of AS Harju Elekter decided to suspend the activity of Harju Elekter AB for an unspecified term. AccordingtotheGroup’sdevelopmentstrategy,ScandinaviaandSwedencontinuetobesignificanttargetmarkets,butthereasonbehindthisstepwastheinefficientandcost-intensivebusinessmodelused2011–2013.ResponsibilityfortheGroup’sSweden-orientedbusinessactivityandthelocalclientswastakenoverbythesalesanddevelopmentteamsofASHarjuElekterElektrotehnika,alongwithpartneragentsbasedinSweden.SalesintheSwedishmarketincreasedin2014comparedtothepreviousyearbyalmosttwotimes.

On 17 June 2014, Satmatic Oy, a subsidiary of AS Harju Elekter in Finland, signed a contract for the purchase of all shares in Finnkumu Oy, Finland’s largest pre-fabricated substation producer. Afterthetransaction,FinnkumuOycontinuestooperateunderitsown

nameandbrandasawholly-ownedsubsidiaryofSatmaticOy.BypurchasingFinnkumuOy,theGroupwillincreaseourmarketshareinFinlandaswellaselsewhereinScandinaviaandincreasestheproductrange.

In Q2 negotiations took place about selling minority stake in the associated company of AS Harju Elekter. On 9th of July 2014 AS Harju Elekter concluded a contract according to which AS Harju Elekter sells their 34% holding in AS Draka Keila Cables to the core investor Prysmian Group. SellingtheholdingwasastrategicdecisionofHarjuElekterGroup.ASHarjuElekterisgoingtocontinueclosecooperationwithASDrakaKeilaCablesintheprocurementsoflowvoltageandothercableproducts;similarlylong-termrentalcontractsofproductionfacilitiesaregoingtoremaininforce.

EAR 2014


Year2014

In September, an invitation to tender was announced in order to find a contractor for a 3100 m2 production building to be built in the Allika Industrial Park, resulting in an agreement signed between AS Harju Elekter and Merko Ehitus Eesti AS. The construction works were launched in October. TheconstructionistobecompletedinJune2015,andapreliminaryleasecontracthasalsobeensigned.

Krediidiinfo AS awarded to AS Harju Elekter the credit rating AAA (excellent) and to its subsidiary AS Harju Elekter Elektrotehnika AA (very good). TheratingofKrediidiinfoASassessestheactivitiesofthecompanyasawholeandrepresentsanaggregateassessmentofthecompany’seconomicandfinancialconditionaswellasthepaymentpatterns.Lessthan10%oftheEstoniancompanieshavecreditratingAAAorAA.

Finnish subsidiary Finnkumu Oy was awarded the certificate “Suomen Vahvimmat 2014” by the client register of Suomen Asiakastiedon. Thecreditworthinessofthecompanyisthemainevaluationcriterionandthetitleisawardedtoacompanythathasmetthehighestrequirements

ofAlfarating.Thenumberofsuchcompaniesmakesuponly12%ofallcompaniesregisteredinFinland.

Swiss CE Asset Management, along with its Baltic partners, announced the next nominees for the Corporate Excellence Award. AS Harju Elekter, a fourth year in the row was recognised as the best in Estonia. Itwasrecognisedthankstoitsmarketposition,stablecustomerbase,goodhistoriceconomicresultsandpromotionofthegeneralmanagementofthecompany.

In the Group’s Estonian and Finnish subsidiaries, the process of implementing the Lean 5S/6S principles ofincreasingproductivityandactivitiesinordertoincreaseprofitabilityandcustomersatisfactionthroughthecost-effectiveuseofresourceswascontinued.

The Group’s subsidiaries participated actively in exhibitions: inFebruary,SatmaticOyparticipatedintheInternationalExhibitionofElectricityTelecommunicationsLightandAudioVisual(Sähkö,Tele,ValoandAV),inJyväskyläandinSubcontractingExchibitioninTampere,inSeptember.ASHarjuElekterElektrotehnikaparticipatedinSLOAutumnExchibitioninSeptemberandASHarjuElekterTradeGrouppresenteditsproductsrangeintheinternationalbuildingfairEstbuild,inApril.


In2014more than1000 units of pre-fabricated substations

wereproducedbyHarjuElekterGroup.

InJune,HarjuElekterpurchasedallthesharesof

Finnkumu Oy,thelargestpre-fabricatedsubstation

producerinFinland.BythispurchasetheGroupwill increase its market share in Finland as well as

elsewhere in Scandinaviaandincreasesitsproductrange.


USINESS RESULTS

Group 2014 2013 2012 2011 2010

Statementofcomprehensiveincome(millionEUR)

Netsales 50.6 48.3 52.8 46.7 40.9

Operatingprofit 2.2 1.7 2.0 2.0 1.5

ProfitattributabletoownersoftheCompany

9.7 5.2 3.5 2.8 2.2

Statementoffinancialpositionattheendoftheyear(millionEUR)

Totalcurrentassets 25.1 15.9 16.5 15.4 14.4

Totalfixedassets 44.7 55.2 43.1 37.5 40.7

Totalassets 69.8 71.1 59.6 52.9 55.1

EquityattributabletoownersoftheCompany

58.5 62.5 48.8 40.3 44.0

Equityratio(%) 83.8 87.9 81.8 76.2 79.8

Ratesofgrowth(%,y-o-y)

Netsalesgrowth 4.8 -8.5 13.1 14.2 1.1

Operatingprofitgrowth 27.8 -11.5 -2.7 33.3 -16.1

ProfitattributabletoownersoftheCompanygrowth

87.9 46.8 26.8 27.6 76.9

Assetsgrowth -1.8 19.2 12.7 -4.0 39.5

EquityattributabletoownersoftheCompanygrowth

-6.4 28.1 21.1 -8.3 43.1

Operatingmargin =Operatingprofit/Netsales*100Netmargin =ProfitattributabletoownersoftheCompany/Netsales*100Equitypershare =AverageequityattributabletoownersoftheCompany/AveragenumberofsharesReturnofassets(ROA) =ProfitattributabletoownersoftheCompany/Averagetotalassets*100Returnofequity(ROE) =ProfitattributabletoownersoftheCompany/Averageowner’sequity*100

Group 2014 2013 2012 2011 2010

Performanceindicators(%)

Operatingmargin 4.4 3.6 3.7 4.3 3.7

Netmargin 19.3 10.7 6.8 6.3 5.6

Returnofassets(ROA) 13.8 7.9 6.3 5.1 3.2

Returnofequity(ROE) 16.0 9.2 7.9 6.6 4.4

Shares(EUR)

Averagenumberofshares(1000pc) 17,400 17,400 17,093 16,800 16,800

Equitypershare 3.55 3.20 2.61 2.51 2.22

Theclosingprice 2.79 2.70 2.64 2.28 3.02

EPS 0.56 0.30 0.21 0.17 0.13

P/E 4.98 9.00 12.57 13.41 23.39

Dividendpershare [1] 0.15 0.10 0.09 0.07 0.06

Liquidityratio

Currentratio 2.8 2.3 1.8 1.8 1.8

Quickratio 1.9 1.4 1.1 1.0 1.1

Personnelandremuneration

Averagenumberofemployees 459 455 452 427 424

Numberofemployeesattheendoftheperiod

483 451 478 457 440

Wagesandsalaries(millioneuros) 9.2 8.6 9.1 7.7 7.0[1]Management’sproposal

Currentratio =Averagecurrentassets/AveragecurrentliabilitiesEPS =ProfitattributabletoownersoftheCompany/AveragenumberofsharesP/E =Shareprice/EPSEquityratio =AverageequityattributabletoownersoftheCompany/Averagetotalassets*100Quickratio =Averageliquidassets(currentassets–inventories)/Averagecurrentliabilities

5yearsfinancialsummary


Inthe2014annualreportthefinancialindicatorsofASHarjuElek-

ter(theconsolidatingentity)anditssubsidiaries:ASHarjuElekter

Elektrotehnika,ASHarjuElekterTeletehnika,HarjuElekterAB

(until31.3.2014),SatmaticOy,FinnkumuOyandRifasUABare

consolidatedline-by-lineandtheresultsofaffiliatedcompany–

ASDrakaKeilaCables-bytheequitymethoduntil30.6.2014.

On17June2014,SatmaticOypurchasedallsharesofFinnkumu

Oy,Finland’slargestpre-fabricatedsubstationproducer.The

annualreport,preparedasat31December2014,comprises,as

of1July2014,thefinancialstatementsofFinnkumuOy.

InJuly2014,Groupsoldits34%holdinginASDrakaKeilaCables

tothecoreinvestorPrysmianGroup.

ASHarjuElekterhasashareof4.6%intheFinnishcompanyPKC

GroupOyj.ThesharesofPKCGroupOyjarepresentedinthe

statementoffinancialpositionattheirmarketprice.Thechanges

inthemarketpriceofthesharescanhaveasubstantialeffecton

thevalueoftheassetsandtheowners’equityintheGroup.

In2014theconsolidatednetsalesoftheGroupincreasedby4.8%

comparedwiththereferenceperiod,amountingto50.6million

euros.Theoperatingprofitofthereportingyearincreasedby27.8%

to2.23millioneurosandnetprofitby89.0%to9.78millioneuros.

Out of the consolidated net sales 40% (2013: 47%) was contributed by

the Estonian, 50% (2013: 40%) by the Finnish and 10% (2013: 12%)

by the Lithuanian companies.

TheGroup’smainareaofactivityistheproductionandmarketing

ofelectricpowerdistributionandtransferequipmentandrelated

activities.Asusual,theseactivitiesmadeupthelargestpartofthe

consolidatedsalesvolume,i.e.90.5%;realestateandotheractivi-

tiesaccountedfor9.5%.

2005 2006 2007 2008 2009 2010 2011

Sales revenue Profits

0

10

20

30

40

50

60

0

2

4

6

8

10

12

2012 20142013

million euros

Sales revenue Net profitOperating profit

Sales Revenue, Net and Operating Profits

BusinessResults


As to the markets, once again the

Finnish and Estonian markets were dominant with 88% (2013: 86%) of the

Group’s products and services sold there.

70%oftheGroup’sproductsandservicesweresoldoutside

Estonia(63%inthereferenceperiod).Increasingtheshareoffor-

eignmarketshasbeen,andwillcontinuetobeinthelongerterm,

oneofthestrategicgoalsfortheGroup’smanagement.

RevenuesfromtheEstonianmarketdecreasedduringthereport-

ingyearby15.3%amountingto15.2millioneuros.Reduced

investmentsintheEstonianenergydistributionsectorresultedin

adecreaseinthesalesvolumesofMVdistributionequipmentand

substations.Considerablyfewerordersunderthepublicprocure-

mentcontracthavebeenfulfilled.OntheEstonianmarket,enquiries

aboutthistypeofequipmenthavedropped.Astherequirements

forMVequipmenthavebeenreduced,lower-ratedbutprice-wise

morecompetitiveEuropeanbrandswillalsoqualifyinprocure-

ments.Thevolumeofordersforenergysectorproductsasdefined

inthepublicprocurementcontractisexpectedtoincreasein2015.

TheeconomicsituationinEurope,theweakcompetitivenessof

FinlandandthecontinuingdownturnintheFinnishexportsec-

torarealsoreflectedintheeconomicperformanceoftheFinnish

industrialsectorin2014.Atthesametime,increasedordersinthe

Finnishelectricalenergydistributionsectorhavehelpedtoraise

revenues.SatmaticOywassuccessfulinthestrongcompetition,

especiallyasregardstheenergydistributionsector.Annualsales

totheFinnishmarketincreasedbyaquarter.Inthesecondhalf

oftheyear,apositiveimpactonthegrowthoftheFinnishmar-

ketcamefromtheadditionofthesalesrevenueofFinnkumuOy,

aunitsubstationproduceracquiredinJune,whichprovideda

17%increaseontheFinnishmarketinthe12-monthperiod.The

Group’sEstonianandLithuaniancompanieshavealsomadeabig

contributiontotheactivitiesontheFinnishmarket.Thecompanies

intheEstoniansegmentincreasedtheirsalestoFinlandby53%

inthe12-monthperiod,to12.6millioneuros,5.8millioneurosof

whichcomprisedproductssoldthroughtheFinnishsubsidiary.In

thereportingperiod,thecompaniesintheEstoniansegmentsold

58%moreproductsthaninthereferenceperiod.TheLithuanian

segment’sdeliveriestoFinlandinthereportingyearamountedto

1.9(2013:0.6)millioneuros,withintra-Groupturnoveraccounting

foronly4.8%.TheEstonianandLithuaniansegments’salesreve-

nueearnedfromexternalcustomersinFinlandamountedto23%

ofthesalesrevenueontheFinnishmarketinthe12monthsofthe

yearinquestion.

AsignificantpartoftheLithuaniansegment’srevenuecomes

fromthesalesofelectricalequipment,whichdecreased4%in

the12-monthperiod.Inthereportingyear,salesrevenuefromthe

Lithuanianmarketdroppedby61%.WhentheLithuanianmarket

accountedfor44%ofthesegment’ssalesrevenuein2013,then

intheyearconcernedthisfiguredroppedto19%.Atthesame

time,companiesintheLithuaniansegmenthaveincreasedtheir

salesvolumesonforeignmarketsby33%,withdeliveriestoFin-

landgrowingby1.3millioneurosin2014.

InQ1,theGroupsuspendedthebusinessoperationsofitsSwed-

ishsubsidiary.AsofApril2014,ASHarjuElekterElektrotehnika

isresponsiblefortheGroup’sactivitiesregardingSweden.Inthe

12-monthperiod,theGroupsoldproductstotheSwedishmarketin

BusinessResults


theamountof1.6millioneuros,whichisalmosttwiceasmuchas

inthereferenceperiod.InQ4,activeeffortscontinuedtofindnew

cooperationpartnersinSweden.Thecompanyparticipatedinsev-

eraltenders.Inthelastquarterofthereportingyear,bidsforsubsta-

tionsontheSwedishmarketamountedtonearly1.25millioneuros.

SalesrevenuefromotherEuropeanUnionmarketsgrewto1.14

millioneurosduringtheyear.WhiledeliveriestoFrancedecreased

inthereportingyear,salesvolumesintheLatvian,Danish,Ger-

man,PolishandPortuguesemarketsincreased.Inthereport-

ingyear,thecompanyexpandedtoanewmarket–Slovakia.All

inall,thesalesvolumestootherEuropeanUnioncountrieshave

increasedbyhalfamillioneuros.

The Russian-Ukrainian conflict, along with the sanctions imposed, had a strong impact

on the whole year. Deliveries to Eastern Europe have decreased by nearly 0.6

million euros, to 0.3 million euros. The volume of sales to the US

market has grown.

Costofproductsandservicessoldincreasedby4.3%during

theyear,remaininginthe12-monthperiod0.5percentagepoints

belowthegrowthrateofsalesrevenueinthereportingyear.As

aresult,theconsolidatedgrossprofitforthe12-monthperiod

was9.1(2013:8.5)millioneuros.Incomparisontothereference

period,thegrossprofitmarginimprovedby0.4percentagepoints

withtheyear,amountingto17.9%.

Comparedtothebeginningoftheyear,thenumberoftheGroup’s

employeeshasgrownby32,reaching483,with18employees

joiningusinconnectionwiththeacquisitionofFinnkumuOyin

Q3.AsaconsequenceofadjustingthesalariesoftheGroup’s

employeesinthesecondhalfof2013,strongpressuretoraise

salaries,aswellastheimplementationofamanufacturing

employees’qualificationsystemattheGroup’sEstonian

Sales RevenueBy business area

Electrical equipment 85%

Sales of electrical components 6%

Real estate rent 4%

Sheet metal products/services 2%

Telekom products/services 2%

Other services 1%

Finland 58%

Estonia 30%

Sweden 3%

Lithuania 2%

Other EU 2%

Others 5%

By market

BusinessResults


companies,labourcostsinmanufacturinggrewfrom1January

2014,resultinginanincreaseoflabourcostsascomparedtothe

referenceperiod.Inthe12-monthperiod,labourcostsincreased

by6.0%,amountingto12.0millioneuros.Theratiooflabourcosts

tosalesrevenuewas23.8%(2013:23.5%).

TheGroup’sdistributioncostsinthe12-monthperiodwere2.7

millioneuros,increasingby3.6%comparedtosameperiodinthe

previousyear.Theratioofdistributioncoststorevenuewas5.4%,

remainingatthe2013level.Generaladministrativeexpenses

decreasedby0.6%to4.0millioneurosduringtheyear.Theratio

ofgeneraladministrativeexpensestorevenuewas8.0%,having

decreasedby0.4percentagepoints.InQ2,someofthestaffof

theFinnishcompanywasrestructuredfromgeneraladministra-

tionintosales.Inthereportingyear,theGroupwroteoff103,000

eurosindoubtfuldebts,thefigureforthereferenceperiodwas

155,000euros.

Overall,thegrowthrateofoperatingexpenseslaggedbehindthat

ofsalesrevenue,increasingby3.8%to48.3millioneurosduring

theyear.Inthereportingyear,EBITDAaswellasEBITincreased

bothby0.5millioneuros,to3.7millioneurosand2.2millioneuros,

respectively.Returnonsalesbeforedepreciationforthe12-month

periodimprovedby0.6percentagepoints,amountingto7.4%,and

returnofsalesby0.8percentagepoints,amountingto4.4%.

Dividendincomeinthereportingperiodwas0.91(2013:0.95)

millioneuros.In2014,200,000(2013:90,000)sharesofPKC

GroupOyjweresold,withfinancialincomefromsellingtheshares

being4.6(2013:1.7)millioneuros.Theannualprofitfromfinancial

investmentstotalled5.6(2013:2.6)millioneurosandtotalfinancial

incomein2014amountedto5.7(2013:2.6)millioneuros.

InQ3,theGroupsoldits34%holdinginASDrakaKeilaCables;

thefinancialincomefromsellingtheshareswas1.8millioneuros.

UntilJune30,theGroupconsolidatedaprofitof0.8(2013:1.3)

millioneurosfromtheassociatedcompany.

Incometaxexpensein2014was675,000(2013:475,000)euros.

Theconsolidatednetprofitofthereportingyearwas9.8million

euros,increasingbyapproximately4.6millioneuros.Theshareof

theownersoftheparentcompanyamountedto9.7millioneuros.

EPSwas0.56(2013:0.30)euros.

OthercomprehensiveincomeThemarketpriceofashareofPKCGroupOyjontheHelsinki

StockExchangedecreasedduringtheperiodof12monthsby6.72

eurosandclosedat17.47euros(2013:increasedby8.76euros

to24.19euros).Othercomprehensivelossfromtherevaluationof

financialassetsamountedto7.41millioneurosinthereportingyear,

inthereferenceperiodtherewasacomprehensiveincomeof11.69

millioneuros.4.61(2013:1.66)millioneurosofrevaluationprofit

wereearnedfromthesalesoffinancialassets.Asawhole,the

revaluationreserveintheowner’sequitydecreasedby12.02(2013:

increasedby10.03)millioneuros.Differencesintheexchangerate

emerginginrecalculationoffiguresofaforeigncompanyformedan

insignificantpartofothercomprehensiveincome/loss.

FinancialpositionTheamountoftheconsolidatedbalancesheetoftheGroupasof

31December2014was69.8millioneuros,decreasingby1.3mil-

lioneurosduringtheyear.Mostofthechangesinthefixedassets

derivedfromvalueadjustmentoflong-terminvestmentsinthe

BusinessResults


HelsinkiStockExchangeandthesaleoffinancialassets.Overall,

thecostoffinancialinvestmentsinthestatementoffinancialposi-

tiondecreasedby12.2millioneurosinthereportingyear.InJuly

2014,theGroupsoldits34%holdinginASDrakaKeilaCables.As

atthebeginningoftheyear,thebookvalueoftheassociatedcom-

panyinthestatementoffinancialpositionwas3.6millioneuros.

Inthereportingyear,theGroup’sinvestmentsinfixedassets

amountedto1.9millioneuros;inthereferenceperiod,thisfig-

urewas2.3millioneuros.Throughbusinesscombinations,fixed

assetstotalling4.9millioneuroswereacquired(Note31).Over-

all,thecostoffixedassetsdecreasedby10.5millioneurosthe

12-monthperiodamountingto44.7millioneuros.

Bytheendoftheyearbusinessclaimsandprepayments

amountedto6.9millioneuros,increasingby1.0millioneurosdur-

ingtheyear,andinventoryamountedto8.1millioneuros,increas-

ingby2.3millioneuros,1.5millioneurosofwhichwasinventory

relatedtotheacquisitionofthesubsidiary.

Asatthereportingdate,theGroup’sliabilitiestotalled9.95million

euros,ofwhichshort-termliabilitiesmadeup8.4millioneuros.

TheGroup’sliabilitiesincreasedby2.7millioneuroswiththeyear.

Tradepayablesandotherpayablesgrewthemost:2.6million

euros,reaching7.0millioneuros.Short-termliabilitiesincreased

by2.3millioneurosyearonyear.

Bytheendoftheyearinterest-bearingdebtobligationsamounted

to1.1(31.12.2013:1.8)millioneuros,withshort-termobligations

makingup0.3(31.12.2013:0.7)millioneuros.Asat31Decem-

ber2014,interest-bearingdebtobligationsformed11.0%ofthe

Group’sliabilitiesand1.6%ofassets;asat31December2013,

thesefigureswere24.2%and2.5%,respectively.

Inthe12-monthperiod,thenetdebt(interest-bearingdebtobliga-

tions–cashandbankaccounts)oftheGroupdecreasedby6.5

millioneuros,amountingto-8.9millioneurosbytheendofthe

year.Theratioofnetdebttoowners’equitywas-17.4%;inthe

referenceperiod,itwas-3.8%.

Duringtheyear,theowners’equityoftheGroupdecreasedby4.0

millioneuros,amountingto59.8millioneurosbytheendoftheyear.

Attheendofreportingperiodcurrentassetsamountedto36%

(2013:22%)andfixedassetsto64%(2013:78%),ontheother

hand,foreigncapitalaccountedfor14%(2013:10%)andowners’

equityfor86%(2013:90%)oftotalassets.

Inthereportingyear,netcashfromoperatingactivitieswas2.8

(2013:2.5)millioneurosand5.6(2013:0.5)millioneurosfrom

investmentactivities.Thelargestexpenditureinthereporting

periodwastheacquisitionofthesubsidiaryFinnkumuOy.The

ownerswerepaid6.7millioneurosfortheirshares.Theacquired

companyhad1.9millioneurosinitsaccount,resultinginatotalnet

cashoutflowof4.8millioneuros.Thelargestrevenuescamefrom

thesaleoffinancialassets(sharesofPKCGroupOyjandtheasso-

ciatedcompany),inthetotalamountof11.1millioneuros(2013:1.8

millioneuros).PKCGroupOyjpaiddividendstoitsshareholdersat

0.70eurospershare.In2014,ASHarjuElekterreceiveddividends

intheamountof910,000(2013:950,000)euros.

In2014theGrouppaiddividendsof1.8(2013:1.6)millioneuros.

Overall,thenetcashusedinfinancingactivitieswas2.5(2013:

2.3)millioneuros.Cashandcashequivalentsincreasedinthe

reportingyearby5.9millioneuros,amountingto10.0million

euros,whileinthereferenceperioditincreasedby0.8million

eurosamountingto4.1millioneuros.

BusinessResults


A moderate increaseintheproductionofprojectproducts

continuedduringthereportingyearand

additional resources wereusedfordevelopment.

In2014wereceivedchallenging new orders for special substations

inEstoniaaswellasinFinland.


As of 31 December 2014 the Group was active in two fields – production and real estate – where the accompanying risks and rewards were very different and both fields of activity had enough weight to form a separate segment.

Theshareofthetradinggroupoperatingwithintheparentcom-

panyand,ofHarjuElekterAB(suspendedforanunspecified

termsince1.4.2014),hasduringthelastyears(including2014)

remainedbelowtheessential10%and,therefore,itwasrecog-

nisedaswithinthecompositionofotherfieldsofactivities.

USINESS SEGMENTS

Sales RevenueRevenue of Business Segmentsmillion euros

0

10

20

30

40

50

60

Production Trade Real estate Other activities

2005 2006 2007 2008 2009 2010 2011 2012 20142013

Production 90%

Real estate 5%

Other activities 5%

By business segment

Sales RevenueRevenue of Business Segmentsmillion euros

0

10

20

30

40

50

60

Production Trade Real estate Other activities

2005 2006 2007 2008 2009 2010 2011 2012 20142013

Production 90%

Real estate 5%

Other activities 5%

By business segment


BusinessSegments

ProductionTheproductionsegmentincludeselectricalequipmentfactories

inEstonia(ASHarjuElekterElektrotehnika),Finland(SatmaticOy,

FinnkumuOy)andLithuania(RifasUAB)whichproducemainly

electricpowerdistributionequipment(substations,cabledis-

tributionandfuseboxes)andautomaticandcontrolboardsfor

theenergysector,industryandinfrastructure.ASHarjuElekter

TeletehnikainEstoniawhichmanufacturesproductsforthedata

andtelecommunicationsectoraswellaselectro-technicalsector,

alsobelongsinthissegment.

In 2014 production gave 90.5% (2013: 88.9%) of the consolidated sales

revenue. The segment’s volume of sales decreased within a year by 6.7%

amounting to 45.8 million euros.

AS Harju Elekter Elektrotehnika

ASHarjuElekterElektrotehnika,whichisfullyownedbythe

Group,isaleadingmanufactureranddistributorofMV/LVdis-

tributionunitsinBalticcountries.Theheadquartersandplantof

ASHarjuElekterElektrotehnikaarelocatedinKeilacomprising

11,000m2ofproduction,warehouseandofficepremises.The

averagenumberofemployeesis198,incl.35ofthemworkingin

salesandR&D.

TheeconomicactivitiesofHarjuElekterElektrotehnikain2014

canbeconsideredsound,asthecompanywasabletoretainits

marketshareinthedecliningdomesticmarketandevenincrease

itintheforeignmarketsatatimeofeconomiccrisis,keeping

itssalesvolumesatthelevelofthepreviousyears.Thecompa-

ny’ssalesrevenuein2014was19.9(2013:20.5)millioneurosin

Sales Revenue

Satmatic Group 48%

AS Harju Elekter Elektrotehnika 37%

Rifas Group 10%

AS Harju Elekter Teletehnika 5%

By company


anenvironmentwheredomesticconsumptionwaslowandthe

economiccrisisinEuropehadweakenedthecustomers’busi-

nesssituationasaresultofpoordemand.Indirectly,thecompany

wasalsoaffectedbytheRussian-Ukrainianconflict.Although

theeconomyoftheEurozonedidnotrecoverinthepastyearas

expected,theshareofsalesofASHarjuElekterElektrotehnikato

foreignmarketsincreased,includingintra-Groupsalesby29%,

reachingarecord53%ofsalesrevenues.

20

15

10

5

0

AS Harju Elekter Elektrotehnika Sales Revenuemillion euros

25

20142005 2006 2007 2008 2009 2010 2011 2012 2013

Sales revenue Export

Therewerepositivedevelopmentsincarryingoutcooperation

contractswiththeFinnishOEM(originalequipmentmanufactory)

andcontractingentitiesintheenergysector.Wealsoreceived

challengingnewordersformanufacturingautomationpanelsfor

theindustrialsector,MVandLVsubstationsfortheenergysec-

torandspecialsubstationsfortheindustrialsector.Atthesame

time,theordersforstandardproductsdecreasedwiththeyear.

Thereforewecontinuedtowidenourproductrangeanddirected

additionalresourcestofindingnewmarkets,increasingtheshare

ofspecialsolutionproductswithahighervalueadded,anddevel-

opingfurtherproject-basedcooperation.Asaresultofsuccessful

negotiationsanumberofnewlargelong-termcooperationcon-

tractswerealsoconcluded.

As regards product groups, unit

substations with concrete and metal enclosures still held the leading

position in sales revenues.

Salesofsubstationsgrewby6.5%comparedtothepreviousyear,

amountingto66%ofthecompany’sannualsalesrevenue,with

thespecialsubstations(portcranes)productgroupsignificantly

improvingitsposition.SubstationswerefollowedbytheLVequip-

ment,LVserialproductsandMVprimaryandsecondarydistri-

butionunits’productgroups,thesalesofwhichbothtodomes-

ticandforeigncustomersmetexpectations.ThesuccessfulQ4

broughttheannualsalesrevenuesofLVequipmenttoathree-

yearrecordlevel.

BusinessSegmentsIProductionIASHarjuElekterElektrotehnika


Estonia 49%

Finland 46%

Sweden 3%

Other 2%

Sales RevenueBy product group

By market

Equipment for energy/powerdistribution 74%

Equipment for industry sector 19%

Equipment for building sectorand infrastructure 6%

Other 1%

InApril2014,theactivitiesofHarjuElekterABwereindefinitely

suspendedduetotheinefficientandcost-intensivebusiness

model.ResponsibilityfortheGroup’sbusinessactivitiesregard-

ingSwedenandthecustomersinthatcountrywenttothesales

anddevelopmentteamofASHarjuElekterElektrotehnikaandthe

partneragentsinSweden.Asaresultofstructuralreorganisation

andgoodmarketing,salesintheSwedishmarketincreasedinthe

reportingyear.

Theupdatingofthecompany’slong-termstrategyandtheimple-

mentationofemployees’qualificationsystemcontinuedin2014.

Asregardsdescribingtheprocessesforincreasingmanagement

effectiveness,wereachedthefinalstageofdevelopingsuccess-

basedindicatorsandfinishedthepreparationsforstructural

changestobeimplementedin2015inconnectionwiththecre-

ationofqualityandlogisticsdepartments.Asconcernsprocess

development,thedevelopmentoftheplanningprocessmustbe

highlighted,whereemployees’proposalsregardingtheorgan-

isationofproductionconstitutedinputfortheconsultationson

improvement.The5Sactivitiescontinuedintheproductionunits.

Alltheactivitiesmentionedabovearecrucialtosettingthecom-

pany’sobjectivesandforthesmoothfunctioningoftheorganisa-

tion,aswellasapreconditionforincreasingproductivity.

Inordertobetterunderstandtheexpectationsandneedsofcus-

tomers,thecompanycontinuedtoregularlyseekcustomerfeed-

backonthequalityofitsmainprocesses.Wearehappytonote

thatonthebasisofcustomerfeedback,thequalityofthecompa-

ny’scustomerservice(therecommendationindex)hasmovedin

apositivedirection,meaningthatourcustomersareincreasingly

recommendingASHarjuElekterElektrotehnikaasabusiness

partner.Thisinformationisalsovaluableforimprovingbusiness

processeswithinthecompany.Theintroductionofcomplemen-

taryoptionsofthebusinesssoftware,MSDynamicsAX,also

continued,includingtheimprovementoftheregistryofelectronic

purchaseinvoicesandthemanagementreportingenvironment.

Ontopofthat,bothlicensorsandkeycustomersauditedthe

productionofMVandLVdistributionunitsonseveraloccasions

throughouttheyear,duringwhichthecompatibilityofproducts

andtechnicaldocumentation,themanufacturingprocessof

BusinessSegmentsIProductionIASHarjuElekterElektrotehnika


productsandotherqualityassurancerelatedissueswerethor-

oughlyexamined.Theauditsareusefulforallpartiesandconsti-

tuteanimportantbasisforfuturecooperation.

Duringthereportingyear,thecompanyparticipatedinvarious

professionalfairsandcustomerfairdaysandseveralcustomer

visitsandstudydayswereorganised.Activecooperationcon-

tinuedwiththeTallinnUniversityofTechnologyinthefieldsof

productdevelopmentandtestingnewproducts;ajointstudypro-

grammewiththeTallinnPolytechnicSchoolwaslaunched.

Inordertoensurethedevelopmentandgrowthofthecompany

activeexportmarketingwillbecontinuedinforthcomingyears.In

ordertoenhancecompetitivenesstheactivitiesrelatedtoincreas-

ingtheeffectivenessofthemainprocessesinthecompanyand

improvingtheorganisationofworkandtheenvironmentpro-

tectionwillbecarefullyobserved.Additionalopportunitiesare

createdbyextendingtheexcitingproductrange,reinforcingthe

co-operationbetweenthecompaniesbelongingtotheGroupand

continuingtheco-operationwithhigher,specialisedandvoca-

tionaleducationalinstitutions.

AS Harju Elekter Teletehnika

ThemainactivitiesofASHarjuElekterTeletehnika,whichisfully

ownedbytheGroup,includethemanufactureandmarketingof

dataandtelecommunicationboxesandotherequipmentand

accessoriesandfibreopticalcablesforthetelecomsector.In

addition,arangeofcustomer-basedsheetmetalproductsand

semi-manufacturedarticlesareproducedfortheelectricalengi-

neeringsector,subcontractingworksarecarriedoutandservices

renderedintheareaofsheetmetalprocessingandfinishing.The

companyalsocomprisesamechanicaldivision,whichexecutes

specialordersforcompaniesinKeilaIndustrialPark,andholds

licencesfordesigning,installingandmaintainingfireandsecurity

systems.ThefactoryislocatedinKeilaandthecompanyemploys

65people.

AS Harju Elekter Teletehnika Sales Revenuemillion euros

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

2010 2011 2012 2013 201420092008200720062005


2014 was a year of improving production organisation and developing new sales

channels for the company.

BusinessSegmentsIProduction


BusinessSegmentsIProductionIASHarjuElekterTeletehnika

Thefocuswasonincreasingtheprofitabilityofspecificproduct

groupsandcustomersegments,aswellasonimprovinggeneral

efficiencyinproduction.Severalactivitiesweredirectedatrais-

ingcustomersatisfactionandsecurityofsupplywiththeultimate

objectiveofboostingcustomerconfidenceinthecompany’spro-

ductsandservices.Inthesheetmetalsector,asinpreviousyears,

therewasstrongcompetitionasregardspricesanddeliverytimes.

Overall, the sales revenue of AS Harju Elekter Teletehnika in the reporting year remained practically on the same level as

in the previous year, decreasing by 0.4% to 2.9 million euros.

Bothsalesonthedomesticmarketandintra-Groupexport

increased,by2.1%and13.4%respectively,butsalesoutside

Estoniadecreasedby2.4%.Theshareofexportsinthecompa-

ny’ssalesrevenuewas55.2%.Thelargestforeignmarketwas

Finland(90%oftotalexportturnover),followedbySwedenand

Germany.Theslightdeclineofforeignmarketswasmainlyrelated

totheFinnishtelecommunicationssegmentcustomers,who

decreasedtheirinvestmentsintodatacommunicationnetworks

asaresultoftheunstablepoliticalandeconomicenvironment.

Asconcernsproductgroups,productsandserviceslinkedtothe

telecommunicationssectorheldtheleadingpositionwith58.5%,fol-

lowedbysheetmetalproducts,industrialsubcontracting,intermedi-

atesaleofproductsandservicesandotherproductsandservices.

SeveralcustomerauditswereorganisedatASHarjuElekter

Teletehnikain2014,wherebycustomersevaluatedthefunction-

ingofthecompany’sprocessesanditsabilitytoensureproduct

quality.Feedbackfromcustomerauditsiscrucial,asithelpsthe

companytobetterunderstandcustomers’needsandadjustits

processesaccordingly,inordertooffercustomersmorevalue

addedonahigherlevel.


By market

Products/services for telecom sector 51%

Sheet metal products 30%

Intermediate sale 3%

Industrial subcontracting 2%

Others 14%

Estonia 48%

Finland 47%

Germany 2%

Other 3%


Duringthepastfinancialyear,thecompanypresentedits

productsatseveralfairsinFinlandandGermany.Therapidly

changingeconomicenvironmentforcescompaniesincreasingly

tofocustheirproductionactivitiesanddefinetheirproductand

customersegmentsmorestrictly.Inclosecooperationwithcus-

tomersandasaresultofcontinuousproductdevelopment,AS

HarjuElekterTeletehnikadevelopedseveralnewproductsaswell

asimprovedversionsofexistingproducts.Thecompanycommit-

tedtothedevelopmentofproductionorganisation,concentrated

ontheimprovementofplanningaccuracyandincreasingsecu-

rityofsupplyandlaunchedthemeasurementandadjustmentof

operationtimesinproduction.Inthefieldofmanufacturing,the

developmentofthe5Sprogrammecontinued,theaimofwhichis

toreducenon-valueaddingactivitiesandthemisuseofresources

aswellastoimproveefficiencyandproductquality.Anew

systemforupgradingstockandcostaccountingofsheetmetal

wasimplemented.

ThekeywordsforASHarjuElekterTeletehnikaduringthisyear

willbethegrowthofsales,shortdeliverytimesandproducts

withhigheraddedvalue,whichconstituteapreconditionforboth,

increasingsalesrevenueandproductivity,aswellasensuringthe

company’ssustainabilityandboostingcompetitiveness.The

companyfocusesonthedevelopmentofnewcompetitivepro-

ducts,improvingthecost-effectivenessofproductionprocesses

andraisingthelevelofcustomersatisfaction.Developmentof

employeeknowledgeandskillsincreaseseachemployee’scontri-

bution,makingthecompanymorecompetitiveandsustainable.

Satmatic Group

On17June2014,SatmaticOy,asubsidiaryofASHarjuElekterin

Finland,signedacontractforthepurchaseofallsharesinFinn-

kumuOy,Finland’slargestpre-fabricatedsubstationproducer.

Afterthetransaction,FinnkumuOycontinuestooperateunderits

ownnameandbrandasawholly-ownedsubsidiaryofSatmaticOy.

In 2014, the Satmatic Group’s sales revenue amounted to 26.0 million euros, and there are 92 employees

working in Group.

Satmatic Oy

SatmaticOy,afullyownedsubsidiaryofASHarjuElekter,isa

leadingproducerofautomationequipmentfortheindustrialsec-

torandofelectricpowerdistributionandtransferequipmentin

Finland.Theproductrangeofthecompanycoverstheneeds

ofcustomersfromthedevelopmentofproducts,programmes

andprojectstofullmaintenanceservice.Therangeofproducts

iswideandthecompanyaimstoofferitscustomersupto20kV

productsandsolutions.Asubstantialpartofproductsandsolu-

tionsofSatmaticOyaresoldoutsideFinlandeitherdirectlyor

throughmediatorsi.e.Finnishexporters.SatmaticOyisalsoan



importerandretaileroftheproductsofthecompaniesbelonging

totheGroupinFinland.Theheadquartersandthefactoryofthe

companyarelocatedinUlvilanearPori.Thecompanyalsohas

asalesrepresentationinKeravainordertobetterservicebusi-

nessesandothercustomersinHelsinki-area.Thecompanyhires

75employees.

TheunstableeconomicenvironmentinEuropeandthedownturn

intheFinnishexportsectorwerealsoreflectedinthe2014sales

revenueofSatmaticOy.Evenso,increasingordersintheenergy

distributionsectorcontributedenoughtoensurethatthecompa-

ny’ssalesrevenuegrewcomparedtothepreviousyear,reaching

21.4(2013:19.7)millioneuros.SalesoutsideFinlandeitherdirectly

orthroughintermediariesaccountedfor63%ofsalesrevenue.

Satmatic Oy Sales Revenuemillion euros

5

10

15

20

25

Sales revenue

2011 2012 20142013201020092008200720062005

0

Satmatic Oy operates mainly in three sectors: industrial sector, energy

production and distribution sector and infrastructure.

Accordingtothetypeofsupplytwodifferentproductionmodels

canbedifferentiated:contractmanufacturingandprojectbased

product/solution.However,suchordersfromcustomergroups

orientatedtoexportscreateuncertaintyaccompaniedbytherisk

thatsuchordersmaybeeasilymovedfromFinlandtosomeother

countrywheretheproductioncostsaresubstantiallylowerand/

orthefinalcustomeriscloser.Theenergyproductionandenergy

distributionsectorincludingdifferentrenewableenergysolutions

andinvestmentsinnuclearpowerstations,whereordersare

eithermadeinthedomesticmarketortheclosestneighbouring

countries,showaremarkableincrease.

Theactivitiesofthecompanyarebasedonvaluingcustomer

relations,payinggreatattentiontodevelopingfirst-rateprofes-

sionalproducts/solutionsaswellasofferingmutualaddedvalue.

Amoderateincreaseasregardsprojectproductscontinuedinthe

reportingyear,thereforeadditionalresourceswereusedforthe

development.Variouselectric,controlandautomationinstallations

weredevelopedatthefactoryanddeliveredtocustomersinthe

pulpandpaperindustry,aswellastherockwool,steelandfood

industriesandforoffshore,shipbuildingandminingsectorsand

(electrical)powerstations.

BusinessSegmentsIProductionISatmaticGrupp


ThemaintargetcountrieswereSweden,Russia,Poland,China,

USAandFinland.Withintheproductgroupofserialproducts

andproductsforcontractcustomers,carheatingswitchboards

andchargingstationsformedthelargestshare,withtheprod-

uctsmainlysoldbywholesalers.Theshareofenergydistribution

sectorproductsintheproductportfolioincreasedasaresultof

theleadingFinnishsubstationmanufacturerFinnkumuOyjoining

theGroup;theproducts–unitsubstationsandcabledistribution

boxes–ofthisproductgroupweredeliveredprimarilytoFinnish

networkoperators,energyandpowerstations.On-gridandoff-

gridsolarenergysolutionsprovedtobethestand-outproductsin

therenewableenergysector.

ThedailybusinessoperationandorganisationofSatmaticOy

followsqualityandenvironmentalpoliciesbasedoninternational

standards.Issuesrelatedtobothqualityandtheenvironment,

arediscussedasanintegralpartofeverydaymanagement,sales,

development,manufacturing,logisticsandrealestatemanage-

mentactivities.Thecompany’semployeeshavereceivedthe

relevanttrainingthatenablesthemtotakenoteofproblemsand

makesuggestionstoensurethattransport,wastemanagement

andusageofmaterialsandenergyareorganisedbetterandina

moreenvironmentallyfriendlyway.TheactivitiesofSatmaticOy

donotinvolveenvironmentallyhazardouswasteandthecompa-

ny’soperationsareinaccordancewithqualityandenvironmental

managementstandardsISO9001/2008andISO14001.Inaddi-

tion,SatmaticOyhasavalidULcertificate,whichisaprerequisite

forsellingthecompany’sproductsontheUSmarket.

In2015,thecompany’sactivitieswillbefocusedonfindingnew

customersandmoreefficientinvolvementofwholesaleandretail

tradersinthesalesofsubstations,distributionandtransferequip-

ment,aswellasincreasingon-linesales.Inordertofurtherdevelop

theorganisationofthecompany,greaterattentionwillbepaidto

intensifyingtheworkofthedevelopmentdepartmentandorga-

nisinglogisticsmoreefficiently.Withtheobjectiveofincreasingthe

company’ssalesrevenue,alongsideofferingfirst-classserviceto

existingcustomers,wewillconcentrateonfindingnewcustomers

ondomesticandforeignmarkets,usingbothtraditionalandelec-

tronicsaleschannels.Furthergrowthisexpectedfromimpro-

vingtheefficiencyofmarketingactivitiesinrelationtotheproducts

ofHarjuElekterGroup(substations,distributionboxes,etc.)and

involvingwholesalers.Toincreasethesalesofrenewableenergy

products,heatingswitchboardsforcarparksandchargingsys-

tems,theseproductswillbemadeevenmorecustomerfriendly.


By market


Equipment for energy/powerdistribution 28%

Equipment for building sector,infrastructure 8%

Indirect export 55%

Finland 37%

Direct export 8%

BusinessSegmentsIProductionISatmaticGrupp


Finnkumu Oy

FinnkumuOyisawholly-ownedsubsidiaryofSatmaticOyand

Finnishleadingprefabricatedsubstationmanufacturer,involved

intheplanning,productionandsaleofelectricitydistribution

devices,mainlysubstationsanddistributioncabinets.Thecom-

pany’sheadquarterislocatedinKurikkaandthecompany

employees17people.In2014,thecompany’ssalesrevenue

amountedto9.0(2013:10.4)millioneuros,ofwhich4.0million

eurosincludesintotheHarjuElekterGroup’ssalesrevenue.

Rifas Group

RifasUABisASHarjuElekter’sLithuaniansubsidiary,which

locatedinPanevežys.ASHarjuElekterown62.7%ofsharesof

thecompany.Themainareaofactivitiesofthecompanyisthe

productionandmarketingofindustrialautomationequipment

andelectricpowerdistributionandtransferequipment.TheRifas

Group(hereinafter“Rifas”)comprisestheLithuanianmanufac-

turingenterprise,RifasUAB,anditssubsidiary,Automatikos

IrangaUAB,whichspecialisesindesign.Thecompanyhires82

employees.

In2014,thesalesrevenueofRifasamountedto5.3(2013:5.8)

millioneuros.Thedecreaseinsalesrevenuewasduetothe

strategicdecisiontorestructurethecompany’sexistingprod-

uctportfolio,accordingtowhichitwasdecidedtowithdrawfrom

thegeneralcontractingbusinessthathadsofaraccountedfora

substantialpartofthecompany’ssalesrevenuebutentailedhigh

risks,andtofocus,forthesakeofasustainablefuture,onitspri-

maryactivities:thedevelopment,productionandsaleofMVand

LVelectricinstallations.Althoughthesalesvolumesofother

productgroupsincreasedduringthereportingyear,itwasnot

enoughtocoverthelossessufferedinthebusinesssegment

givenup.

Mostofthenetsalescomefromtheproductionandsalesof

projectbasedproductsandservicesandasmallpartofitfrom

theintermediatesaleofelectriccomponents.Differentfrequency

converter,electricandcontrolboxeshavethelargestshareinthe

rangeofproductsofthecompanyfollowedbycontrolsystems

andpanelsandenergydistributionproducts.

Rifas UAB Sales Revenuemillion euros

0

2

4

6

8

10

2011 2012 20142013201020092008200720062005




According to the company strategy and focal points in the fields of activities,

main emphasis was put on boosting the efficiency of production processes and

increasing production capacity, primarily in the export markets.

Duringtheyear,thestandardisationofthecompany’sproduct

rangecontinuedandnewstandardproductsandsolutionswere

developedthatshouldensureastrongbasisforincreasingthe

volumeofproduction.Long-termpersistenteffortsresultedinthe

conclusionofnewimportantcooperationcontractswithseveral

foreignpartners.

Theintroductionofthenewbusinessandaccountingsoftware

continuedinthecompany;in2014,themainfocuswason

implementingtheproductioncapacityplanningandproject

managementmodules,alongwithintroducingthefinancialand

managementaccountingmodules.Besidesthat,throughoutthe

yearpreparationswereongoingfortheintroductionandadoption

oftheeuroasof1January2015,whenLithuaniabecamemem-

beroftheEurozone.Theexchangeratewasfixedat1EUR

=3.4528LTL.

Forthefurtherdevelopmentofthecompanythemainfocuswill

beputonthereinforcementofstrategicrelationswithexisting

cooperationpartnersandonactivemarketingtofindnewcus-

tomersandprojects.Thedevelopmentofprojectbasedcustomer

relationsonforeignmarketswillcontinue.


By market


Equipment for building sector,infrastructure 1%

EU countries 47%

Other Europe 32%

Lithuania 19%

Others 2%

BusinessSegmentsIProductionIRifasGrupp

RealEstateHoldingandOtherActivitiesThesalesrevenuesoftherealestatesegment(Parentcompany)

andothernon-segmentedactivities(Parentcompany’sTrade

Groupanduntil31.3.2014HarjuElekterAB)totalled9.5%(2013:

11.1%)oftheconsolidatedsalesrevenue,outofwhichmerchandise

formed49.2%,rentalincome45.1%,intermediarysaleofservices

4.0%,andincomefromotherproducts/servicesformed1.7%.


Real Estate Holding

Thesalesrevenuesofthesegmentwere2.4millioneuros,being

onthesamelevelcomparingtothepreviousyear.Rentalincome

amountedto2.2millioneuros,accountingfor89.3%(2013:90.1%)

oftheprofitofthesegment.Renderingpublicandotherservices

totalled10.7%(2013:9.9%)ofthesalesrevenueofthesegment.

Other Activities

Duringthereportingperiod,thesalesrevenuesofothernon-seg-

mentedactivitiesdecreasedby8.4%amountingto2.68million

eurosandforming5.1%(2013:6.0%)oftheGroup’ssalesreve-

nues.Themainrevenuesourcesweretheintermediarysaleof

productsandthesaleofGroup’sproducts(electricalequipment).

Revenuefromthesalesofotherserviceswas49(2013:80)thou-

sandeuros.

AS Harju Elekter

ASHarjuElekteristheParentcompanyoftheGroup.Itsactivities

aredividedintotwosegments–RealestateandOtheractivi-

ties.Unallocatedactivitiesincludethecoordinationofco-oper-

ationwithintheGroup,managementofsubsidiariesandrelated

companiesthroughtheirsupervisoryandmanagementboards,

managementofthefinancesandinvestmentsoftheGroupand

managementofdevelopmentandexpansionactivitiesaswell

asmanagingofpersonnel,ITandcommunicationservicesand

guaranteeingtheprofessionaloperationofthecorporatestores.

StoreslocatedinTallinn,TartuandKeilasellbothproductsofthe

Groupandrelatedcompaniesandothergoodsnecessaryfor

electricalinstallationworkmainlytoretailcustomersandsmall

andmediumsizedelectricalinstallationcompanies.

ThebusinessactivityoftheParentcompanygives9.0%(2013:

9.6%)fromtheconsolidatedsalesrevenues.

Harju Elekter AB

HarjuElekterABisarepresentationandsalesorganisationofthe

Groupfoundedin2010inSweden.ASHarjuElekterhasashare

of90%inthesubsidiary.InApril2014,theactivityofHarjuElekter

ABwassuspendedforanunspecifiedterm,becauseoftheinef-

ficientandcost-intensivebusinessmodel.Responsibilityforthe

Group’sSweden-orientedbusinessactivityandthelocalclients

wastakenoverbythesalesanddevelopmentteamsofASHarju

ElekterElektrotehnika,alongwithpartneragentsbasedinSwe-

den.SalesintheSwedishmarketincreasedin2014comparedto

thepreviousyearbyalmosttwotimes.

Real estate 55%

Trade 39%

Other 6%

Sales RevenueBy activity

BusinessSegments


Long-term cooperation projects withinternationalpartnerscontinued.

Duringthereportingyear,thespecial

substations(portcranes)productgroup improved its position

significantly.


SIA Energokomplekss

SIAEnergokomplekssisasalesorganisation,foundedin2006.

AtthebeginningtheGroup’sparticipationintheLatviancompany

SIAEnergokompleksswas10%anditwasincreasedto14%in

2009.HoldinginSIAEnergokomplekssmakesitpossibletopar-

ticipatetogetherininvitations-to-tenderforMVandLVequipment

inLatvia.

PKC Group Oyj

PKCGroupOyj(hereinafterPKC)isaFinnishpubliclytradedcom-

pany,whichmanufacturescableinsulationfortheautomobile,

telecommunicationandelectronicsindustries.In2014,salesrev-

enueofPKCwas829.2millioneurosandtheGroupemployees

19,437people.

THER FINANCIAL INVESTMENTS


0

2011

Profit from the sales of PKC shares Dividends from PKC

thousand euros

2,000

1,000

3,000

4,000

5,000

20082005 2006 2007 2009 2010 2012 20142013

Profit Earned from Financial Investment

PKCsharesarequotedontheHelsinkiStockExchangeandAS

HarjuElekterhas4.6%ofPKCsharesasatDecember31,2014.

Themarketpriceofthesharesdecreasedin2014by6.72euros

andonthelastdayoftradingthepriceofashareontheHelsinki

StockExchangewas17.47(2013:24.19)euros.PKCsharesare

valuedinthebalancesheetaccordingtomarketpriceandthe

changeinthemarketpriceoftheshareshasadirectinfluenceon

theGroup’sassets.Thecostofinvestmentinassetsandreserves

inequitydecreasedbythelossof7.4millioneuros;withinthe

comparableperiodincreasedbytheprofitof11.7millioneuros.At

ahighpricelevel,inordertopromptlyfinancethepurchaseofthe

Finnishsubsidiary,200,000sharesinPKCGroupiOyjweresold

inMay.Thebookvalueofthesharessoldwas4.8millioneuros.

Intotal,thecostoffinancialinvestmentsdecreasedby12.2million

eurosto19.1millioneurosduring12monthsperiod.

PKCGroupOyjpaiddividendstotheshareholders0.70eurosper

share.In2014ASHarjuElekterreceiveddividendsintheamount

of907,000(2013:948,000)euros.InQ2,theGroupsold200

(2013:90)thousandPKCshares,thenonrecurringprofitforwhich

amountedto4.6(2013:1.7)millioneuros.

20

25

30

5

10

15

2012 2013 2014

Share of PKC Group Oyj in 2012–2014eur

OtherFinancialInvestments


ERSONNEL

The companies of the Harju Elekter Group are located in Estonia, Finland and Lithuania. However, most of the employees (85%) work in either Estonia or Finland.

WhileinEstoniaunemploymenthasbeendeclining(2014:7.4%)

andemploymentratesrisingforseveralconsecutiveyears,in

Finlandunemploymentstartedtogrowagainlastyear,amount-

ingto8.8%oftheworkingagepopulationinDecember2014.

Thestructuralunemployment,whichhasremainedonarelatively

highlevel,isaconcernforbothcountries.InEstoniaandLithua-

nia,employershavedifficultiesfindinghighqualitylabourandthis

isaggravatedbytheunattractivelevelofsalariesinthebusiness

sectorandtheoutflowofhighlyqualifiedspecialistsfromthese

countries.Theshortageofhighlyqualifiedlabourhascreateda

constantpressuretoraisesalaries.

Asatthebalancedayon31December,therewere483(2013:

451)peopleworkingintheGroupandtheaveragenumberof

employeeswas459(2013:455).Employeewagesandsalaries

totalled9.2(2013:8.6)millioneurosintheyear2014.Theaverage

wagesperemployeepermonthamounted1,669(2013:1,584)

euros.Itisimportanttonote,thattheaveragewageinFinlandisa

multipletimehighercomparedtoEstoniaandLithuania.Number of the employees at the end of the period Labour cost

Personnel and Labour CostsNumber of employees

Labour costmillion euros

0

2

4

6

8

10

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


ThemajorityoftheGroup’semployees–311people–workedin

Estonia,including48peoplewhoworkedintheParentcompany.

Attheendoftheyear,therewere92peopleworkinginFinland

and80inLithuania.From483employeesworkingintheGroup

375ofthemweremenand108women,113ofwhomhavehigher

education,317peoplehavesecondaryorvocationalsecond-

aryeducationand53havebasiceducation.Inordertoimprove

theskillsandqualificationsofemployeesjointin-servicetraining

courseshavebeenstartedinco-operationwithhigherandvoca-

tionaleducationalinstitutions.

Harju Elekter Group is characterised by is its solid organisational culture.

Thehighpercentageoflong-termemployeesmotivatesnewcom-

erstopreserveanddevelopthisculture.62.9%ofemployees

haveworkedintheGroupforoverfiveyears.

TheaverageageoftheGroup’semployeeshasremainedstable,

andwas41.2yearsintheaccountingyear.Tofindnewcompetent

employees,ASHarjuElekterco-operateswithuniversitiesand

vocationalschoolswhichinsummerusethecompaniesofthe

Groupeitherastheirbasisforvocationaltrainingorintheframe-

workofin-servicetrainingorretrainingprogrammes.

Since2001,ASHarjuElekterhashadcloseco-operativerelations

withTallinnUniversityofTechnology(TUT),since2010asGolden

Sponsor.Overtheyears,altogether50Bachelor’sorMaster’s

degreestudentshaveparticipatedinthescholarshipprogramme

andfiveyoungengineersarecurrentlyemployedbytheGroup.

IncooperationwiththeTUTandundertheleadershipofMarek

Mägi,anelectricalengineeratthesubsidiaryASHarjuElekterEle-

ktrotehnika,aprototypeofastoragedeviceforasubstationwith

anenergymanagementsystemcapacitywascompleted.Within

EmployeesBy country

Length of ServiceIn Harju Elekter Group

Up to 5 years 179 persons

6−10 years 142 persons




More than 41 years 12 persons

Estonia 311

Finland 92

Lithuania 80

Personnel


Personnel

theframeworkofajointdevelopmentprojectofASHarjuElekter

ElektrotehnikaandTUT,theprototypedeviceisbeingtestedat

theTUTonarealmicro-gridtestbench.Theprototypedevicewill

bepresentedforthefirsttimeinMay2015atthelargestNordic

electricalengineeringfairElfackinGothenburg.

HarjuElekterGroup’sEstonianenterprisescarryoutseveral

co-operationprogrammeswiththeTallinnVocationalEducation

Centre,TallinnPolytechnicSchool,TTKUniversityofApplied

Sciences,andotherschools.Finnishsubsidiarycontinuesaclose

co-operationwithSatakuntaUniversityofAppliedSciencesand

TampereTechnicalUniversity.

Inthereportingyear,companiesintheGroupcontinuedtofocus

onoptimisingcostsandensuringtheefficientoperationofthe

organisation.Thequalificationsystemofmanufacturingemplo-

yeeswasimplementedintheGroup’sEstoniancompaniesduring

thereportingyear,whichhashelpedlinkemployees’skillsand

contributiontoafairandmotivatingpayandpointedoutpossibili-

tiesforthedevelopmentandforincreasingsalaries.Thequalifica-

tionsystemimplementedhasproventobesosuccessfulthatthe

mappingofjobsofadministrativepersonnelisplannedtobecar-

riedoutinthebeginningof2015.Exercisesandtrainingcourses

organisedforemployeesduringtheyearweremainlyaimedat

improvingprofessionalskillsandqualifications.Intheproduction

units,activitiescontinuedinordertoimplementthe5Sproduc-

tionmodelandfirstresultshavebeenachievedintheformof

increasedproductivityandreducedlosses.Besidesthat,firstaid

coursesareorganisedaftereverythreeyearsandspecialcourses

introducingthemostimportantamendmentstotherelevantlaws

areofferedtoworkingenvironmentrepresentatives.Allemployees

areconstantlybriefedaboutwastehandlingandtheorganisation

ofthewastesortinginthecompany.

The Group has many possibilities for motivating its personnel:

a bonus system linked to operating profitandinvolvesall

employees.Bonusesdependentonprofitmotivateemployees

toalwaysconsidertheoutcomeoftheirworkforthecompany

asawhole;

share-option schemes,aimingatinvolvingmembersofthe

directingbodiesandemployeesofcompaniesoftheGroupto

motivatethemactinginthebestinterestoftheGroup;

the cross company as well as cross-border employee

exchange programmes,promotetherapiddevelopment

ofknowledgeandskillswithintheGroupandofferrotation

opportunities.

ASHarjuElekterisaresponsibleandcaringemployeroffering

itsemployeescontemporaryworkingandrecreationconditions.

TheGroupisinvolvedinconstructiveco-operationwiththeKeila

IndustrialParktradeunion,oneofthemainoutcomesofwhich

iscollectivelabouragreement.Thestability,socialguarantees

andmotivationschemeofferedbyASHarjuElekterpromotetrust

betweenthecompanyanditsemployeesandpreventthedisrup-

tionofwork.


NVESTMENTS AND DEVELOPMENT

Asawholetheinvestmentscanbedividedintotwocategories:

halfofthemaimedtosupportandensuretheGroup’sfurther

developmentandtheotherhalfincludesinvestmentthatismade

toensurethatproductionpremisesandtechnologyarekept

up-to-dateandcomplywiththequalityrequirements.

ThedevelopmentoftheMSDynamicsAXmanagementandbusi-

nesssoftwarecontinuedintheGroup’sEstoniancompanies.

Althoughthelargestinvestmentsinthatregardweremadeinthe

years2009–2011,workcontinuedtoidentify,adjustandintroduce

newmodulesandadditionaloptionsofthebusinesssoftware.In

2014,thefocusoftheGroup’sEstoniancompanies’development

activitiesinthefieldofinformationsystemswasonprojectsrelated

tobusinessanalysisandinformationdissemination;preparations

werestartedfortheupcomingrenewalofthemanagementand

businesssoftwareversionin2016.TheGroup’sFinnishandLith-

uaniansubsidiarieswerealsocarryingoutactivitiestoimplement

anddevelopthemanagementandbusinesssoftwareandintegrate

itintoacommonplatform.DevelopmentoftheCRMandQlikView

programmescontinuedinallsubsidiaries.Investmentsinthe

developmentofbusinesssoftwaremadeduringthereportingyear

In 2014, the Group investments to real estate, tangible fixed assets and intangible fixed assets totalling 1.9 (2013: 2.3) million euros. In addition, fixed assets totalling 4.9 million euros were acquired through business combinations.

0,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Investments R&D costs

Investments and DevelopmentInvestmentsmillion euros

R&Dmillion euros

1,0

0,5

2,0

1,5

3,0

2,5

3,5 2,0

0,0

0,5

1,0

1,5


totalled188,500(2013:84,500)eurosandinvestmentsininformation

technologyequipmentamountedto98,000(2013:73,800)euros.

Asregardsprocessdevelopments,thedevelopmentoftheplan-

ningprocessinASHarjuElekterElektrotehnikamustbehigh-

lighted.Allsubsidiariescontinuedwiththe5Sactivitiestoincrease

productivityandreduceadditionalcosts.

WorkinvolvinggrantsfromtheEuropeanUnionstructuralfunds

inthedevelopmentprojectsoftheGroupcontinued.Theprojects

weremainlyaimedatdevelopingkeyactivitiesofthecompanies,

preparingstrategiesandtrainingthepersonnel(improvement

inqualifications,teamworktraining).Withassignedtechnology

grantstheproductioncapabilitywillcontinuetobeenhanced

throughimprovingthetechnologywhichresultedintheimproved

qualityandsecurityofsupplynecessaryforsuccessfulexport

activitiesaswellasshorterproductioncycles.In2014,assigned

grantswerereceivedmostlyformarketingactionsandtotalled

15.4(2013:19.0)thousandeuros.

AccordingtothedevelopmentprinciplesoftheGroup,theGroup’s

companiesaimsatthecontinuousmodernisinganddevelop-

mentofnewproductstomeettheneedsofitscustomersandto

improveproductiontechnology.In2014thedevelopmentcosts,at

costprice,oftheGroupamountedtoatotalof0.60(2013:0.62)

millioneuros,accountingfor1.2%oftheGroup’ssalesvolume.

ThemainproductdevelopmentresourcesoftheGrouparecon-

centratedintheEstoniansubsidiary,ASHarjuElekterElektroteh-

nika;SatmaticOyandRifasUABspecialiseinindustrialproducts

andthedevelopmentofrenewableenergysolutions.

Theyear2014wasdiverseandinterestingfortheEstonianprod-

uctdevelopmentteam.TheDevelopmentCentrewhichpoolsthe

engineersfromproductdevelopmentandtechnicaldepartments

andsalesengineersofASHarjuElekterElektrotehnikagrewby4

persons.Newtheunitconsistsof23employees.

The Development Centre will be an incubator that will provide sales units with innovative products and solutions

and offer technical support to production units.

TheDevelopmentCentreincludesalaboratoryforthedevelop-

ment,buildingandtestingofnewprototypesandforintroducing

newproductsamples.

Asignificantpartoftheproductdevelopmentresourcesofthe

KeilaDevelopmentCentrein2014wasusedtodevelopanew

solutionforsubstationswithconcreteandmetalenclosuresspe-

cificallydesignedfortheexportmarkets.Productdevelopment

activitiesandtestingproductsattheTallinnUniversityofTechno-

logycontinued,duringwhichtheproductionofasmartgridsub-

stationprototypeanddevicewasdevelopedandimplemented.

Theupgradingofthesubstationproductportfoliowasstarted

withtheaimofensuringthecompatibilityoftheseproductswith

therequirementsofthenewdirective,soontoenterintoforce.

InvestmentsandDevelopment


In the reporting year, large long-term cooperation contracts to manufacture

substations and control system cabinets for the export markets were concluded

and successfully launched.

TheGroup’sproductdevelopmentteamdevelopedchalleng-

ingsolutionsinconnectionwiththemanufactureofcontrolsys-

temcabinetsfortheindustrialsector,MV/LVsubstationsforthe

energysectorandspecialsubstationsfortheindustrialsector.

Onepositivedevelopmentwasthesignificantimprovementofthe

positionofthespecialsubstationsproductgroup,whichhasused

upconsiderableproductdevelopmentresources.

TheFinnishandLithuaniansubsidiariesfocussedondevelop-

mentsandprojectsrelatedtorenewableenergyandoffering

suitablesolutionsinthisfield.Ontopofthat,SatmaticOymade

effortstoincreasethelevelofautomationbypurchasingand

installingtwonewpiecesofequipment:aCNCpunchpressand

acableconnectorinstallationandcuttingdevice.TheFinnish

subsidiaryincreaseditssalesofsolarpowerequipmentandser-

vices.Thedevelopmentofheatingswitchboardsforcarparks

andchargingsystemsforelectriccarscontinuedinordertomake

theseproductsevenmorecustomer-friendly.

TheGroup’ssubsidiariesparticipatedactivelyinprofessionalfairs:

inFebruary,SatmaticOyparticipatedintheInternationalExhi-

bitionofElectricityTelecommunicationsLightandAudioVisual

(Sähkö,Tele,ValoandAV)inJyväskyläandinasubcontracting

fairinTampereinSeptember.AlsoinSeptember,ASHarjuElekter

ElektrotehnikaparticipatedinthetraditionalSLOautumnexhibi-

tion,andinApril,theASHarjuElekterTradeGrouppresentedits

productrangeattheinternationalbuildingfairEstbuild.

InvestmentsandDevelopment


UALITY MANAGEMENT AND ENVIRONMENTAL POLICYA high quality business and management model is one of the assets of the Harju Elekter Group. The objective is to develop business processes, practices and systems based on the principle of continuous improvement and in accordance with the customers’ needs and expectations.

Qualitydevelopmentisacontinuousprocesswhereevery

employeehasacentralroletoplay.TheGroupparticularly

emphasisesthehandlingofcustomerfeedbacksothatthe

necessaryinformationreachestherelevantemployeeswith

minimumdelayandthatcorrectiveandpreventiveactioncan

beeffectivelyimplemented.

TheproductionprocessesofASHarjuElekterdonothaveasig-

nificantnegativeimpactontheenvironment.Nevertheless,the

companiesoftheGroupmonitorandmeasuretheirenvironmental

impactaccordingtotheenvironmentalpolicy,organisehazard-

ouswastecollectionandtransferstowastehandlingcompanies.

Takingcareoftheenvironmentispartofthedailyroutineofallthe

Group’scompanies.ThecompaniesoftheGroupfollowasystem

developedforthecollectionofpackagesandpackagingwaste

andfortherecoveryofpackagingwasteinaccordancewiththe

requirementsofthePackagingAct.TheGroupisacontractual

partnerofthenon-profitassociation,EstonianPackCycling.The

storesoftheASHarjuElektercommercegrouporganisethe

collection,recyclinganddisposalofunusableelectronicdevices

(boilers)inaccordancewiththeWasteAct.

Followingtheprinciplesofqualitymanagementandenvironmen-

talpolicythesubsidiariesoftheGroupcontinuallyfocusedon

optimisingimportantworkprocessesandontheefficientuseof

materialsandproductsinordertoreducetheresultantwasteto

aminimum.Firesafetytrainingwasorganisedforworkerswhich

consistedofatheoreticalpartaswellasafieldexercise.Inaddi-

tiontothatseveraloccupationalandelectricalsafetytrainings

wereorganisedforworkers.Theproductivitywascontinually

increasedinEstonianandFinnishsubsidiariesbyfurtherelaborat-

ing5Sproductionprinciples.

VALITEEDIJUHTIMINE JA KESKKONNAPOLIITIKA


Duringtheaccountingyearseveralauditsofkeyaccounts,pro-

ductcertificationcompaniesandvendorsoflicensedproducts

weresuccessfullycarriedoutinsubsidiariesoftheGroup.The

furtherdevelopmentofthemanagementandbusinesssoftware

andimplementationofadditionalmodulescontinuedinallsub-

sidiaries;theFinnishcompany’sworkalsoincludedsoftware

relatedintegrationactivities.

AccordingtotherequirementsofqualitystandardsISO9001

andISO14001internalandexternalauditsarecarriedoutinthe

Group’scompaniesatleastonceayearandaftereverythree

yearstherecertificationiscarriedout.InJanuary2014anew

certificateforthenextthreeyearperiodwasissuedtoASHarju

ElekterTeletehnika.Thiswasprecededbycomprehensiveaudits

whichwerepassedflawlesslybythecompanies.Regularannual

auditswerecarriedoutinothersubsidiaries.Thenextrecertifica-

tionwillbecarriedoutin2015.Consequently,theorganisationof

productioninallthecompaniesoftheGroupmeetstherequire-

mentsoftheinternationalqualityandenvironmentalmanagement

systems,ISO9001andISO14001.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Harju Elekter ElektrotehnikaISO9001/ISO14001(since2000) upto1/2016

Harju Elekter TeletehnikaISO9001/ISO14001(since2002)

upto1/2017

Rifas ISO9001(since2003)

ISO14001OHSAS18001

upto

12/2015

Satmatic ISO9001(since2003) ISO14001upto

10/2015

–recertification

Certificates Issued to Harju Elekter Group Companies

QualityManagementandEnvironmentalPolicy


Various electric, control and automation installations were developed at the factory

anddeliveredtocustomersactiveinthepulpandpaperindustryandtherockwool,steelandfoodindustries,

aswellasforoffshore,shipbuildingandminingsectorsand(electrical)powerstations.


ORPORATE TARGET FOR 2015The preparation of the Group’s action plans and the organisation of business activities of companies belonging to the Group are built on the Group’s long-term development strategy.

Accordingtostrategytowhichshort-termaswellaslong-term

decisionsareguidedbytheGroup’saimtobethewell-known

andrecognisedproducerofelectricalequipmentandautomation

devicesintheBalticandScandinaviancountrieswhomanufac-

turesanddeliversahighlyprofessionalrangeofproductsand

comprehensivesolutionsinthesegmentofMVandLVproducts,

usingadvancedtechnologyandthebestknow-howavailable.The

Group’sactivitiesderivefromtheconceptofsupportingourcus-

tomers’andpartners’interestsandpreferencesinallouractions

anddecisions.

Alongsidefirst-classserviceofferedtoourexistingcustomers,

thekeyfactorfortheGroup’sfurtherdevelopmentcontinuesto

befindingnewcustomersandincreasingsalesoutsideEstoniain

theneighbouringcountries,otherEUcountriesandbeyond.The

Group’smarketingandsalesareincreasinglyconcentratedonfor-

eignmarkets,developingtechnicallyandquality-wiseimpeccable

productsandsolutionsinaccordancewithourcustomers’and

partners’highexpectations.


In 2015, the Group will focus on:

moreefficientmarketingandsalesactivitiesonalldomestic

marketsandonexpandingtheseactivities

continuingworktofindnewcustomers,partnersandprojects

inScandinaviancountries

remainingapartofourloyalcustomers’businessactivities

andanintegratedpartnerworldwide

furtherdevelopingtheproductandservicerangeintheenergy

andindustrialautomaticssectorandindustrialrealestate

sectorinordertooffercustomersandpartnersevenmore

focussedandcomprehensivesolutions

developingenergyefficientandsmarttechnicalsolutions

developingsolarpowerstationsandincludingtheminour

productrange;improvingandadaptingtheexistingproduct

rangedevelopedintheGroup

ensuringgreaterefficiencyofthebusinessactivitiesandpro-

ductionprocessesofthecompaniesbelongingtotheGroup

throughtheadditionofthenecessarydevelopmentprojects

and/orresources

developinginformationsystemsthroughouttheGroupthat

wouldallowusingmodernandsmartsolutionsindeci-

sion-makingprocessesaswellasareportingsystemthat

includesfuture-orientedassessments

smartandfocussedinvestmentsinproductionresources,real

estatedevelopmentandinformationtechnology

activeeffortstoseekoutandlaunchpotentialfinancialinvest-

ment,mergerandtakeoverprojects

CorporateTargetfor2015


HARE AND SHAREHOLDERSThe shares of AS Harju Elekter were first listed on the Tallinn Stock Exchange on September 30, 1997.

TallinnStockExchangeispartofthelargestexchangecompany

intheworld,theNASDAQGroup.Itdeliverstrading,exchange

technologyandpubliccompanyservicesacrosssixcontinents,

withover3,200listedcompanies.

ThesharecapitalofASHarjuElekteris12.18millioneuroswhich

isdividedintoequal17.4millionordinaryshares.Thenominal

valueofashareis0.70euros.ThesymbolofanASHarjuElekter

shareinNASDAQisHAE1T.ISIN:EE3100004250.Allsharesare

freelynegotiableonthestockexchangeandeachshareconfers

anequalrighttovoteandtoreceiveadividend.Allthesharehold-

ersofthecompanyareequalandtherearenoseparaterestric-

tionsoragreementsconcerningtherighttovote.Accordingto

theinformationavailabletoASHarjuElektertheagreements

concludedwiththeshareholdersdonotincludeanyrestrictions

relatedtothetransferofshares;neitherdotheyincludeanyspe-

cificpowerofaudit.

2013wasarecordyearfortheworld’sstockexchangeswithboth

USandGermansharesreachingnewheightsandtheLondon

StockExchangebeingjustshortofarecordlevel.In2014themar-

ketsexperiencedmoreturmoilbutregardlessofamodeststart,the

largeststockmarketindexintheUS,S&P500,increasedby12%

duringtheyear.ThetradingyearwasfarlesspositivefortheEuro-

peanshares–theStoxxEurope600indexgrewby4%.

TheTallinnStockExchangeOMXTindexfellby8%to755points

withtheyear,havingthesmallestturnoverinhistoryanddecreas-

ingbyone-thirdcomparedtothepreviousyear,to127millioneuros.

Accordingtoanalyststheyearwasdifficult,primarilyonaccountof

theunpredictableRussian-Ukrainiancrisisthataffectedtheperfor-

manceofanumberofcompanies.Outofthe15sharesremaining

onthestockexchangeonlyfourwereabletorise,includingthatof

ASHarjuElekter.

Inthereportingyear,thesharepriceofASHarjuElekterincreased

by3.3%to2.79eurosandthecompany’smarketvalueasat

December31was48.6millioneuros.Comparedtotheprevious

year,thevolumeoftransactionsandthenumberofsharestraded

decreased.


Key Share DataEUR

2014 2013 2012 2011 2010

Numberofshares(inthousand) 17,400,000 17,400,000 17,093,443 16,800,000 16,800,000

Nominalvalue 0.70 0.70 0.70 0.70 0.64

Highestprice 2.85 2.92 2.80 3.54 3.14

Lowestprice 2.52 2.46 2.30 2.19 2.02

Closingprice 2.79 2.70 2.64 2.28 3.02

Change(%) 3.3 2.3 15.8 -23.8 45.9

Marketvalue(inmillion) 48.55 46.98 45.94 38.30 50.74

Tradedshares(pc) 800,823 936,162 759,869 663,917 2,039,910

Turnover(inmillion) 2.17 2.48 1.88 1.88 5.40

Earningspershare,EPS 0.56 0.30 0.21 0.17 0.13

P/E 4.98 9.50 12.57 13.41 23.39

Dividendpershare *0.15 0.10 0.09 0.07 0.06

Dividendyield(%) 5.4 3.7 3.4 3.1 2.0

Dividendpayoutratio(%) 26.6 33.7 44.5 42.4 46.5

*Proposal of the Management Board

ShareandShareholders


2,600

2,800

3,000

2,200

2,400

2012 2013 2014

Share of AS Harju Elekter in Tallinn Stock Exchange 2012–2014eur

165

95

105

115

125

135

145

155

2012 2013 2014

A Comparison of AS Harju Elekter Share Indexes 2012–2014

%

for more information: http://www.nasdaqomxbaltic.com/market/

MXBBGI – OMX Baltic Benchmark GI HAE1T – Harju ElekterOMXT – Nasdaq Tallinn



Shareholderstructurebysizeofholding

Holding No of shareholders

% of all shareholders

% of votes held

>10% 2 0.14 42.92

1.0–10.0% 12 0.81 27.91

0.1–1.0% 54 3.67 15.03

<0.1% 1,405 95.38 14.14

Total 1,473 100.0 100.0

Shareholdersstructure,at31December2014Attheendof2014,ASHarjuElekterhad1,473shareholders.The

numberofshareholdersdecreasedduringtheyearby27per-

sons.ThelargestshareholderofASHarjuElekterisASHarju

KEK,acompanybasedonlocalcapitalwhichasatDecember31,

2014held32.0%ofASHarjuElektersharecapital.Membersof

thesupervisoryandmanagementboardandpersonsorcompa-

niesassociatedwiththemhold9.55%oftheshares.Thecompre-

hensivelistofshareholdersisavailableatthewebsiteoftheEsto-

nianCentralRegisterofSecurities(www.e-register.ee).

Shareholders by Country

> 5% Shareholders

Estonia 80%

Luxemburg 11%

USA 4%

Sweden 3%

Finland 1%

Others 1%

AS Harju KEK 32%

ING Luxembourg S.A. 11%

Mr Endel Palla 6%

Mrs Tiina Kirsme 5%

Others 46%

Shareholdersby Category

Companies,banks, funds 56%

Individuals 44%



DividendsAccordingtothedividendpolicyoftheGrouponethirdofthenet

profitofregularactivitiesispaidoutasdividends.TheGrouphas

anestablishedpracticeofpayingoutdividendsongainsfrom

otherfinancialinvestments.Theactualratiowillbedetermined

basedontheGroup’scashflows,developmentprospectsand

fundingneeds.

AsaresultofstrongcapitalisationtheManagementBoardpro-

posestopayadividendof0.15(2013:0.10)eurospershare,

totally2.61(2013:1.74)millioneurosforthefinancialyear2014,

whichfollowstheprincipleofpayingoutaonethirdoftheannual

netprofitminusexceptionalprofitfromthesaleofASDrakaKeila

Cables.

Dividends per share (eur) Dividend payout ratio (%)

Dividends HistoryEUR %

0.02

0.00

0.06

0.04

0.10

0.08

0.14

0.16

0.12

20

0

60

40

100

80

140

120

2007 20082005 2006 2009 2010 2011 2012 2013 2013

Fordividendhistoryandratios,pleaserefertotheKeysharedatatable.



ORPORATE GOVERNANCECorporateGovernanceReport2014ASHarjuElekterfollowstheArticlesofAssociationofthecom-

pany,therelevantlegislationofthecountriesinwhichitoperates

andasapubliccompany,ASHarjuElekteralsoobservesthe

rulesoftheTallinnStockExchange,thePrinciplesoftheCorpo-

rateGovernanceCodeandtherequirementstotreatinvestors

andshareholdersequally.Accordingly,ASHarjuElektercomplies,

inallmaterialrespects,withtheprovisionsofCGC.Explanations

fordeparturesfromCGCareprovidedbelow.Inaddition,our

corporategovernancereportcontainsinformationontheannual

generalmeetingof2014,thesupervisoryboard,themanagement

boardandexplainsASHarjuElekter’sgovernancestructureand

processes.

CGC Article 1.3.3

An issuer shall make attendance and participation in the general

meeting possible by means of communication equipment (e.g.

the Internet) if the technical equipment is available and where

doing so is not too cost prohibitive for the issuer. SinceASHarju

Elekterdoesnothavetherequiredtechnicalequipmentand

acquisitionofsuchequipmentwouldbecostly,currentlyattend-

anceandparticipationingeneralmeetingsisnotpossibleby

meansofcommunicationequipment.

CGC Article 2.2.1

The Chairman of the Supervisory Board concludes a contract of

service with the member of the Management Board on the fulfil-

ment of his or her duties. TheManagementBoardofthecom-

panyhasjustonemember.Managingdirector/CEOisresponsible

fortheperformanceofcompany’sstrategicareas.Healsocon-

cludesthecontract.

CGC Article 2.2.7

The basic salary, performance pay, severance pay, other paya-

ble benefits and reward systems of each member of the Man-

agement Board, as well as their significant characteristics are

presented in a clear and unambiguous form on the issuer’s

website and in the CGC report. The presented data are con-


sidered clear and unambiguous if they directly express the

extent of the expenses to the issuer or the extent of the likely

expenses as of the day of disclosure. Thepayofamemberof

theManagementBoardisgiventoManagingDirector/CEO.The

rateofpayofamemberoftheManagementBoardandthe

severancepayissetoutinthecontractofserviceandshallnot

bedisclosedtothepublicunderanagreementbetweenthe

parties.Themanagerisentitledtoreceiveaseverancepayment

intheamountof10months’remunerationofamemberofthe

ManagementBoard.

PerformancepayispaidtothemembersoftheManagement

Boardonanequalbasiswiththeparentcompany’sadministra-

tive.Theperformancepayisdistributedaccordingtothebasic

salaryandworkperformanceandtheperformancepayofthe

membersoftheManagementBoardisapprovedbytheChairman

oftheSupervisoryBoard.80%oftheperformancepayispaidby

quarter;theremaining20%ispaidaftertheresultsofthefinancial

yearhavebeendetermined.

Management,incl.ManagingDirector/CEOispaidanannual

bonusof0.4%oftheconsolidatednetprofit(belongingtothe

ownersoftheParentcompany)intotal.Theannualbonusis

approvedbythechairmanoftheSupervisoryBoardandispaid

afterthegroup’sannualstatementhasbeenaudited.

Additionalremunerationforthelengthofemploymentispaidtoall

permanentemployees(incl.ManagingDirector/CEO)onthebasis

oftheirlengthofemployment,includingpermanentemployment

intheHarjuElekterGroup.Therateofadditionalremunerationis

upto10%ofthebasicsalary.

CGC Article 2.3.2

The supervisory council shall approve transactions that are sig-

nificant to the issuer and are entered into between the issuer

and a member of its management board, or another person

connected or close to them, and shall determine the terms of

such transactions. Transactions approved by the supervisory

council between the issuer and a member of the management

board, or a person connected or close to them, shall be pub-

lished in the issuer’s Corporate Governance Report. In2014no

suchtransactionswereperformed.

CGC Article 3.1.3

The Supervisory Board shall regularly assess the activities of

the Management Board and its implementation of the Issu-

er’s strategy, financial condition, risk management system, the

lawfulness of the Management Board activities and whether

essential information concerning the Issuer has been commu-

nicated to the Supervisory Board and the public as required.

Upon the establishment of committees (audit committee, remu-

neration committee etc.) by the Supervisory Board, the Issuer

shall publish on its website their existence, duties, membership

and position in the organization. Upon change of the committee

structures, the Issuer shall publish the content of such changes

and the period during which the procedures are in effect. In

June2010theSupervisoryBoardofASHarjuElekterformedthe

AuditCommitteeofthecompanyfollowingtherelevantrequire-

mentprovidedforbytheAuthorisedPublicAccountantsAct,

affirmeditsStatutes.In2013,membersoftheSupervisoryBoard

ofASHarjuElekter,TriinuTombakandAndresToomeactas

membersoftheCommittee.TheAuditCommitteehasthefollow-

CorporateGovernance


ingtasks:observeandanalysetheprocessingoffinancialinfor-

mation;theefficiencyofriskmanagementandinternalaudit;the

processofauditcontrolofconsolidatedfinancialstatements;the

independenceoftheauditcompanyandtheauditorwhore-

presentsthefirmofauditorsonthebasisoflaw;aswellastosub-

mitproposalsandrecommendationstotheSupervisoryCoun-

cilinissuesprovidedbylaw.DetailsoftheAuditCommitteeand

itspositionintheorganisationwillbeavailableonthecompany’s

website.

CGC Article 3.2.5

The rate of the member of the Supervisory Board pay and the

payment procedure established by the general meeting shall be

presented in the issuer’s CGC report, separately pointing out

the basic salary and additional remuneration (including sever-

ance pay and other payable benefits). Theshareholders’general

meetingofASHarjuElekterhasthecompetencetoelectand

approvethemembershipoftheSupervisoryBoardandtheterm

ofitsappointment.Theshareholders’generalmeetingwhichwas

heldon3May2012appointedthemembershipoftheSupervisory

Boardforthefollowing5years,setting750eurosamonthasthe

payrateforamemberoftheSupervisoryBoardand1,600euros

amonthfortheChairmanoftheSupervisoryBoard,whilethe

ChairmanoftheSupervisoryBoardworkingincompany’sman-

agementshallbesubjecttotherewardsystemusedinASHarju

Elekter(seealsoCGCexplanationforCGCArticle2.2.7).Nosev-

erancepayisallottedtomembersoftheSupervisoryBoard.

CGC Article 3.2.6

If a member of the Supervisory Board has attended less than

half of the meeting of the Supervisory Board, this shall be indi-

cated separately in the Corporate Governance Recommenda-

tions Report. Duringthereportingyear,allofthemembershave

attendedmostorallofthemeetings.

CGC Article 3.3.2

A member of the supervisory council shall promptly inform

the chairman of the supervisory council and the management

board of any business offer related to the business activity of

the issuer made to the member of the supervisory council or a

person close or connected to the member of the supervisory

council. All conflicts of interests that have arisen during the

reporting year shall be disclosed in the Corporate Governance

Report along with their resolutions. MembersoftheSupervisory

Boardmustavoidanyconflictofinterestandfollowtherequire-

mentsofprohibitiononcompetition.TheSupervisoryBoard

andtheManagementBoardworkincloseco-operation,acting

accordingtotheArticlesofAssociationandinthebestinterests

ofthecompanyanditsshareholders.In2014noconflictsofinte-

restsoccurred.

CGC Article 5.3

Among other things, the issuer’s general strategic trends

approved by the Supervisory Board are available for sharehold-

ers on the issuer’s website. Thecompany’sManagementBoard

believesthatstrategyisabusinesssecretandshouldnotbe

madepublic.However,thegeneraltrendsandsignificanttopics

havebeenincludedintheManagementReport.

CGC Article 5.6

The issuer discloses the times and places of meetings with

analysts and of presentations and press conferences for ana-

lysts and investors or institutional investors on the issuer’s

CorporateGovernance


website. The issuer enables shareholders to participate in these

events and makes presentations available on its website. The

issuer shall not hold meetings with analysts or presentations for

investors immediately before the dates of disclosure of finan-

cial reporting. Thecompany’sactivitiesarealwaysbasedonthe

principleoffairtreatmentofshareholders.Mandatory,significant

andpricesensitiveinformationisfirstdisclosedinthesystemof

theTallinnStockExchangeandthenonthecompany’swebsite.

Inaddition,eachshareholderhastherighttorequestadditional

informationfromthecompanyifnecessaryandtoarrangemeet-

ings.Thecompany’sManagementBoarddoesnotconsiderit

importanttokeepatimeandagendascheduleofmeetingswith

differentshareholders.Thisruleappliestoallmeetings,including

thoseimmediatelyprecedingthedisclosureoffinancialreporting.

CGC Article 6.2

Electing the auditor and auditing the consolidated finacial state-

ments. ThegeneralmeetingoftheshareholdersofHarjuElekter

of3May2012electedanauditorforthecompanyfortheperiod

2012−2014;theelectedauditoristheauditingcompanyKPMG

BalticsOÜ.Informationontheauditorisavailableatthecompa-

ny’swebsiteontheInternet.Theauditorwillreceiveremuneration

accordingtoacontractandtheamountoftheremunerationwill

notbedisclosedunderanagreementbetweentheparties.Pur-

suanttotheguidelinesoftheFinancialSupervisionAuthorityfrom

24.9.2003–“Ontherotationoftheauditorsofcertainsubjectsof

statefinancialsupervision”–thecompanyarrangesrotationofthe

auditor,ensuringtheindependenceoftheauditorbychangingthe

executiveauditoratleastonceineveryfiveyears.

Governanceprinciplesandaddi-tionalinformationApubliclimitedcompany’sASHarjuElektergoverningbodiesare

theshareholders’generalmeeting,theSupervisoryandthe

ManagementBoards.

General meeting

Thegeneralmeetingisthecompany’shighestgoverningbody

whohavecompetenceforamendingtheArticlesofAssociation

andapprovingnewones,changingtheamountofsharecapital,

removalofmembersfromtheSupervisoryBoardandthetermi-

nationoftheactivitiesofthecompany,makingdecisionsonthe

division,mergingandtransformationofthecompanywiththepre-

conditionthatatleast2/3oftheshareholdersrepresentedatthe

generalmeetingapprovesuchdecisions.Generalmeetingsmay

beannualorextraordinary.Theannualgeneralmeetingconvenes

onceayearwithinsixmonthsaftertheendofthecompany’s

financialyear.Anextraordinarygeneralmeetingiscalledbythe

managementboardwhenthecompany’snetassetshavedeclined

belowthelevelrequiredbythelaworwhencallingofameetingis

demandedbythesupervisorycouncil,theauditor,orshareholders

whosevotingpowerrepresentsatleastonetenthofthecompa-

ny’ssharecapital.Ageneralmeetingmayadoptresolutionswhen

morethanhalfofthevotesrepresentedbysharesarepresent.The

setofshareholdersentitledtoparticipateinageneralmeetingis

determined7daysbeforeatthedateofthegeneralmeeting.

Theannualgeneralmeetingof2014washeldon8MayatKesk-

väljak12inKeila,Estonia.Atotalof65.57%ofthevotingstock

wererepresented.Thegeneralmeetingapprovedthe2013annual

CorporateGovernance


reportandprofitdistribution.Presentationsweremadebythe

chairmanofthemanagementboard,chairmanofthesupervisory

boardandauditor.

Supervisory Board

Thesupervisoryboardplanstheactivitiesofthecompany,orga-

nisesthemanagementofthecompanyandsupervisestheacti-

vitiesofthemanagementboard.Thesupervisoryboardmeets

accordingtoneedbutnotlessfrequentlythanonceeverythree

months.Ameetingofthesupervisoryboardhasaquorumwhen

morethanhalfofthemembersparticipate.In2014,thesupervi-

soryboardmetninetimes.Allmembersofthesupervisoryboard

attendedallormostofthemeetings.AccordingtotheArticles

ofAssociation,ASHarjuElekter’ssupervisoryboardhas3-5

members.Themembersareelectedbythegeneralmeetingfora

periodoffiveyears.

Inconnectionwiththeexpirationoftheauthorisationdeadlineof

theSupervisoryBoardofASHarjuElekter,theAGMassigneda

five-memberSupervisoryBoardforthenextfive-yearperiod,at

itsmeetingon3May2012.Thepresentmembersofboardare

EndelPalla(chairman),AinKabal,MadisTalgre,TriinuTombak

andAndresToome.In2014,thereweresomechangesinSuper-

visoryBoardofASHarjuElekter.MrMadisTalgre,amemberof

theSupervisoryBoardofASHarjuElekterpresentedtothecom-

panyanapplicationforhisresignationfromthepositionofAS

HarjuElekterSupervisoryBoardmember.AGMelectedonits8th

MaymeetingMrAareKirsmetothepositionofASHarjuElekter

SupervisoryBoardmember.Since8thofMay,theSupervisory

Boardhas5memberswiththefollowingmembership:EndelPalla

(ChairmanandR&DmanagerofASHarjuElekter)andmembers

AinKabal(HansaLawOffices),AareKirsme(Chairmanofthe

SupervisoryBoard,ASHarjuKEK),TriinuTombak(financialcon-

sultant)andAndresToome(consultant).

MrPallahasbeenworkinginASHarjuElektersince1969

(1985-1999asmanagingdirector)andkeepstodaycompa-

ny’sR&Dmanagerposition.MrKabalisHansaLawOfficeslegal

adviserandalawyer,whohaslong-termexperienceinadvising

Group’scompaniesonlegalissues.MrToome(chairmanofOÜ

Tradematic)complementstheBoardwithinvestmentexperience.

In2012wasappointedamemberoftheSupervisoryBoardTriinu

Tombak,toincludemorefinancialknowledgeandexperienceto

theBoard.MrKirsmeisachairmanofsupervisoryboardofAS

HarjuKEK,thebiggestshareholderofASHarjuElekter(hold-

ing32.0%ofthesharesofthecompanyon31.12.2014).Twoof

thefivemembersoftheSupervisoryBoard–TriinuTombakand

AndresToome-areindependent.TheGroupdoesnotgivethe

membersoftheSupervisoryBoardanybenefitsrelatedtopen-

sion,morethanprovidedbythelaw.At31December2014,the

membersoftheSupervisoryBoardownedinaccordancewith

theirdirectandindirectownershipstotally8.4%(2013:7.3%)ofAS

HarjuElektershares(Note23).

Management Board

Themanagementboardisagoverningbodywhichrepresents

andmanagesthecompanyinitsdailyactivityinaccordancewith

thelawandtheArticlesofAssociation.TheManagementBoard

hastoactinthebesteconomicinterestsofthecompany.Accor-

dingtotheArticlesofAssociation,HarjuElekter’sManagement

Boardmayhave1-5memberswhoareelectedbytheSupervi-

soryBoardforaperiodofthreeyears.TheSupervisoryBoard

appointalsothechairmanandthemembersaswellasremovea

memberoftheManagementBoard.EverymemberoftheMan-

agementBoardmayrepresentthecompanyinalllegalacts.

Thecompanyhasaone-memberManagementBoard.Incon-

nectionwiththeexpirationoftheauthorisationdeadlineofthe

CorporateGovernance


ManagementBoardofASHarjuElekter,atitsmeetingon5May

2014theSupervisoryBoardextendedthecontractwithAndres

Allikmäe,theChairmanoftheManagementBoardforthenext

three-yearperiod.ThecompetenceandauthorityoftheManage-

mentBoardarelistedintheArticlesofAssociationandthereare

nospecialitiesnoragreementsconcludedwhichstateotherwise.

TheeverydaybusinessactivitiesoftheGrouparemanagedbythe

ManagingDirector/CEO.OutsideofEstoniacompliancewithgood

corporategovernanceisensuredbythelocalmanagementsof

thecompanies.

At31December2014,themembersoftheManagementBoard

ownedinaccordancewiththeirdirectandindirectownerships

totally1.15%ofASHarjuElektershares(Note23).

Morespecificinformationabouttheeducationandcareerofthe

membersofthemanagementandsupervisoryboards,aswellas

theirmembershipinthemanagementbodiesofcompaniesand

theirshareholdings,havebeenpublishedonthehomepageof

thecompanyatwww.harjuelekter.ee.

Additional management bodies and special committees

Thenecessaryproceduresareregulatedbyrulesandtheneedfor

additionalmanagementbodieshasnotoccurred.Forbetterrisk

managementoftheGroupaninternalauditorhasbeenestablished

whichregularlyreportstothemanagementoftheGroup.In2010

theSupervisoryBoardofASHarjuElekterfollowingtherelevant

requirementprovidedforbytheAuthorisedPublicAccountants

ActformedtheAuditCommitteeofthecompany.TheAuditCom-

mitteehasthefollowingtasks:observeandanalysetheprocess-

ingoffinancialinformation;theefficiencyofriskmanagementand

internalaudit;theprocessofauditcontrolofconsolidatedfinan-

cialstatements;theindependenceoftheauditcompanyandthe

auditorwhorepresentsthefirmofauditorsonthebasisoflaw;as

wellastosubmitproposalsandrecommendationstotheSupervi-

soryBoardinissuesprovidedbylaw.In2012,themembersofthe

SupervisoryBoardofASHarjuElekter–TriinuTombakandAndres

Toome–wereappointedasmembersoftheCommittee.

Information management

AsapubliclytradedcompanyASHarjuElekterfollowstheprinci-

plesofopennessandequaltreatmentofinvestors.Theinforma-

tionrequestedbytherulesandregulationsofthestockexchange

ispublishedregularlyontheduedates.ASHarjuElekterthere-

forefollowstheprincipleofnotpublishingestimatesbutcommu-

nicatesandcommentsonlyinformationconcerningeventswhich

haveactuallyhappened.

InordertokeepinvestorsandthepublicinformedASHarju

Elekteradministersahomepagewhichincludesallstock

exchangenotices,businessreportsandanoverviewofthe

company’sbackground,productsandotherimportantissues.

AllsubsidiariesoftheGroupalsohavehomepages.

Auditors

Accordingtothedecisionofthegeneralmeetingoftheshare-

holders(3.5.2012)theauditsofASHarjuElekterfortheyears

2012–2014arecarriedoutbyKPMGBalticsOÜ.Auditsinsub-

sidiariesoutsideofEstoniaarecarriedoutbyKPMGBalticsUAB

(2013:BaltijosAuditasUAB)inLithuaniaandKPMGOyinFin-

land.In2014,therewasnoneedtoconductanauditinSwedish

subsidiary;in2013theauditarecarriedoutbyAlliansRevision&

RedovisningAB.

CorporateGovernance


OCIAL RESPONSIBILITY AND CHARITYSocialResponsibilityReport2014Theenvironmentarounduscreates,aswellaslimits,ouroppor-

tunitiestoact.Duringitsalmosthalf-centuryhistoryofoperation

ASHarjuElekterhasbecomeoneofthelargestandmostsuc-

cessfulcompaniesinKeilaandintheregionarounditandwefeel

wehavetotakeresponsibilityforthegeneraldevelopmentofthe

society,aswellasthewellbeingofthelocalcommunity.Forus,

socialresponsibilitymeansdailyconsiderationshowtocontribute

tomakinglifebetterinEstonia.

Wehavealwayssupportedfinanciallyandinotherwaysmany

initiativesthatwestronglybelievein.Wevaluehighlythelong-

termco-operationthatmakesthesupportmoreefficient.We

continuesupportinggoodideasalsointhefuture.Overtheyears

fourmajorareasofsponsorshiphaveevolvedwithintheGroup.

Bearing of social responsibility

ASHarjuElekterasalocallarge-scaleenterpriseisconsciousof

acertainresponsibilityforthegeneraldevelopmentoftheregion

andthewell-beingofthelocalcommunityfocusingmainlyonchil-

drenandyouthbysupportingtheireducationaleffortsandspen-

dingtheirleisuretimeingoodsurroundings.Therefore,theGroup

hasconcludedlong-termsponsorshipagreementswiththeKeila

Schoolaswellaskindergartens,sportandhobbyclubsinKeila.

Supporting the education of engineers in Estonia

Thecompanyworksincloseco-operationwithEstonianeduca-

tionalinstitutionsinordertopromoteanddeveloptheeducating

ofengineers.ASHarjuElekterisagoldensponsorofTallinnTech-

nicalUniversitygrantingeveryyearuptothreescholarshipsfor

Bachelor’saswellasMaster’sdegreestudentsinthefieldofelec-

tricityandmechanics.TheGroupalsocarriesoutseveralco-

operationprogramswiththeTallinnVocationalEducationCentre,

TallinnPolytechnicSchoolandtheTallinnConstructionSchool.

Finnishsubsidiaryhadacloseco-operationwithSatakuntaUni-

versityofAppliedSciencesandTampereTechnicalUniversity.


Supporting and inspiring young sportsmen

Thecompanyhas,aboveall,supportedyouthsports-focusing

onlong-termandconstantsponsorshipandtakingintoaccount

thepopularityofthesports.Forseveralyearsthecompanyhas

sponsoredtheyoungskiersandathletesofNordiccountries

combinedwiththeEstonianSkiAssociation.Asfromtheseason

2008/2009thecompanyhasalsosupportedtheskiers,AlgoKärp

andKeinEinaste.TheyouthprojectsoftheEstonianSkiAssocia-

tionarealsoaimedatthefuturefocusingontheWinterOlympics

inSochiin2014.

Promoting recreational sport among the employees

Inco-operationwiththeHarjuKEKAthleticClubwedoeverything

wecantofacilitateanactiveandsportinglifestyleforouremplo-

yees.Healthyworkers,fullofenergy,representapricelessvalue

tothecompany.

Totalamountofdifferentsupportprogrammesin2014amounted

to24.4(2013:13.7)thousandeuros.

SocialResponsibilityandCharity


ENDEL PALLA(19.06.1941)

Chairman of the Supervisory Board

Education: UniversityofTartu,lawyer

Career: 1985–1989ForensicScienceLaboratory,seniorexpert1990–1992EKEInternational,lawyer/vicemanager1993–2001BCLOLawOffices,manager2001–2003SorainenLawOffices,legaladvisor2004–2006HansaLawOffices,partner2011–2013ViruKeemiaGroupAS,headoflegaldept2014–HansaLawOffices,legaladvisor

Participation in the management bodies of business organisations:Manager:Kabal&PartnersOÜ,InvestkonsultOÜ.

Social activities:HarjuCountyEnterpreneurshipandDevelopmentConsultancy,memberoftheCouncil

Ain Kabal owns 10HarjuElektershares.Hehasdirectparticipationinsharecapital0.00%.Hedoesn’thaveindirectholdings.

nformation About the Supervisory and Management Boards

Education: TallinnUniversityofTechnology(TUT),engineer

Career: 1969–1983HarjuKEK,productionmanager1983–1999HarjuElekter,included1991–1999ASHarjuElekterCEO/ChoftheManagementBoard,since1999ChoftheSupervisoryBoardofASHarjuElekter

Participation in the management bodies of business organisations:Ch of the Supervisory Board:ASHarjuElekterElektrotehnika,ASHarjuElekterTeletehnika.Member of the Supervisory Board:ASHarjuKEK,LaagriVara,ASKMV,AS,ASEntek.Ch of the Management Board:SatmaticOy.Member of the Management Board:RifasUAB,FinnkumuOy.

Social activities:2010–EstonianChamberofCommerceandIndustry,memberoftheSupervisoryBoard1995–TallinnDirectorsClub,since2011memberoftheboard

Endel Palla owns1,100,000ofHarjuElektershares.Hehasdirectparticipation6.32%andindirectparticipation0.36%.

AARE KIRSME

(8.11.1975)

Member of the Supervisory Board

AIN KABAL (10.06.1962)


Education:UTLawInstitute,FacultyofLaw

Career: 1998–1999EstonianLandBoard,lawyer2000–2013ASHarjuKEK,legalconsultant2002–2011ASDevest,lawyer2012–ASHarjuKEK,ChoftheSupervisoryBoard

Aare Kirsme owns228,250ofHarjuElektershares.Hehasdirectparticipation1.31%.Hedoesn’thaveindirectholdings.


TRIINU TOMBAK(7.01.1971)


Education: TallinnUniversityofTechnology(TUT),economics

Career: 1992–1999EstonianBank,EstonianInvestmentBank,OptivaBankandSampoBankEstonia,headofinvestmentdept.1999–OÜTradematic,managerParticipation in the management bodies of business organisations:Member of the Supervisory Board:ASTallinnaOlümpiapurjespordikeskus.Member of the Management Board: OÜTradematic,OÜNorberGrupp,BeebimaailmGruppOÜ,OÜM50,HermesWorldwideOÜ.Andres Toome owns 10,000HarjuElektershares.Hehasdirectparticipation0.06%andindirectparticipation0.29%.

Education: TallinnUniversityofTechnology(TUT),economics

Career: 1993–1998EstonianInvestmentBank,OptivaBank.Loandept.,investmentdept.2001–2009WorldBank.Publishingdept.,consultant,since2006salesmanagerofonlinedatabasesande-Library.2014−THConsultingOÜ,manager

Social activities:2013–PraxisCenterforPolicyStudies,memberoftheSupervisoryBoard,since2014chairman

Triinu Tombak owns10,000ofHarjuElektershares.Shehasdirectparticipation0.06%.Shedoesn’thaveindirectholdings.

ANDRES TOOME(9.01.1972)


ANDRES ALLIKMÄE(7.02.1957)

Managing Director/CEO

Education: TallinnUniversityofTechnology(TUT),engineer

Career: 1982–1991HarjuElekter,engineerandheadofdepartment1991–1999ManagingdirectorofASHarjuElekterCableHarnessesFactory1999–MemberoftheBoardandCEOofASHarjuElekter

Participation in the management bodies of business organisations:Member of the Supervisory Board:ASHarjuElekterElektrotehnika,ASHarjuElekterTeletehnikaMember of the Management Board:SatmaticOy,RifasUAB,HarjuElekterAB,FinnkumuOy.

Social activities:2007–EstonianAssociationofElectricalEnterprises(EAEE),VicepresidentoftheManagementBoard2010–TallinnIndustrialEducationCentre,memberoftheSupervisoryBoardAndres Allikmäe owns 200000ofHarjuElektershares.Hehasdirectparticipation1.15%.Hedoesn’thaveindirectholdings.

InformationAbouttheSupervisoryandManagementBoards


ASHARJUELEKTER

Paldiskistr31

76606Keila,ESTONIA

Tel+3726747400

[email protected]

www.harjuelekter.ee

Pleasefindtheyear2014auditedannualreportofASHarjuElekterherehttp://www.harjuelekter.ee/sites/default/files/public/pdfid/HE_annualreport2014_eng.pdf

Documents

ONTENTS - Harju Elekter€¦ · in 2014; this year’s growth is expected to be 3.0%. The whole year was strongly affected and made unstable by the Russian- Ukrainian conflict, along