HARJU ELEKTER

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO FINANCIAL RESULTS, 9M 2001



Sales and Revenues

The consolidated net sales of Harju Elekter in the January-September period

totalled 135.6 (2000 9M: 146.1) million kroons, which is 92.8% of the level of

the previous year. Thereby, the volume of the parent company remained almost at

the level of the first 9 months of 2000, amounting to 98.7% thereof.

A significate backslide on the export markets was caused by the overall

declining demand in the vehicle and electronics industries worldwide. Production

of cable harnesses and wiring systems decreased by 21% and the production and

sales of telecommunications services decreased by 57%. Total exports were 28%

smaller than in the same period in the previous year. The exports of the 2001 9M

were 55.0 (2000 9M: 76.1) million kroons, i.e. 40.6% (2000 9M: 52.1%) of the

consolidated net sales, remaining at the level of H1 at the end of the reporting

period (40.6%). Orders from new customers have reduced the decrease of the

export volume. In Q3, deliveries of electrical distribution equipment to the

Finnish market increased by over 2.5 million kroons compared to Q2 of the

reporting year. The new markets added in 2001 were the Netherlands, the USA and

Russia.

Contrary to the decrease of exports and sales of cable harnesses and

telecommunications products, the sales in the domestic market increased by 15%,

an increase took place in the production and sales of electrical equipment

(+5.2%) and sheet metal (+17.5%) compared with the same period of the previous

year. Strong growth continued in the commerce and intermediation activities

(+34.1%).



Profit

The Group's operating profit for the 9 months was 9.5 (2000 9M: 13.5) million

kroons. The main reason for the decrease of the operating profit is, despite the

relatively stable activity and other business revenues/expenses (2001 9M: 17.4

and 2000 9M: 16.3 million kroons), the reduction of sales revenues caused by the

export volumes. The total profit margin remains at 20% (2001 9M: 19.8%; 2000 9M:

20.4%).

The Group's profitability indicator of the 9 months in 2001 settled at 7.0%

(2000 9M: 9.2%), which is 0.5 percent better than the same indicator of the H1

and 2.6% better than the same indicator of Q2 of 2001. The profitability

indicator of Q3 of 2001 was 8.0% (Q3 of 2000: 12.8%). Lower profitability of the

parent company in Q1 that was caused by the declining export volumes, was offset

by means of cost control measures and the profitability settled at 8.1% as

compared to 4.3% in Q1. Thus, the return of sales ratio has improved quarter by

quarter.

Despite the fact that the income from the sale of stocks decreased by 0.4

million kroons and the income from dividends decreased by 0.7 million kroons,

the income from the financial activities practically remained at the same level

(2001 9M: 8.2 million kroons; 2000 9M: 8.9 million kroons). The consolidated

profit of the affiliated companies, Keila Kaabel and Saajos Balti, amounted to

3.4 (2000 9M: 2.9) million kroons, which is an increased of 15.6%.

In total, the net profit of the Group for the 9 months in 2001 was 17.7 (2000

9M: 22.4) million kroons. The net profit margin was 13.1% (2000 9M: 15.3%). EPS

was 3.28 (2000 9M: 4.14) kroons.



Investments and capital employed

During the reporting period, new investments in tangible assets in the Group

amounted to 6.8 (2000 9M: 26.3) million kroons. In Q3, Eltek, a 100-% subsidiary

of Harju Elekter, launched production of fiber-optic cables and accessories.

Harju Elekter invested almost 1 million kroons in the construction of production

premises that would meet the technological requirements. The subsidiary invested

3.5 million kroons in the high-tech equipment. In June 2001, Harju Elekter

increased the share capital of the subsidiary by 1 million kroons.



To purchase technological equipment, two new leasing contracts were concluded in

Q3. The price of the equipment purchased by leasing was 1.7 million kroons.

During the accounting period  7.2 (2000 9M: 6.1) million kroons were spent on

the repayment of long-term loan and capital lease principal sums. Dividend

payments to the owners for the year 2000 amounted to 6.5 (2000 9M:  5.4) million

kroons, which payment did not incur any income tax liabilities on Harju Elekter.



Balance sheet

The volume of the consolidated balance sheet amounted to 171.9 million kroons at

the end of September 2001. The balance sheet total increased by 4.0% in the 9

months. The Group has a strong capitalization base. As of the balance date, the

equity accounted for 71.2% (2000 9M: 63.2%), available capital 36.0% (H1 2000:

28.5%), dept liabilities 15.9% (2000 9M: 21.1%) and fixed assets 68.0% (2000 9M:

65.7%) of the assets. As of the balance date, the Group had in total 27.3

million kroons of debt liabilities, of which 19.3 million kroons are of long-

term nature. The debts to credit institutions have decreased by 1.8 million

kroons over 9 months.



Personnel

As of the balance date 30.09.01, 659 persons were working in the Group. With the

aim to reduce labour costs, employment contracts were terminated with 144

employees, incl. 52 employees whose contract had expired.







Andres Allikm„e

Chariman of the Management Board

67 47 400





Lembit Libe

economic agent

67 47 412