AS Tallinna Sadam (TSM1T) Earnings Call Transcript & Summary

I'm in charge of the group, and I would like to introduce and give the floor to our new colleague, Angelika Annus, leading the Investor Relations. And please, Angelika.

Good morning, dear investors, listeners. I'm very glad to be part of Tallinna Sadam team. I have been working here for 2 months, and I'm really looking forward and encourage you to contact me for any questions, any matters. You can write to me either [email protected] or contact me directly. Thank you very much.

Thank you, Angelika, and welcome again. And then we will continue with Andrus, our CFO. And then let's first cover the results and main events from Q2 and then, of course, 6-month results. We have had quite active Q2. But the most important is that our cargo volume stabilized. And now the biggest group is ro-ro that is slightly increasing, also container shows the growth. Therefore, we strongly believe that we have the stable cargo now and step by step, we're managing to grow that. Also important event we had in Q2, we signed a contract with new shipping line X-press Feeder in Muuga, and they started. Remarkable is that their new ship is running on methanol. It's quite a big containership, and it now goes regularly to Muuga. Also in Q2, we win the tender in very business for the next period. Of course, it doesn't give the effect just now, but it's very important for the future of our company for the group. This period ends in autumn '26, but now we are within the next period. Also we managed to sign the longer-term contract for 5 years with Baffinland, and that's also a positive that they trust us, and we're preparing for the new job. Also we signed another contract for, let's call it, summer work with BP. Their period started earlier, but it was shorter due to the technical problems, but we're really working on that, and we're preparing now for the Baffinland work starting from September. And then we signed also additional agreement with state for ferry Regula in summer period. And we're working with cost. We have another cost saving program. We described our main processes already last year and this year, we're now getting the effects and the number of employees decreased by 6%. We had ordinary AGM. We paid out our promised dividends. Then we signed a loan agreement with Swedbank just for financing our big investment in [ Paldiski ]. We decided to prolong contracts with 2 members in TS Shipping and TS Laevad. Then there are 2 court cases. And we have had a dispute with SLK and Väinamere Liinid. Now we've got a positive, let's call it, final decision. But there is ongoing court case with members -- all members or former members from our company. Trends in business segments. In Passengers, we see continuous growth, but it's very important, drive mainly by Helsingi line, also have seen good numbers in cruise business, I mean, the passenger numbers. And important is that we have increased in passenger vessel costs also. Cargo, trend, we -- as we mentioned, we have had a stable or stabilization period due to the decrease in vessel calls. There is a slight decline in revenues, but again, important the growth in ro-ro and containers. Ferry business is very stable. And Botnica or Other segment shows increase in Q2 because we started the contract or chartering with BP earlier. Here are the numbers from Q2. As I mentioned, the growth is there. In Cargo, still liquid bulk decreases and ro-ro and containers are on a growth phase. Shipping volumes on [ ferry ] side, very stable in 6 months with also a small increase in numbers of passengers and also in vehicles. And yes, in Botnica or on the Other segment, we started the summer season earlier than last year. Therefore, we see the quite big increase in charter days and in volume. Future. We believe that passenger business will recover. And in shorter period, I mean, this year, we believe, in slight growth still. On ro-ro and container lines, we believe also that there is interest to serve better Scandinavia import, export. Therefore, we continue discussions and negotiations with some new lines. And there is interest in offshore wind farms base harbor. We made offers to 3 tenders outside of Estonia. Therefore, we believe there is interest. And what is important that also the development goes well. And hopefully, the new harbor or new key will be ready by the end of next year. There are preparation for real estate development and even this autumn and at the end of the year shows some news on that. And hopefully, we will start then next year with tenders for developers, for the investors. And we're preparing for reducing the state shareholding. There are no big news. There is just now -- we continue with negotiations with the state. But of course, our attitude is very positive to have more interests towards institutional investors, [indiscernible] or whatever model there will be. And we continue with efficiency. Yes. Please, Margus. Sorry, Andrus.

Thank you, Valdo. So these are the financial results for the second quarter and 6-month period. The results were strongly impacted by the good results from our icebreaker Botnica. Botnica was chartered out for extra 25 days in the second quarter of this year. The summer charter with PP started already in the middle of May, and this also contributed to the growth of revenue. So the revenue increase was 10%, and the revenue was EUR 31.6 million, and the growth was almost EUR 3 million. Also Ferry segment supported the growth here as we made more trips. And also we had positive impact from indexation. There was a slight negative impact from cargo ship calls. We had fewer calls. Therefore, we had less vessel charges from Cargo harbors. And also, we had less cruise ship calls, but it was in some extent, balanced by the higher number of [ roper ] ship calls and all the other revenue streams expect the cargo charges increased. Good results were from the sale of electricity, also rental revenues were quite high. So all the other revenue streams supported the growth here in the second quarter. Adjusted EBITDA increased by 27% and amounted to EUR 14.9 million. Here, the growth in euros is even higher than on revenue level. The growth was EUR 3.2 million. To explain that, the efficiency measures has already given the results, and we had lower repair cost of noncurrent assets, especially for the icebreaker Botnica year, we have docking works, and in connection with that, we made also regular repair works, and also the Cargo segment -- Cargo Harbor segment and Ferry segment, there we had also lower repairment costs. Also the tax expenditures were lower because of the tax rate were lowered since the beginning of 2024. And personnel expenditures increased by 1%, but this is mainly in connection with the earlier start of summer charter of Botnica and this goes only to Shipping segments. All other segments reported decline in terms of personnel expenditures -- expenses. Adjusted EBITDA margin increased by 6.3 percentage points and amounted to 47%. Operating profit was almost EUR 9 million, and the growth there was 55%. Income tax was minus EUR 3.1 million. Despite we paid out the same amount dividends as last year in the second quarter, like we regularly do in the second quarter, that income tax increased. This year we had reduced the income tax -- last year, the income tax was reduced by reversal of deferred income tax. Last year, we received dividends from joint venture company Green Marine and this impacted the income tax as well. Profit for the period was EUR 4.1 million. Growth here was 200%. And we invested in the first quarter EUR 7.1 million. The main investment project is still the key construction in the Paldiski South Harbour to serve in the future offshore wind farms. This project is going by the [ lens ]. And in the second quarter, we also reconstructed the ramp in Old City Harbor to serve the ro-ro traffic and also made some investment to electricity, equipment and electricity supply and also IT investments. On a 6-month level, the growth ratios were a bit lower than in the second quarter. Just to remind, in the first quarter, the revenue was impacted by planned docking works of [ Eckerö Line ] by Finlandia, which impacted negatively the revenue. And in the Ferry segment, there were higher fuel costs because we had severe ice conditions in the first quarter, and this impacted the fuel consumption and fuel costs. And profit for the period for 6 months were EUR 9.3 million, and the growth was 31.5%. We invested during the first half of the year EUR 25 million. Like in the second quarter, the main project, the key construction in Paldiski South Harbour. And in the first quarter, we had already also the docking works for our ferry Tõll. These were planned docking works and nothing extraordinary there. So these are the results in segment terms. In the second quarter, revenue increased in the segment Other and in the Ferry segment, and there was a decline in the Cargo Harbors in terms of revenue. And in Passenger harbors, the revenue was flat year-on-year basis. In the segment Other, good results from Botnica activities and operations increased the revenue. Also we had less repairment -- repair costs and therefore, the segment Other reported very good results. In the Ferry segment, revenue increased due to the indexation. And in the second quarter, the [ EBITDA ] also increased, and this reflects the growth on revenue level. In Cargo harbors revenue decreased because of fewer vessel calls and also cargo charges decreased mainly because of the liquid bulk. But despite of that, we managed to increase the EBITDA. And here, we can bring out that our efficiency measures has given us -- have given us effect, and this was very positive. And in Passenger harbors, like already explained, we had fewer cruise ship calls, but at the same time, more [ robust ] vessel calls. And on EBITDA level, there was decreased because of higher repair costs of noncurrent assets. We made some reconstructions for the cruise keys [Audio Gap], which serve the cruise ships. So in the long run, we see that this is very necessary to keep the keys in good condition to serve the cruise ships because this is very lucrative and profitable business for us. On a 6-month period, trends or the figures is quite similar growth on revenue level in Ferry segment and in the segment Other and decline in Cargo segment and Passenger harbors. In the segment Other, the first quarter was similar as a year before. So the growth is attributable to the same -- second quarter. In the Ferry segment, revenue increased on a 6-month period, but EBITDA decreased because of the higher fuel costs. In Cargo harbors, here is the numbers similar as in the second quarter and the explanation is also similar, fewer vessel calls and less cargo, but we managed to keep costs under control, and therefore, the EBITDA increased. And in the segment -- in Passenger harbors, revenue decreased because of the [ Finlandia ], mainly the ship made less calls in the first quarter. And in the second quarter, we had more repair costs. On cash flow side, you see that cash from operating activities increased by EUR 2.7 million and amounted to EUR 25 million. So receipts from the sale of good and assets has increased. Cash used in investing activities reflects the high investment level and was minus EUR 22 million. Free cash flow EUR 2.7 million, and the decrease was minus EUR 15.6 million, which is attributable to higher investments. And cash used in financing activities was minus EUR 6.6 million, which is more positive than last year. Here, we can see the impact from the loan, which we signed a loan agreement, which we signed and draw in the -- already in May an amount of EUR 20 million. This is unsecured loan with a term of 3 years and mainly taking to finance our investment this year. Net cash flow was minus EUR 3.8 million. And net debt at the end of period increased by almost EUR 18 million because of the new loan agreement. And on financial position, you see that cash and bank accounts reflects the cash flow. Noncurrent assets has increased because of the investments and lowering effect from depreciation. Our [ first debt ] has increased because of the new loan agreement. At the same time, we have made some loan repayments for the loans which we have taken earlier. And equity was impacted by the dividend payout and profit for the period. But with that, we have -- we will conclude the presentation. There are some extra slides, like always, about revenue generation and EBITDA generation. The presentation is uploaded. And if you have any deeper interest, you can browse them, these slides later. And now we will make short break. You can submit questions, and we'll be back in a couple of minutes.

Welcome back. And we have 2 questions sent upfront. So the questions I will answer up first. The first question is about the article, which was published last week, and it was about departure of large institutional investors from Tallinn Stock Exchange. In this context, has Tallinna Sadam noticed any interest or intention from large institutional investors to sell their shares? We don't -- we haven't seen any interest from institutional investors that they would exit from Port of Tallinn or from Tallinn Stock Exchange. So in connection with our company, so no further comment on that. Also the turnover on the stock exchange with stock of -- with the shares of Port of Tallinn didn't show that there was some panic or some interest to sell. So we don't have any information or haven't heard anything that some institutional investors would like to exit. And the second question is, what stage is the Climate Ministry's plan to reduce its stake in the company? Like already explained during the slides, this process is under preparation. We are -- the Ministry of Finance and Ministry of Climate are making the preparations. And like commented already in May, most probably at the earliest, the reduction of the state shares will take place in the second half of 2025 or 2026. But of course, we have to follow the market sentiment and developments on the stock exchange. But currently, we don't have any additional information regarding this. Yes. So it seems that we don't have any additional questions. So thank you for watching, and see you next time. Thank you.

Thank you.