TTS (Transport Trade Services) S.A. (TTS) Earnings Call Transcript & Summary

Okay. So hello, everyone, and welcome to our video conference regarding the debate of the first quarter (sic) [ half ] results, 2025. Before we move on to the questions side and the detailed side, I'm going to conduct a brief highlight of the main elements of the report so that we can have a discussion basis for our debate, and then we are going to have -- we are going to show you a brief presentation.

Is it all right?

No, I just have to share it. It's not shared yet. So please let me know when I can begin the presentation. Okay. All done. So please let me know when I can begin the presentation.

We can begin.

Okay. Thank you. So first half of the year entail the difficult economic climate. We saw it in the first quarter, but it continued in the second quarter due to volatility of commercial flows and a huge pressure in regards of tariffs. Still the second quarter, the best quarter in the past 12 months of the group was a visible inflection point. So moving towards the general presentation, what we witnessed in the quarter. So we had unfavorable market conditions, continuous pressure on tariffs, especially in terms of transport. And good groups were -- became smaller and smaller. So everything is crumbling in this regard -- goods categories. Moreover, April 2025. And our estimation was one of the weakest months in terms of port operation in Constanta, we had very low volumes there were no imports and exports. At the same time, the ports on the Danube suffered up until May. In June, things started to gain a bit of motion. But the need for port operation service was low. And there were difficult navigation conditions on the Danube, so low water level. And in our point of view, this lead to higher cost, higher workload overall. There is a difference when transportation is used by navigation conditions. From our perspective, however, if we analyze good flows and operations, structural changes related to goods and operations are starting to yield results and work in our favor. On one hand, port operation and mineral product volumes accelerated in the second quarter of 2025. We had new contracts, a more offensive commercial positioning and the mineral products and chemical product flows recorded growth compared to Q1 2024 and Q2 2024. So we are witnessing a positive evolution as compared to multiple quarters in the past. This is very important for us. Another important aspect, optimization of the cost structure and reduction of expenses that yielded the results. This can be seen in our cost position versus expense position. And it grants us a great positioning for the second half -- for the second quarter because these results are persistent. They will not change easily. And what concerns investments we continue the investments, but there was a major difference. They are focused strictly on areas where we have structural need to conduct investments, expansion of the Canopus terminal and modernizations at the level of Decirom without neglecting the fleet, but the fleet witnessed maintenance investments, no new capacities. So 2025 is a transitional year for us, which is pretty obvious. We had a first quarter that was based on adjustment, adjustments that were started in 2024. And the second half of the year has a potential for a comeback. So right now, we have rethought our cost base. We have a favorable mix of activities and goods for the second half of the year and a better operational momentum. Moving now towards results for -- without reading the tables, they are included in the report. So you can find them in the report. The results in the second quarter are the best results at the group level from the past 12 months of activity. EBITDA is growing as compared to the first quarter in light of a slightly lower turnover, still, EBITDA grew. The operational loss has been diminished significantly, it was under RON 1 million and net loss of around RON 4 million, considerably lower as compared to the first quarter. In terms of margins, we maintain our margin at 14.6% and the overall half year, 11.7%. So you can also witness here a positive evolution in terms of the -- on a quarter by quarter basis, that was in relation to consolidated results. At individual level, so the margins are maintaining a good level, Q2 8.8% overall half year 9.1% and profit margins, 5.8%, basically equal. Quarter to half year. What you can notice here is that they are lower than at the group level. And this shows an optimization of the structure of contracts and revenues at group level. So difficult times entail the fact that everybody has to limit themselves. The contracts are as is, but between ourselves, we can adjust things. Financial position is still solid. Not a lot of things to add to this chapter. The only thing maybe worth mentioning the diminishing of net asset at TTS level, stems from the dividend that was paid out that was granted via the Annual Shareholders Meeting. Moving forward, so the overall expense landscape. What I mentioned beforehand, you can see here that there are significant decreases quarter-by-quarter with small exceptions. Actually, if we analyze, there is only one exception, so to say, the expense relating to reparations -- repairs on port operations, it's 5% plus. It's a very low increase. Otherwise, we achieved reductions -- decrease in all categories. So here, you can witness the efforts that we started at the end of Q3 last year when things were already kind of clear, the market was already showing weakness signs. So that's why we started in September to carry out all these measures, and now we can see the results. And what concerns the market, we maintain -- in terms of river transport, we maintain the level that we had in Q1, 31%. Unfortunately, we cannot give you the margins for the Constanta port. The public data that we have made available are not okay quality wise for us to conduct credible estimations. Of course, if anything changes in the reporting of Constanta port, we will let you know, but Constanta as compared to Canal, which gives out better data. In Constanta, we can only rely on year-end data. That is the situation. We will try maybe to bring out an estimate for a 9-month period, we don't know if we will succeed. In terms of good flows, we believe that the most spectacular quarterly evolution was in the category of mineral products. They increased continuously starting with Q4. So this is the third continuous growth quarter. And the simple explanation would be that you can witness here are contracting flows that were supported by the structure we have in Constanta. So everything was well integrated and this has yielded such a positive development. Without Decirom, we probably wouldn't have been able to access good flows that are reflected in this positive chart. Moving forward. Chemical products showed growing multiannual development. It's similar at quarterly level, minus the decrease from the first quarter. The second quarter is always affected by seasonality. If you can see it's above the second quarter of 2024. And if the first quarter would have been included, you would have seen a significant difference between 2024 and 2025. The weakest development was in relation to agricultural products, as we have mentioned before in the past, so much more volatility as compared to other categories. And at the end of 2024 or the agricultural year 2024-2025, we went through weak crops in 2024, another aspect. As of Q4, the flows basically drained, nobody was able to sell anymore. The farmers had all of their products in storage because the international markets had such low prices. Of course, the seasonality aspect -- the first half is always weaker than the second half. And here in this chart, you can see the effect of the disappearance of grains that came via Ukrainian export. And the second half in the Q2 2024, this was the last flow. With significant flows, agricultural volumes were at 1.4 million tons. In Q2 2025, they have decreased to almost 0.6 million. Overall, the aggregated volume is showing a slight decrease in Q1. This is reflected in the turnover, but it's still increasing as compared to Q4. What we see right now is a diminishing overall. If we compare Q2 2025 with Q2 2024, and in parallel, the difference between Q1 2025, Q1, 2024, we can see that there is a decrease. So Q2 2025 is much closer to Q2 2024 as compared to the difference between Q1 2025 and Q1 2024. This recovery dynamic was a bit more highlighted in terms of volumes of operated imports. There was a decrease in terms of volume of almost 0.9 million tons. So 86% of this value was concentrated in Q1. So Q2 was actually -- went better than expected, although April was a very bad month overall. We're looking to the estimate for 2025. Our estimate, of course, the conditions are in the report and you need to read it alongside for the turnover of the consolidated is RON 685 million and RON 725 million for 2025. As the restaurants, 93% to 99% from the 2024 realized revenues. For the EBITDA, our estimate is that it will be between RON 120 million and RON 140 million. 88% to 99.6% of the 2024 EBITDA. At the individual level, the turnover is estimated between RON 430 million and RON 460 million. 88 -- 90.6% to 95% of the '24 figures and EBITDA between RON 56 million and RON 62 million. 89% of the 2024 realized EBITDA. And the profile in the second semester, as is in our estimate seems to be better than the first semester of 2025 and the one from 2024. But the annual results will be very close to 2024, but below these. And of course, the last chapter, some -- talking about the evolution in the second semester. We expect with regards to the mineral products, it's one of the most important products. We estimate demand to stay here, but we may see increases at the end of the year. As winter, of course, the coal demand will increase. Looking at the steel products will continue to be very low, the demand. But here, we can also see a slight increase of the flows that are transported and operated by the group. For the chemical products, the evolution will be normal and seasonal. In the third quarter, the increases will be important in the agricultural products. But starting with Q4, we will see the market being blocked due to the international pricing. Looking at the river transport, it will continually be affected by the excess demand, but also by the unfavorable navigational conditions, we have very low levels of the Danube, and the conditions were very, very bad. From the port operating, it would be less affected by these conditions, mainly due to our presence in the Constanta port. We see a gradual increase based on the increase in the operating speed. And at least in the third quarter, we might see -- as we see the new harvest, an improvement to the Danube ports in terms of transport. So this is -- these were our results based on the report. Going forward, we can switch to the questions. Please ask your questions.

Okay. We have some questions that we have received prior to the call. From the GSM, we have a question from Mr. Wang Chan. How do you see the future of the TTS and the development of other business lines?

Hello. I will start with the second part. Talking about the vertical part, we're analyzing. We did not identify opportunities to develop. But we cannot state that we are not interested in this topic. Talking about the strategy, so the new Board of Directors, we are trying to build a committee, a large one with some managers and directors that will highlight in a certain period of time, a strategy of develop on short, medium term. And we will have a conclusion. So if we look at other business directions will be a topic to be addressed. How do we see the future of TTS? Of course, it depends on the completions of this research. But what we can say now, talking about the prospectus. In 2021 -- from 2021 a lot has happened in a lot of our directions. But the main pillars remain the same. We have an organic growth via the investments that we are making, Canopus is part of it. And it will be finished next year. It's a very important investment for the whole group to increase the capacity of development and operating by 60%, which is very much. We have the investments ongoing in Decirom in assets and increase, and we also have the storage. We are upgrading with technologies, we can already see, of course, Decirom becomes visible especially when looking at the amount of commodities transport and of the integration in the group operating system, so organic growth. And these are the two examples, the most important ones. But this is going in the overall activity, Giurgiu, we invested there, with the European funds. Of course, in the vertical environment was also finished, and we will be able to get a new land and finish other investments that are required to start the activity in Giurgiu. We have some grains transport, which is -- it's not quite at par. So we will be looking at investments in optimizing a reorganization. This is also a part of the organic growth. Of course, integration with the Constanta, Danube ports. And there are other topics that have been part of them as some of the investments took place, some did not, some are pending in the mineral, some are working already. This is why we see this growth in the mineral side when compared to last year, there are several, we hope that we'll begin to start operating by the end of this year. Also on the trade side, we need to consolidate and we are consolidating in the chemicals production, which hopefully may big -- small jump in the chemicals side.

Mr. Petru told you, on the grain side, it's unpredictable. We're trying to adapt to the market conditions. So this is on the trade side, on the commercial side. And as mentioned in the prospectus the M&A part, we had some opportunities. We had even recently some invitations to analyze some projects, none of them attracted us enough to act on. But we're looking at the market, and we are willing to invest in something new. If it fits our structure and our future structure. Only to add an observation about the strategic committee, we need to mention the idea came from Mr. Stefanut, if I remember, it was one of the first things he noticed and I'm closing this parenthesis as he is the Chairman of this committee. But the first thing I would like to notice, it is a committee that is mainly executives. So there are 3 members with executive attributions, Mircea Mihailescu as a development director, with 2 other managers in the system, [indiscernible] from [indiscernible]. And Mr. [indiscernible] that manages the operating business in Constanta and he has great professional history. I don't remember how it must Mr. [indiscernible] was part of the company when we bought that part. So there's high weighting giving to -- given to the executive part, because we need to look at the group as a whole. Mr. Stanciu, which is also a member of the BoD. And Mr. [indiscernible], who is experienced in [indiscernible], he was here, he was the Chairman of the BoD. And of course, from somebody who comes from outside the business sees better, some things that are not really visible for us as we are fighting day-by-day. A new, fresh perspective it helps a lot because it tackles an issue that we had throughout history. How do you harmonize 14 companies with 14 BoDs, with 14 management that are legally autonomous, so they make decisions in the interest of those companies and then they are considering the group. So a systematic integral approach by such a committing, it's advisory, of course, it will issue recommendations and it will assist the BoD of the TTS. It will help -- we estimate to have a better integration at the strategic level of the group.

And we also have a series of questions received via e-mail from Mr. [indiscernible]. What were the changes of port operation prices in the last 12 months? It's complicated to mention, to estimate. So basically, the prices decreased. The direct and indirect impact of Ukrainian goods has disappeared. We're not only talking about the grains exclusively. We also had chemical products, oil products. So basically, overall, the prices have decreased. So how has the price for river transport changed in the last 24 months? There were a lot of fluctuations in terms of price in this period as compared to previous periods. In essence, the effect was generated by the Ukrainian situation. It was an avalanche of good categories on the market. And of course, there was a higher level requirement in terms of fleet. And then the goods disappeared. And the change was reflected as abruptly as you know. So the prices started to increase at the beginning of the year, but then they started to decrease again. So stock exchange of port operator is not -- it doesn't exist. They are private enterprises, and they have a long-term plans and activities. Public information. Okay. We have the prices of our competitors. In terms of river transport, the prices seem to -- so they're not written in a book, but they are in the market.

Yes. So the idea -- I think the differences come from land transportation. So the idea is that if we're talking about land transportation, you have all the prices there regardless of how large or smaller companies. Why? Because there are a lot of stakeholders. The market is much more declassified, and we have a lot of stakeholders many more than in river transport. So 50, 60 operators top. Ms. [indiscernible] wants to intervene. She also sent her questions.

Can you hear me?

Yes, we can hear you.

I didn't know if I could ask the questions live. I also wrote them in the chat but you can ignore them. So first off, congratulations for your results, and for this recovery. My main question relates to agricultural goods. And if you can give us more details what is the new reality in terms of agricultural goods and products and what are realistic volumes that we can expect. Even in light of this crisis, access in terms of production. So some farmers decided not to export or transport goods to due low prices, but these volumes are stored somewhere. So I'm guessing they will be eventually transported. And I'm guessing this is a temporary situation? Or is this a permanent situation that will impact TTS' activity? And the other question, I think, was already answered. What factors do you see as impacting profitability? Or would improve profitability in the next quarters in the next 12 months. So one, I saw that you mentioned the reduction of costs and you already did it and you also mentioned the mineral products. Are there other products that you would like to mention in this regard.

Okay. So let's see, I have to answer this question as well. On the grain side, it could be a very long story, but not a story like fabricated, but it's a very complex situation and a very complicated industry overall. Traditionally speaking, there were 2 crops to harvest. So what is plotted in September in the autumn and is harvested in the summer at the end of June, July, and there's a boom in terms of export once the harvest is conducted. So without taking into account and using interior silos, corn, for example, that was the period of adjustment. This is -- and also sunflower harvest crops overall. For example, this year, last year, we're not going to mention because the crops and harvest overall had a visible impact. But this year, the summer harvest grape seeds and grains in Romania were phenomenal. We had a record -- historical records for wheat, for example. Serbia has had a great harvest as well. So normally, we should have had an avalanche of goods in July -- June, July. Up until -- so in Constanta port, we had approximately -- an exit of approximately 2 million tons. That's not a lot compared to what the market actually has. But there were bad water conditions. So Mr. Techera was very generous when saying that there were a few interruptions. No, there were difficulties, huge difficulties in terms of navigation. So even when having small quantities, for example, over [indiscernible], you could not cross for the whole month of July. Then the trucks came into play. It's weird. So Canopus and Constanta had an exceptional June month in terms of tonnage achieved. Why? Because the goods came via trains and trucks. So we regained the market position. And right now in the Giurgiu area moving towards Albania, the trucks are unbeatable in terms of price. And nowadays, the price prevails when it comes to transportation. So right now, we have huge stock of goods overall -- agricultural goods and the farmers are not selling, because the price they would have to accept in order to sell right now is much lower than what they want or are willing to accept. So the price right now is $10 per ton. So the Constanta price is much higher than the Russian price by $10. So nobody in Romania wants to lose that much money. So it's not -- let's not call it a blockage, but the quantity is huge, but it's less than what should have exited the market today. And this trend will continue. There are enough goods, but the water situation is still dire unfavorable right now, and it will continue to be unfavorable and in our silos. So we have built throughout the country, several smaller silos of farmers. There is no pressure on the farmers because last year's harvest was catastrophic. This year's harvest is weak. So the services have a decreased by a lot. And the production overall is, of course, obviously, higher than that of last year, but much lower compared to 2 years ago. So they are still -- they plan to keep their goods for a longer period of time. It's good and it's bad. So there is a pressure in terms of prices, on transportation prices and the sense that prices are decreasing, and this has been seen in the market, but the good side is that there will still be enough goods to be transported. So traditionally, in the first half of the year, there is a boom now there is a lot of transportation in terms of corn. But now corn will be replaced by wheat and hopefully, this replacement will continue up to the end of the year and maybe at the beginning of next year. So overproduction, huge costs in terms of production in Romania and pressure caused by Russian and Ukrainian goods that actually can be sold at lower prices. And we are caught in the middle. But not only as Serbia is in the same situation, exactly the same situation. It's not exporting as much as it has. The export takes place only when farmers need some money. That's it. So this situation will probably continue, but it's happening in other countries as well. They will exit the market eventually, all of these goods. We're not talking about huge volumes, but they will exit the market in small increments.

And the second question, we are trying to control the costs. Of course, we succeeded to achieve certain reductions. We're trying to keep under control the cost, and we want to maintain this in the second half of the year. So a balance between revenues, costs, production costs, we are trying to obtain as much as possible in terms of activity on the market so that we can maintain a good margin overall, a good market share as envisaged for Q3, it's not quite as we envisaged it in terms of water transportation. In terms of fleet, yes, everything is great. But in terms of transportation there is -- there are some issues, but due to water conditions. So if we analyze strictly from a financial perspective, we forget what TTS' objective activity is. So the fact that we maintain the cost right now at a control level, the cost if we analyze for Q2, they were almost at the level supported by tariffs. So the loss was low, was small in Q2. And if April wouldn't have been so disastrous in terms of port activity, the situation could have been even better. So we have costs that are at the level -- at the lowest level seen on the market. So as of now, anything that comes in addition via revenues should be reflected in the profitability because, of course, costs can increase. We have direct cost to transport more volumes. But everything should be reflected in profitability because the cost basis is very healthy right now. This is one aspect. Another aspect. We haven't finalized the process yet. Here let me give you an example that I know in detail. Right now, at the Decirom level, we are restructuring the entire salary grid and scheme and we want to bring it closer to the tariff levels that are supported by the market that are not great amazing. And we could witness something new in terms of profitability from the growth increase of productivities. So the second half of the year in terms of endowment in Decirom is better than compared to the first half. In the first half, one of the huge 20-ton cranes was being refurbished, so only one crane, one 20-ton crane was working, but right now, the first crane is refurbished and it is working as of August. And the other -- the second crane is going to start the process of modernization and refurbishment. So of course, we expect to see a small productivity difference between the output of these 2 cranes. So there are things that aren't as spectacular and the impact on cost is not as spectacular as in Q4 2024, but the process is not finalized. So we might witness even more profitability in those regards. No, Mrs. [indiscernible] wishes to say something else.

Thank you for your answers to 2 questions. What happened differently or negatively in April? And on the 3 categories, which is the most profitable one to be transported.

Thank you. In April, there was no merchandise in the port. Generally, the month of April is a waiting and month of expectations. In May, you can see the production to the first 3 categories of grain. And in April, everybody is on hold. The farmers, the traders decide if they will give more inventory or less. So April is a month traditionally. So the fertilizers are not demanded, all of them the nitrogen-based ones run out in March, and you can -- they are very seldomly used. And on minerals, generally, the large achievements come from Southern Africa, Australia, Brazil, from Indonesia, we can see the coal. So 70,000 tons, it's a small shipment. So if that pavement is delayed in the Red Sea, instead of coming in at the middle of April, it arrives at the beginning of May. So this is about April. In port, it is a bad month at the overall port operations. April and October, you don't know which is the logic behind it because everything stops. So but April, in Constanta port as this particular year, nobody, we haven't seen for ages. And the biggest margin in normal conditions, the grains have the highest margin without a question. On average, in normal conditions.

From Mr. [indiscernible] the harvest looks good, how do you think it will be affected, you will be affected? From CapEx, are you with Canopus?

So talking about the harvest. We talked about it. So we will see based on the grain markets in the area, but of course, in the worldwide level, if you have a surplus, everything will be touched by that. Canopus will be operational at next harvest at the beginning of May of 2026 in Turkey. So some of the [indiscernible] are being used, utilized already. From Decirom, Mr. Techera will tell you. And what else? Canopus and Decirom. In Canopus, it will be operational next year. Of course, this is a big objective of expansion in Decirom. Things are a bit more fragmented or small targets. And the last crane that we had for upgrading, now is being upgraded. The conditions -- storage conditions have been improved. And we brought forklifts, which are -- that help us looking at the steel products. And of course, the new storage facilities are according to plan. Three months, as an example, the permits were stopped. There was the February incident in the port. Nothing was signed. So if there is an incident, this is what happens. We are already seeing the volumes this year in Decirom. They are a lot higher, significantly higher than the same period last year. Of course, except April because we talked about April, but we can see significant differences in the increase of volumes with new contracts, but are also based of our integrated operating operations in Constanta because there we don't have only Decirom. Decirom operates with [indiscernible], which provides direct transport. Of course, so Decirom operates the transporting site. We have an increase in the operational capacity, we are looking at investment and investing further here. If I am to estimate, in the second semester, and I don't know looking at the storage, but next year, we will have full operational conditions. Equipments we're buying. We assess them that we have an opportunity, but that did not materialize, but we are monitoring, and we have the focus on increasing the productivity in the port overall.

From Mrs. [indiscernible], thank you for the presentation. Looking at the -- compared with the initial budget, the revision was determined due to the tax or volume. Can you explain the increase in the leasing liabilities the long term?

May I answer? The long-term increase was reevaluation of the rental agreements in the ports. In the ports, the land is being rated by long term, when we acquired Decirom. We weren't believe to find the criteria with the contracts of leasing. We signed this year. And as for as IFRS 16 principles, we need to recognize these contracts as operational leasing. So all contracts that had as a scope renting of land in the board. So this is why we could see an increase of the liabilities. Looking at -- we will have explanatory notes at the end of the year report, and we will provide details on the assets on the liability side regarding this contract.

When compared with the budgeted figures. Mainly both the tariffs and the volume, but it's true that the tariffs, they're annual, on an annual basis, it's the sports tariffs, which are a bit lower than we estimated in January and the effect that we talked about already, and the decrease of the grain market. But we have a smaller impact here than the volumes, which were decreasing. In April, it was a very bad month. It's also the problem, the issue with the navigation in the Giurgiu area that reduced -- highly reduced our volumes in August and also in September. And this -- we cannot decrease the expenses as per the decrease in revenue. So this is why we are away from the budget estimate.

What is the right to use assets? It's about the rental contract, about the lands in the ports. As per our latest document side led us to recognize as leasing -- as financial leasing contracts. These are the assets that resulted from this recognition.

We don't have currently any other questions? I think we can conclude. There are no further questions. So we are closing this video call. Thank you for your participation. And as usual, we can -- we are waiting for you at the end of November as always at the conference from the end of September. Also at the video call at the end of November with the 9-month results. Thank you very much. Goodbye, everybody. [Statements in English on this transcript were spoken by an interpreter present on the live call.]