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

Hello, everyone, and welcome to our video conference regarding the preliminary financial results for 2025. Right now, people are still logging in. So let's wait a couple more minutes so that everyone can join.

Thank you. So hello, everyone, including those who joined us afterwards, let's briefly present the preliminary results. I will conduct this presentation. I would like to announce the fact that Mr. Ion Stanciu is participating; Mrs. Miruna Mihailescu; Mrs. Nicoleta Florescu, CFO; Mr. Tudor Boboc, IR Specialist; and Mrs. Aldescu, our consultant on IR matters. So 2025, as you already know, as we have already discussed throughout the year, was a market normalization point after the compression of the post-Ukrainian war cycle that started in the second half towards the end of 2023. It continued throughout 2024 in its entirety. And in the beginning of 2025, then the market normalized and came back to lower levels as compared to Ukrainian export periods. From our point of view, we believe that 2025 reflects the group's capacity to adapt in a difficult market context, where we had low levels of tariffs and operated volumes. The preliminary consolidated revenues are situated in the middle of the estimated interval that we communicated in the 9-month report. And preliminary EBITDA was below the estimated interval, mainly due to certain pressures emerged in the fourth quarter, an increase above expectations of expenses with raw materials and consumables, namely diesel fuel that was additionally required as an effect of unfavorable navigation conditions. So an additional RON 1.3 million, a higher level than anticipated with subcontractor expenses, namely for goods operated in ports by means of third parties. It increased in Q4 by RON 7.3 million, and the net impact of provisions and currency fluctuations. So a difference amounting to RON 1.4 million as compared to Q3. At the individual level, however, the company, TTS recorded an operational performance above the anticipated level for EBITDA. Individual revenues were situated at the middle of the estimation interval, thus confirming the resilience of our business model based on integrated logistics, commercial discipline and operational flexibility. Now you can see the consolidated results, preliminary results for 2025. You already know them from the report, but we added something. We added Q4, so that you can have a better overall picture of the development throughout the year. As I stated, revenue, RON 651.3 million, fell in the middle of the estimated interval. EBITDA was below the level. It was RON 93.4 million, below the RON 96 million estimation. The margins -- and this is the main reason why we added Q4. EBITDA margins in Q4 were -- better said, the EBITDA margin and the profit margin in Q4 were lower, weaker when compared to the remaining year. So EBITDA margin was 10.9% for Q4, but throughout the year, it was 14.3%. A similar situation happened in terms of the profit margin. In Q4, it was minus 3.7%. Throughout the year, overall, it was minus 1.6%, so a better value. In what concerns individual results, as I mentioned, revenues, RON 410.7 million. So the revenue was in the middle of the estimated interval. EBITDA was significantly better than we anticipated in the 9-month report, namely RON 41.9 million as compared to the RON 37 million, RON 39 million interval that we estimated. In what concerns margins, the situation is reversed as compared to the one from the consolidated results. So the EBITDA margin and profit margin in Q4 were better as compared to the entirety of 2025. So we have 13.4% EBITDA margin in Q4 and 10.2% for the entire year for the 12-month period in 2025, 9.8% profit margin in Q4, and profit margin for the entirety of the year was 7%. In what concerns the financial position, as I already mentioned, you've seen it in the report. What I would like to highlight, in relation to increase of borrowed amounts, the main reasons are investments, more precisely Canopus, the Canopus investment that continues, and reclassifications as an effect of the implementation of IFRS 16. I mentioned this already in the previous video conferences, the net asset diminished, decreased on one hand, due to the negative result and additionally due to the dividends that were distributed in 2025. At individual level, overall debt decreased. This is a trend. It has been decreasing quarter-by-quarter successfully. We also had reimbursements when it comes to loans and a reduction overall of commercial debt. In what concerns net asset, it increased slightly as a result of the fact that the preliminary net result is higher than the value of dividends that were distributed in 2025. This is a brief presentation, a brief overview regarding the results, the preliminary financial results. So now we are eager to hear your questions.

What to expect in 2026? How do you see the evolution of the EBITDA margin at the beginning of the year?

First of all, we are working on the budget for this 2026, the investment and the CapEx one. We cannot provide figures right now. But if you remember, last year, both budgets came with some comments that analyzed some opportunities, some risks, and we will do the same this year. We're not talking about the war in our area of expertise. There are certain different conditions. The agricultural side of the business, for example, a good year. We're not talking about only the harvest, but also the movement of the goods. This is a positive impact. And as a bad outcome, we have, of course, a bad harvest, we have bad results. From the start of the war in Ukraine, there were some changes on the commercial routes and the logistical ones. In 2024, at the end of the year, and 2025, there were some phenomena, which were negative. And a lot of intermediaries had financial issues. Some started the insolvency proceedings. You can find them in the media, which led us to believe that this year, the multinational companies will have to change within our borders. So about working straight to the farmers. So we're fine-tuning the budget. What we can tell you, as last year, we can see some main pillars of supporting the activity. We have port operating operations where we can see an increase. I cannot tell you if it's a high one or a low one. I wouldn't be cohering in explaining. And we also have the basis for that. And the second pillar is reducing the loss on the river transport. And this comes from what Mr. Techera already mentioned, a strictest possible control on a national or international level, but also due to some measures that we took several years ago without estimating the current crisis. And we have new good flows of minerals. These are maturing now here, and we hope to value them also. We see an improvement in the river transport and an increase in the port operating activities. We have some positive estimates, but we need to see the impact from the Gulf war on other activities. We are talking about shipments of wooden products. We are managing clearly the cash position and also controlling the investments that are being carried out. We will detail this when we send the notice to attend the GMS, and we will include also there the explanations and details. These are the main pillars for growth. They are very well managed right now.

Mrs. [ Rina Ryland ] wants to talk.

You talked about changing the manner in which you conduct business with the farmers. What do you mean by that? And what is the impact towards FSF?

We'll take the questions one by one.

The market, since the start of the Ukrainian war, there was a huge wave of intermediaries between the producers and the buyers. Not in minerals. We had still factories who are very large. But in areas, whether the origin or the final buyer, as the farmer is a smaller entity when comparing to a multinational, the farmer is the final beneficiary with fertilizers. With grains, it's the other way around. He is the producer and sells those products towards a beneficiary who in Constanta is one of the biggest ones in Romania. When the war started in Ukraine, and the mixing of the war, and also the Danube transfer, in Serbia, Ukraine, Bulgaria, we had the same phenomenon. Some intermediaries, average ones, started to buy the goods and resell it to another final beneficiary. By intervening in this supply chain, it's normal that both ends had contact between them. The traditional model, the big companies ensured funding to the farmers, inputs, fertilizers, and these things decreased as a way in their activity. And the part of the intermediaries had huge problems, some insolvency. And there might be an increase in the direct relation between the buyers and the big companies, or from sellers and the buyers of the products. This is an advantage for us if it will happen, because the companies, the big ones, are very old and very strong. So as a theory, our access to the goods, it will be a lot easier because multinationals are very strong part. And the standard of quality that we provide, we might have access to goods of good quality that will leave the Constanta Harbor.

Talking about the cost in the Q4, we had the fuel and the unfavorable conditions on the Danube. But on the third parties, did you have higher tariffs, because each cost here on operating activities is the reason this increase in tariffs?

The RON 7.3 million increase is not unanticipated. It's some of the picture we had previously from the end of Q4 in what concerns the expenses with the third parties. But there was this increase of RON 7.3 million when compared to Q3. So it wasn't an abrupt impact. This was the estimate that we had. Third parties or contractors are companies outside the group from the Constanta Port. And they provide transport services. In the steel, there is only one. There is no secret. And of course, the cost increases because there were higher volumes. We had the Danube-Black Sea Canal transport. And we have also the surveyors. So a part of the third-party expenses comes from our activity. Those expenses are balanced by revenue. So it's not about an increase in tariffs. If we look at the operating side, the volume in Constanta that was managed by third parties was higher than in Q3. So it's not about the tariffs. Actually, they were decreasing from Q3.

Another thing I would like to mention. If we take into account simply increase in terms of expenses with diesel and provision impact, EBITDA comes back, falls back into the estimated interval, RON 96 million to RON 100 million. So we wanted simply to show you, not necessarily growth as compared to Q3, but rather the sources that led to imprecision in terms of estimation in the 9-month report.

I understand now. I was comparing with Q3 because it was a good quarter. It seemed to show recovery signs. So that's why I am asking about the changes. What changed? What happened in the fourth quarter? And why didn't you achieve the performance that we were all expecting?

Well, we mentioned in the 9-month report, we mentioned the fact that the perspective isn't great. I was talking with a colleague of mine today, the culprit for Q4 has a name, agricultural products. Agricultural products in Q4 were less than estimated and the tariffs were much lower than estimated. It is an issue because we are witnessing a deformation of the grain market. In 2025, the history from 2024 repeated itself. This year, there are high chances for this underperformance to repeat itself on the grain market. I'm talking about the grain market. I think Q1 won't be covered by this issue, because we are going back to our usual pattern. Q1 is the lowest and slowest, Q2 is okay, Q3 is great, and Q4 is, depends on the year. But the grains market was different. We had Q3 and Q4, we called it a season overall. And the market was exhausted due to how many goods there were on the market. The volume was huge. So we had a lot of things to work on. In Q3 and Q4, everything was great. In Q1, you had some remains. And then in Q2, we were analyzing the crops and the estimations. And then, of course, the cycle repeated itself. But as of 2022, this cycle changed completely. In 2024, when the Ukrainian exports ended in the first quarter towards the second quarter, and we started involving Serbia and Hungary and so on, so no more pressure from Ukrainian goods. We started reporting in June, July, everything fell. In terms of water transport, we lost the peak for Danube transportation, water levels were low. And then the goods themselves started to disappear from the market, and it was an acute phenomenon. We had small lots on the spot market, nothing similar to the patterns we were accustomed to. Last year, the same thing happened. In August, the Danube grains market collapsed after 14 days of closure, complete closure. Then we had difficult navigation conditions. And then the goods themselves, the volumes almost completely disappeared. Our contracts remained as they were. And everything was traded on spot. Q4 continued this trend of lower prices. We had low prices and low volume of goods. If we analyze this in terms of impact or average price, we end up with a much lower number as compared to what we estimated. But we had an increase in revenues and expenses with third parties, but it was 1:1. But this increase couldn't cover the loss, the direct loss within the group due to lower tariffs for grains. And this year, we are afraid that it will happen again. We don't know what will happen with Ukraine, with Russia, but right now, Romanian crops seem to be just as good as last year. We have a lot of places where water levels are excellent. So we're not talking about drought, as was the case last year, and other fears or challenges in this regard. Now we have an excellent saturation in terms of water level. So the summer crops seem to be great, but it depends. It depends.

I understand now.

And I would like to add something else that you need to take into account. In our goods mix, agricultural goods have the best margins. But if the mix changes and agricultural goods are lower in weighting, this obviously automatically affects EBITDA, because even if we have good tariffs, if the volumes are low, EBITDA inevitably goes closer to EBITDA for minerals and chemical products, where we have lower margins.

Okay. And how do you see Q1 in 2026 as compared to Q1 2025? We have 2 concluded months. So what kind of expectations do you have for the market in terms of volumes?

It's too early, relatively early to talk about this. What I can say is that in Q1 last year, we had an unexpectedly good quarter in terms of activity volumes. I don't remember exactly the weightings. But for us, so in terms of tonnes of goods and the actual activity, so in addition to this, last year, in Q1, we had spring time. Now up until a couple of days ago, we had winter season, full on winter season. So beginning of the year, low water level, then high water level, Constanta Port was closed. So it's limited.

Okay. So last year, we had a higher baseline, so to speak, yes. In terms of expenses, now we are way better off as compared to Q1 last year. Last year, Q1 was one of the weakest in terms of financial perspective, because the measures that we undertook in the group weren't showing results yet, or were just starting to show results. So profitability was low, negative.

I understand.

So on the cost side, I understand it's going to be difficult. But we worked a lot on the cost expense side. We're going to see if the market helps us because we have a good cost structure right now, but the market also has to move in a certain positive direction.

I understand. And a question regarding the conflicts in the Middle East. Do you expect an impact for TTS, reconfiguration of flows or any other change? Maybe what your intuition tells you about potential changes?

So right now, it's day 5. We see a psychological effect. There is an uncertainty in the air. But for us, besides the wood export, we have quite juicy contracts for this segment, fabulous contracts in terms of delivery for wood products via Constanta. Of course, these types of products go towards the Red Sea. They didn't go through Port Louis. But otherwise, we're thinking about diesel fuel price increases. Otherwise, anything else doesn't come to mind, nothing dangerous. We don't have goods stemming from or going to the area. We have some raw material, fertilizers, but they don't come from that particular area, but rather closer to the Suez Canal, goods that come from afar, from Indonesia, for example, or iron, for example. But other goods, no, other goods categories don't seem to be affected, because they simply do not go through the area. We don't have any close locations to the conflict areas. So right now, we don't see any direct or immediate effects, but who knows? Who knows? Maybe something will happen in the future. Nobody knows. They don't know. We don't know.

And the last question, I saw that you didn't include the volume split for revenues. or maybe I didn't see it. Is there a split?

Okay. So the reason is, traditionally, when it comes to financial results, we don't go into detail in terms of activity volumes and so on. But we also have a substantiation reason. In order to have a coherent overall image in terms of financial and operational side. So volume segments, you know how we do it. We have to be able to consolidate financial data at the end of February, which for us is impossible. If we don't have a consolidated view at the financial level in a detailed manner, we are simply making sure that the figures that we publish now are as certain as possible. But when we go into detail, the reporting doesn't comply with this level of consistency in February. This happens in March, when we are going to include the volumes and the split, of course, we have a good overall view of the volume split. But due to the fact that we didn't consolidate everything with a high level of certainty, we don't want to publish the volumes when we publish preliminary results.

Thank you for all of the things you explained and for the results, and we will wait for the next figures. Thank you.

Now let's move forward. So Mrs. Popov. Were there bad navigation conditions in Q4?

Yes. In Q4 and throughout the year. We have an impressive database at Navrom for 2025. Let's analyze it based on historical data. So water flow in Bazias on the Danube, the level is by far the worst one, let's call it that, in terms of water flows for navigation in the past several years. We have statistical data available to us.

How many days in 2025 did the water level and water flow equal or was it above the average?

27 days last year. That's when compared to 80 days the previous year. The Danube was closed from Giurgiu to Zimnicea. So 15 days was closed that specific area. There were tough conditions and barges can be put, 10 meters, 20, like a pusher. The water, the debit was bad from July up to August, very bad conditions. And then from the middle of August to December, there were difficulties. There were no 3 months same conditions of navigation. When you load in Constanta, you have a number of days until a pusher comes, and then you have another 7 to 10 days. So we will have a forecast to know where to load. So you would much rather load a lower amount. And this is the reason for increasing the fuel costs, because the navigation conditions were bad. The average distance was the highest in history as per Navrom data. The reasoning, we had a decrease of volumes in the lower Danube area. So we have 2,000 kilometers, so the Giurgiu-Zimnicea, we had difficult conditions. And in Hungary, river bed in Austria and in Germany, those are quantifiable. Again, with the data from our colleagues. Last year was the worst year for all 4 areas. We had three 2 meters, 20, with days. So the conditions were heavy everywhere. After the rains today, present, and we had also snows, the Danube is high. Now it's too high, the Danube. But also in Q4, there were unfavorable conditions, except the last days in December.

Also, Daniela Popov. What is the situation in Q1? Mrs. Nicoleta Florescu, why did the amortization decrease?

This is due to the policy that we applied since the beginning of the year from the ship amortization from the Transport segment. We changed the amortization policy, and this is why it decreased.

Also, how can you manage the cost with subcontractors?

So those are always covered by revenues. This is how the model works. In Q4, what happened is that a part of the increase that came, that we knew about, the estimated increase was not properly estimated. It's not a lack of control under no means. Next question. Considering the EUR 170 million bids for FAST Danube, how much do you think that dredging will last? How much do you think the goods volumes will increase in Europe?

Again, probably you are waiting for an exact answer to this question. What we know is there are some bids ongoing for the Romanian and Bulgarian segment, so Romania and Bulgaria side of Danube for hydrotechnical works. Our colleagues in Galati are part of some offers. We have, again, subcontractors. They are subcontractors for others, hopefully to the winners. There are some operations that have the design. We have 88. We don't talk about execution. The volume of goods, how much it will increase, we will talk about 2030 and onwards. We don't know yet. But let's not forget that the simple dredging of the Danube is not sufficient. The Danube, of course, flows. If you look at the highway, you have gas stations, you have business areas, business centers. This is just a road with cars. The Danube has to have ports. And today, they are going in an upgrading process. We see some steps forward, and they do intend to develop the projects of modernizing the infrastructure in the ports. We're talking about Romania, Giurgiu, [ Sea Gate ], and so forth. So there is an interest to connect this highway. And of course, then we need the raw material for that, for grain, for fertilizers, and this land can produce grains. In industry, we don't have many connections to the port, in Galati, Braila, and Dolj only. We don't have a direct connection to the Danube ports. So this is something we can estimate starting with 2028. And the rest of the investments are undergoing, the bidding process. And we will be able to see, if there are some projects, industrial ones, that connect to the Danube. Because the Danube is a bulk mass transport route. So we have agriculture, chemistry and industry overall.

So we also have the volume-related question. We don't know now.

This is for me, this question. When will the Decirom exploit the full capacity? From the equipment perspective, the maximum capacity will be reached in 2027, when Decirom will have 5 upgraded cranes. Now works only with 4. The fifth one is undergoing modernization. This last year was the same. Another one was modernized and now is operating. But even with these levels, the 2025 volume was a record one. Decirom exceeded 1 million tonnes. As we had 2 months overall with very difficult conditions, so the transport overall decreased. We will have an increase of the market share in 2025. We cannot provide the figures because the Board has not provided those figures. Somewhere in April, they report the transit on the previous year. So even we had 2 very bad months, one in April, when all flows stopped until the tariffs from the U.S. were handled, and November. In these conditions, Decirom surpassed all its historical levels. Of course, not a load, integrated in the group with the TTS operator, the TTS Group. But we can see some effect of the integration, but the capacity full will be in 2027, we will have 5 modernized cranes. We will have a storage unit. This is an ongoing project, and it will increase the storage capacity, but also the ratios due to the technical aspect of it. This is the situation with Decirom. Do you believe that overcapacity on the transport market for goods on the Danube persists right now? Or are there signs of balancing overall? We were talking earlier about the collapse.

Do you believe that overcapacity on the transport market for goods on the Danube persists right now? Or are there signs of balancing overall?

We were talking earlier about the collapse. We don't rejoice in calling it that, but there is a small collapse in terms of agricultural products. So a development took place. It was a chaotic development and unfolding in terms of assets in the transport area and import operation for Constanta Port as well. A part of these assets disappeared. We're talking about leasing assets from France or similar. So we are witnessing a clear diminishing right now in terms of capacity. Some goods completely disappeared. Some goods are taken out of exploitation right now, because current prices do not allow for a cash operation, let's call it, let alone if you are envisaging profit. It's difficult right now to say how many vessels are currently operating on the Danube right now. But last summer, until the harvest began via the Cernavoda Bridge, we would see vessels everywhere on the Danube. Now their number has decreased significantly. There are only a few left. So they went somewhere, obviously. They're not in Constanta. That's obvious, because the barges are huge. So it's clearly visible that there is a diminishing. We don't know how many of those vessels are Romanian, how many are stemming from Serbia or operating from Serbia. Maybe a part of them simply went back home to Serbia. We don't know. We can't say for sure. But I think in the summer, we will be able to give a better answer, a clearer answer. That's when the situation will crystallize and we will see. But right now, there are fewer players on the market. And the fleets overall are lower in number of vessels. We don't have a clear, clear number, a clear figure. acn.ro is the one that has, maybe. But the changes refer to the fleet with the Romanian flag. So we have a lot of fleets working in Romania, EU-related, Romania-related, and non-EU-related. So it's difficult to actually quantify. But obviously, there is a huge decrease when it comes to the name, [ Peru ].

And the last question with a very brief answer. So the question from Mrs. Daniela Popov. Can you explain the increase of expenses with sold goods costs in Q4. So Mr. Stanciu already stated, those fabulous contracts entailed sold goods covered by revenues. But in the expenses, if you analyze the expenses, you can see quite significant increase, but agricultural activity is the culprit here. So it started in Q4, in November, and that's why it was reflected as such. In November, the growth started quite significantly. There are no other questions. So that means that we can conclude today's video conference. Thank you for participating, and we hereby invite you to our next video conference when we are going to discuss the annual report with a whole lot more details in a month for our next video conference. Thank you, everyone. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]