Hello, and welcome to our video conference. We are joined by several people. TTS presented a report on the 15th, and today we are holding a meeting dedicated mainly to discussions with attendees. And we are happy that we are presenting good results, special results, in light of goods transported on Lower Danube. This morning, we had the EGSM for the approval of shares. And we're happy that today Ziarul Financiar celebrated 25 years of activity, and we participated in the discussions for that occasion. And now we have this meeting. Now, I would like to give the floor to my colleague to present a couple of questions that we received beforehand, and then we can start the dialogue. Hello, everyone. So we have a couple of questions received before the commencement of the video conference.
I am going to go through them one by one, and then we are going to analyze the answers. First question: Can we estimate or approximate the volumes for the fourth quarter? Yes, so the answer is, simple as always. Estimations in terms of figures cannot be done right now, but we can tell you that in, the fourth quarter, we are going to continue what happened in the previous quarter and in the previous quarters. The second question: What would be the factors that could lead to a recovery of volumes in terms of minerals and chemical products? So factors, we have to analyze them one by one.
Minerals, currently, as per the information that we reported at the end of last year and six months after the start of the year, are influenced by the ceasing or reduction of the two installations active in this sector that we collaborate with. Otherwise, things are going precisely as planned in our budget, and as we have and as per what we have reported up until now. So everything is going according to the plan. If we are talking about Tulcea, we don't have information right now in terms of production. They have a project in terms of increasing volumes, and Galați wants to start production. There is intent in that regards. We have some figures from them, but they want to start depending on the possibility to acquire raw materials and, of course, the development of the market in this regard.
The development in terms of raw materials depends on the cash flow of the installation. So in the next period, maybe even as of December, we envisage a slight increase, but that will not influence significantly the figures. First off, if we talk about transport, it's done via barges, and right now, we have insufficient barges, and we allocate them to various flows depending on internal factors, depending on clients, and of course, operational efficiency as well. The second criterion relates to Decirom. Before August, when we included this aspect in the reports, we told you that we have a plan to collaborate with Decirom in this regard. We want to work on the barges on one hand and on the storage facilities on the other hand. So we have certain proposals in this regard. We have plans.
So we could envisage a foundation for a slight change in terms of positive trend, increasing trend, in terms of figures. So this is due to two reasons. I told you before, one of them, capacity and allocation, depending on capacity and optimization. And second off, Constanța, which is influenced by an overcrowding in terms of barges in general. And of course, this leads to huge delays in terms of deployment of barges, and of course, it also impacts, acquisition power in general. So a recovery to the volumes from previous years will not happen quickly, in our opinion. There are signs in terms of trend changes on the market and, based on the strategies of those with whom we collaborate, but we have to see. This is, the situation currently. Third question?... relates to navigation conditions. I'll take this one as well.
So if you recall, last year, we had 41 days of interrupted navigation in Zimnicea. This year, the conditions were good. They started to deteriorate in August, but we didn't incur a loss. We had restrictions that we had to tackle in terms of barges on the southern area in Zimnicea, but there were no issues overall. Now, navigation is almost standard, normal, and based on the information from our colleagues from Galați, there is an increased trend in terms of the water and water flow, which is a good thing, especially in light of the fact that winter is coming. So for fourth quarter, the navigation conditions are optimal and standard. The fourth question, if we envisage or if we have an estimation related to the development of tariffs in the following period.
The development of tariffs is going to follow the trend from this year. Fixed tariffs that are going to be funded based on based on contractual terms, but this was not the case this year. And we have inventory-related tariffs that relate to opportunity in terms of negotiation, demand, capacity, and how we can comply with orders. So we have goods that have huge tariff fluctuations, and we have goods that don't fluctuate in terms of tariffs, that they have fixed tariffs. So it depends. We believe it's a standard level overall. We are currently discussing certain aspects. In the past period, ever since the Grain Odesa Corridor was started, we have had discussions in this regard, so there was an increase. And 10 days ago we had, for example, ships on that corridor.
The prices increased, the goods price increased. Yesterday, we had another ship in terms of grains that also reached the corridor. So when discussing about the middle section of the Black Sea, there was a slight reduction in general, not necessarily referring to us, in terms of Constanța flows. Oltenița as well has gone through certain reductions. But up to the end of the year, the tariffs are overall as they were this year. For next year, of course, we are negotiating in terms of renewal of contracts as of January first, in light of the fact that we are currently having these negotiation discussions, and we're going to discuss next month about grains for certain goods volumes, and of course, other goods that are valid up to the first quarter of next year.
So what we can not consider reigniting the negotiations. So it's the merchandise from Ukraine and for the Serbia. And here we suspect that this year, we'll have reporting on the stock exchange on the volumes. So you will be informed in due time. The fifth question we have, it's about the port's operating utilization of the terminals. If we can see a further increase of the volumes in this port operating. This is a very important question. It's a complex issue, and it's very hard to answer, but the short answer is yes. There are elements that are related to the infrastructure, equipment. We have the floating cranes, and after the testing of these cranes, they have a special performance, and they sustain our strength in the volume.
The merchandise that goes to the crane has to come in time. We have in Constanța Harbor, but we don't have enough of them. Then the second reason, we cannot provide the merchandise to the cranes continuously at the speed of operating of the cranes. So the goods go to Constanța. It's the maneuvering stage. The terminal is overcrowded right now, so there's a margin of hours of waiting. So we can state that where we're also using our own barges, the crane capacity is 50%, and we are happy when it's above 50%. Yes, we see an increase in volumes. This is also valid for other terminals in Constanța. We're talking about the commercial capacity.
For Canopus is performing extraordinary this year because a lot of goods are transported by road, by trucks, so the conditions are a lot better than last year. We are budgeting a record year from the volumes of goods that have been transported that will be transported. Again, the answer is yes, we will see an increase in volumes. I believe that I will also answer the next one. If we have an overview about the investment in barges and the modernization of the Decirom cranes in 2024, before answering, I will state the fact that I believe that you viewers remember that in the issuance prospectus, we stated, and even afterwards, that the Navrom fleet has the modernization phase in the planning.
So we have the barges of 3,000 tons have been covered. We have this capacity barges, the second program to increase and covering the barges of 2,000 tons, and this also increases the transport capacity. It's a lot more complex. It also entails the increase in volume of the barge. We need to replace the Schlepp S-70, S-80 are in the fleet. It's an old model. They are actually from the 1980s, 1990s, but they're obsolete. We want to replace them all with barges. These barges, what we can buy, acquire from the market, there was an auction, and we bought a few barges there. We are talking about new buildings, and finally, we have facilities where to build these barges.
So the second barge of the set of 4 from this year was launched. And it, it was already launched on water. We don't know if the other 2 will be launched this year, but if not, at the beginning of the next year. We budgeted a lot more for next year, but 4 were accepted. New barges, brand new. The same, we are looking at the market. If we can buy even more barges that can fit in our navigation system, we will buy them. If not, we will continue building barges also in 2025, as long as it fits in our development model. Our target is not to increase the fleet, our target is to replace the schlepps with barges.
So there will be less, smaller number of units for utilizing, and there will also be shorter periods of time in unloading and loading of goods. So there's a lot of manual labor there, and unloading a barge can be optimized. So talking about modernizing the cranes from Decirom, the third one is operational. And we can see that in the development. We do not consider now investing in other cranes in Decirom for the time being. We will work with what we have now. So we have the operations towards the shore and towards the sea with the current fleet, and Decirom has direct operation in the storage or directly to trucks, and in the following days, the investments to the storage facility will begin. Because the project has been a bit redrafted.
... It was first thought in a traditional way of thinking. We redrafted the project, but about the concept and about the destination has been changed to a destination that's closer to the water. In the following days, they will start operating the execution. We see this storage facility being finished by the end of next year, and we will talk about equipment. So we cannot promise full operational process from next year. After this, we are going to analyze how we can start using the equipment. There are investments that have been carried out in mobile equipment, such as accumulators, all sorts of specialized installations that we use in our operation activities, and we are going to include them.
What we had envisaged in the program are functioning, and it's a long process, so it's going to take some time, and we don't want to rush it in any way. And I think that was the last question. This. We answered the last question as well, how do we envisage the Decirom in the following year and years? So in terms of port operation, as we stated, we know that in this area, we don't open or shut off the light. A lot of investments with modest requirements, so please analyze the term modest from a positive view in terms of relation to the investments. So in terms of the Decirom, we envisage growth.
This year, we have followed the monthly development, and we saw that there are higher revenues as compared to the same period from last year. But we are not trying to force the situation or the growth, because any forcing of a situation leads to unbalance. Thank you. Would you like to add something more? I was reading the questions we received in the Q&A section. So we have Zoom questions as well. Mr. Caius Rapanu congratulates us for the results. He wanted to say hi, and thank you for answering his questions. Mr. Mihai Nedelcu: Hello. Congratulations for your results. I have three questions. One, what will be the impact of the two cranes that entered into production in September and the port operation segment?
Should we expect a one-figure increase of port operation, or are we talking about a higher increase, such as 20, 30, 40%, thanks to these cranes? So part of the question was answered previously. So port operation is conducted based on two pillars. It's for a part of the goods, for example, goods from Ukraine. I told we have told you about this situation. So transport is ours, maneuvering ours, equipment ours, so things are going well in this regard, in this area of activity. These activities can substantially support gaps in terms of goods in the future.
The second line of operations, we work with fleets belonging to third parties, and these third-party fleets, we have a lot of collaborators with smaller fleets that collaborate with us in the sense of a public service. They. But it's not a public service in the sense that it's conducted by the state, but the prices are good. So there are people who have smaller fleets, and they collaborate with others. And we have an issue here, because, as I stated beforehand, if we have use performance of 50%, we are happy. But here we can't intervene when it comes to these third parties. Overall, the contribution of the two cranes cannot be computed at 10% or 40% because it depends on a lot of factors involved.
If we are to analyze their nominal power and capacity, yes, we could say we have two cranes out of 10, so in addition to the eight we had, and we could say that they bring a 10, maybe over 10% increase in nominal terms. We're talking only about ourselves, not about the general activity. Nominal power is one thing, and what we achieve in our activity is something else. I want to give you an example. I had an experience in a terminal with a crane of our own, not one of the new ones, one of the old ones, which are comparable to the new ones, of course. So the crane worked one day. One crane worked on a larger ship and another day on a smaller ship, and it worked 8,000 tons.
So this happened on a barge for 1,500 tons of goods. It works for 6 hours for the respective barge. So it all depends in terms of how the facility works itself. So the second question, what is the impact of the low level of the Danube in October in terms of revenues and profitability for TTS? No, we haven't done these calculations, and we can't do them right now. We have to see the situation. We normally carry out computations in terms of average efficiency for one year. Based on this computation, we reach the tariffs, and if there are certain differences, of course, we collect, we charge those surcharges, surcharges. Namely, percentages that are applied in terms of each 10 centimeters decrease of the water level.
So we have a protection option if the water decreases too much. The third question has been answered. The barges acquired from Severnav will increase the fleet of barges of TTS, or will they replace all their barges? So we answered. We want to mobilize the fleet, and we want to eliminate the old, obsolete part, and of course, have a more modern replacement. Mr. Andrei Pușcărariu, hello and congratulations for your results. How is the activity going in light of the continuation of attacks of Russia at Ukrainian ports on the Danube? Is your position still the same, that TTS activity is not affected? Yes, it's a good question. So for over a year, we were under the impression that the certain ports will not be affected by the war.
On the day of the first attack on Reni Port, it was a shock for us. It's a strong shock for us, but especially for those who have to reach that port. We have two advantages. The first advantage is that we have a lot of production going through that port. And the second advantage is that we do not have self-propelled ships. We only have barges. We have a mechanism. I'm not going to go into detail, but we have a mechanism. The barges stop in international waters, such as Izmail Port and Reni, and then they continue their maneuvers in terms of barges in certain areas. Of course, there are patrols, and they intervene sometimes for maneuvers, but this is not a common occurrence. So this is the situation.
We only had barges and, people, exposed or not to... Of course, if we have issues, then, yes, the situation is different. But in terms of procedure, we don't have any type of exposure in this regard. In the beginning, it was easier to say that we were not affected by the Ukrainian activity. After Izmail and the other port, and we saw that navigation means were not affected, we slowly got accustomed, in a way, let's call it like that. The people there got accustomed to continue their activity, but with protective measures in place. So we don't expose our people to areas that are dangerous. Our people remain in Romania or, neutral areas. The second question?
In the conference for the sixth month, you mentioned that TTS S.A. works at full capacity on the transport and port operating. Which is the situation now? It's the same situation. Aside those Schlepps, which are on hold right now, the fleet is working at full capacity. We don't have any bottlenecks. No vessels are waiting to be utilized. Three months was the period that some barges waited in Constanța with the grain. It was a lot of time. And if we don't take into consideration the waiting time, the whole fleet is in full capacity. This is also valid for the floating cranes in Constanța. Of course, there are some wear and tear that need to be fixed. The berth, the cranes are being utilized continuously.
We have used a lot of this, and those that were not used that were used in the transshipment directly between the equipment, so we did not use those berths because they were not needed. With the information available at this moment, how do you see the TTS activity in Q4, but also in 2024? We already answered this question. Looking at the interventions passed, considering the flow situation after closing the war, you mentioned that the old routes to be used might take 2-5 years. Do you still think the same? This is an issue of port infrastructure, and we are basing our judgment on others' views. The optimists are saying 2 years, that it might take this process, the pessimists 5 years. So this is the information we have at hand.
Hello, and congratulations for your results. We also saw a decrease in the prime, in the raw materials expenses and subcontractors. What happened? A lot of the raw materials are constituted by fuel, and we could see a decrease in their price. So the future about the fuel cost is uncertain, of course. But despite that, we could see a decrease in the fuel costs in the latest 4-5 weeks. We could also see that in the gas market. It's very hard to estimate this fuel cost. We have Rotterdam as a benchmark, and we saw also the EUR 140. We are computing this actually as an average, as a weekly average, and that was the maximum last year.
Now we could see 108, 110. We can see a constant here. We cannot estimate what will go. We could see that the adjustment between segment, the segments increased, increased by 800 basis points from 47%-55% as a share of the revenues. Do you have a target for this indicator in between segments? If we can see that the revenues increase, we of course, of course, we could see that also in the intersegment. We all-
(Integrate. That's-)
We said that TTS is a group headquartered in Bucharest, and here we have acquisition, the software side, the operational architecture. But a lot of our actual activity is performed via the companies within the group. They are independent, yes, but these are the assets of the group. Navrom has the fleet. Due to the war, our activity with the parties decreased a lot in order to export the grain from Ukraine. Ports, we have our own terminals, but we also have Comvex, which is a partner. We are talking about 1.5 million tons per year, but this is not part in the intersegment side. We have Canopus, TTS Operator, which they are part of the group. The larger side of the execution is being performed by the companies within the group.
I don't know how much exactly, so we're talking above 50%. This is an advantage, actually, that we do not rely on other parties. Mr. CIocoiu, looking at the salaries cost, can you state if they are influenced—they're influencing the consolidation of Decirom? Which was the evolution of the workforce? The salaries from August and September were consolidated. We have an increase in workforce. We have 1,700 personnel, compared to 1,500 last year. As a component of expenses, we have 82% from what we have budgeted, but also with the revenues, we are at 90% of budgeted.
... as a component, 80% of the expenses have a fixed component, and the rest is variable. We are talking on a consolidated level. Do we have any forecast? Yes, we expect the variable component to increase a bit, and of course, we will see an overlap with the expenses related to the personnel. Andrei Pușcărariu, please. You mentioned a share increase. Do you want us to perform that in 2023 or in 2024? In 2023, we cannot do that because there is no more time. So we might see-- Yes, so in 2024, yes. In 2023, it has been deferred to the first quarter of 2024. We want to defer the reimbursement of shares to be performed. This was the strategy.
We talked about a share increase, but we consider that the redemption operation is more important to finish that activity that was approved in the GMS last year. We are considering options on stocks. Today, the redemption was approved, which means that in the following months, we will implement this. We are considering the share increase, but because we had this redemption process, and we think the GMS will be notified in the first of 2024. In relation to question one, can you mention something about subcontractors? They are usually related to revenues, but they are never going to increase or grow as revenues, because certain expenses relate to volume, certain are fixed expenses. So it's clearly a growth there, an increase, but we cannot see something significant in this regard.
Another question, in light of the fact, in light of the Decirom and a higher productivity, do you expect the weighting of intersegments to increase, to grow? We don't know. The weighting, it's difficult to say. When we are strictly discussing about Decirom, up to the acquisition itself, or up to the moment when we knew the acquisition will be carried out, we didn't have any relation with them, so we didn't know a lot of. So, right now, we can't bring you figures in this regard. We have to analyze. As of June, July, and especially August, since we started a consolidation, our figures with Decirom are increasing. We're not talking about huge figures here, not huge increases. Small. Our intention with this integration of activities that we mentioned beforehand, we will become a client of Decirom.
Where do we want to end up? We don't want the Decirom to do everything through us. We are undergoing a renewal process in terms of contracts for the next year, but in certain areas, there will be interventions after these operations. Here, we don't have a list mechanism to tell you, "This is how it's going to be done." Each contract is going to be negotiated, discussed, and it's going to be very individualized. So in terms of values of intersegmentation of TTS and Decirom, there will be an increase, but we don't know exactly up to where. So subcontractors decreased in the last two quarters, yes. It's the reversal of the increase or growth in the intersegments, because operations increased with operating companies from within the group. So operations with third-party collaborators decreased. Mr.
Sarkany, congratulations for excellent results, and thank you for your responses. Related to SOP, do you have performance criteria based on which you are going to grant shares, or will you divide them towards all employees? There's a combination of the two. As a first package, we want the first package to be given to the management in the group. But what we have managed to do up to the listing, the success of entering the capital markets, the second plan, the second pillar of our decision, should be compensated with license indicators from the top management and the management, both in TTS and the subsidiaries, and a very small share will be related to normal, everyday work activities.
So we are considering performance indicators that will be applied, and the first plan is to make an estimate for the following three years. The second quarter from 2023, as compared to the second quarter in 2022, it was about the subcontractors. And afterwards, he thanks us. We also have the persons wishing to ask a question live, Ivana Derek.
We don't hear the question. You could be on mute. I requested the participant to open their microphone, so the person is not responding. If there are other questions?
What percentage of Q3 revenues comes from Decirom?
Okay, so that was the question.
Non-significant.
Insignificant.
Another question: How do you see the activity of the group, in a context lacking war? So a couple of days ago, we had a discussion with the general director from the metallurgy installation, and we talked about this topic, and we reached the following conclusion. When the Ukraine war started, nobody knew what the effects would be.
The effects were, on one hand, the closing of certain metallurgy installations, the closing of raw material flows from Russia, minerals, coal, fertilizers, and so on, and other flows that could not reach, for example, Galați or other installations. And of course, there was a lot, an increase, a hike in terms of prices.
But after a period of time, the Ukrainian army intervened, especially in terms of grains, fertilizers from Ukraine, and there was a huge pressure on the market. All prices increased, all costs increased, especially costs in terms of salaries, which were, of course, completed by inflation. So this increase in terms of the Ukraine situation and this overwhelming volume of goods had an influence in Constanța and on the Danube, and it was a snowball effect. So we increased volumes on the Danube, which led to increase of costs and, in light of the Russian situation as well. So this was a snowball effect. If tomorrow the war ends, believe us, nobody knows what will happen. There are analysts that we follow, and some of them are optimists, some of them are pessimistic.
It could last between 2 and 5 years to come back to the situation pre-war. But if the war ends, we have no guarantee that metallurgy installations will fully restore their activities, and the volumes on the market will recover, that the Ukrainian goods will disappear from the market. So we don't know. There are a lot of questions that we are currently analyzing, and we have certain scenarios drafted in terms of reactions on our side, depending on the trend and direction of these activities. But we can simply adapt to the market. That's all we can do. What we have done up until now is we tried to continue our collaboration with clients prior to the war. We didn't give them up.
Of course, we don't expect port operation as before the war, but we have high expectations. Maybe 100%, 80%, over 50% is great for us in terms of recovery. We don't want to lose clients in terms of the market on, more eccentric routes, let's call them, further routes. So we are, we want to protect ourselves. We want to preserve our clients in light of tomorrow, with, with whatever that they may bring. But we believe that we have, quite a good, response, time and reaction time in terms of market developments. We're going to see. Another question, at the presentation of results for the first quarter of 2023, you were surprised by the results, especially for Q1.
Right now, based on the data that you have and contracts already signed, do you believe that the rhythm, the pace of the results will be maintained, or will we come back to a normal seasonality with a first quarter weaker than the rest of the year? I think I answered beforehand. We were optimistic at the time, so there was an endorsement last year. 2023 is going to be a year with huge cost increases, especially in terms of salaries, energy, and so on. For us, Q1 was a surprise because, as you very well stated, traditionally, Q1 wasn't great. We were surprised by that quarter and its development, especially in light of the fact that it came into in a moment when things started to go back to a normal course.
In Q2 and Q3 and Q4 seems to follow this trend, we seem to be on a normal path. If and when we are going to re-encounter seasonality, we don't know. Right now, our figures that we have right now look good, and we are ready to adapt to any change that may occur or emerge on the market, such as the start of the war. If something like this, if such dramatic changes occur in the future, we are going to see how we respond, on the short term, medium term, and long term, of course. I would like to highlight something. We have a context that is influenced by a lot of things we can't control.
These circumstances we are operating in, acquisition of the Decirom and acquisition of the two cranes, represented a positive factor for the activity carried out by the company, because it allowed us, in those circumstances, which were complex and filled with difficulties, to have an additional capacity that we could make available to our clients in terms of port operation, operation in general. And even if we can't reach a load at the level of nominal capacity for a port crane, the fact that they appeared at the right moment was a happy occurrence that completed the effort for the acquisition of the Decirom, and that's how we were able to tackle and respond with resources this additional demand that appeared on the market.
We consolidated the capacity of Decirom, but by means of the existence of these two additional cranes, we could operate ships in indirect water operation. So in the future, I believe that we are going to identify solutions whenever needed, and if we ever encounter ideal work conditions, then the results could go even higher. But our group's history is a long one, and we've never had a year without complex issues that hinder our activity. The issues are never the same, they always change, but this entire complex is under control. The power of the group, in general, is generated by this combination of equipment forces that we have and transaction capacity of TT, TTCL that creates the architecture of the global transport operations. So thank you.
This is what I wanted to mention, to add, so that we can all better understand how our activity is carried out. No other questions?
One more question. Thank you for your answer. Another question. Share capital increase, how large will it be? What will you use the money for in light of the fact that you have an in a negative sign, and it would be very easy to finance via a bank any investment?
Okay, so the share capital increase we envisage will be similar to the one that took place last year, namely, the granting of free shares for shareholders in the form of an exceptional dividend expressed in shares.
So we are not talking about a capitalization, we are talking about a distribution, depending on the result, depending on the reported result, in the form of free shares for shareholders.
Okay, great.
If there are no other questions, thank you for your participation, and we are going to see you at the next video conference. Thank you.