Good afternoon, ladies and gentlemen, and a warm welcome to our conference call presenting our financial results for the first half of 2022. Before our CFO and my colleague, Roland, will lead you through the financials in detail, let me comment on the market environment in which we currently operate and highlight our major achievements in the first half. For more than two years, we have been experiencing how volatile logistics can be. Restrictions to combat the COVID-19 pandemic , especially in China, weather-related effects, construction work on rail and on road, and the war in Ukraine with its direct and indirect implications, have further aggravated the situation on global trade routes. All these events did not happen at the same time, but they have reinforced each other. Each individual challenge is manageable, but the combination amplifies the effects and makes the situation incalculable.
After a good start in the first quarter, volume development was weaker in the second quarter since our quayside capacities were limited due to highly utilized storage systems here in Hamburg. Persisting supply chain disruption led to significantly increased dwell times of import and export containers in the Port of Hamburg in the first half of 2022. Whereas in the first quarter we had to cope mainly with long dwell times of export containers due to ongoing ship delays, the situation also got worse in the second quarter with regard to import containers. We therefore implemented several measures in the first half of the year to manage the high storage utilization that was restricting our quayside handling capacity.
We have rented additional space in the Port of Hamburg for container storage, and we are trying to gain additional capacity through more flexibility in our operations. At the same time, we are in close exchange with all participants in the supply chain in order to better manage exports and imports together, whether by water, road or rail. It's the whole system overall. At the international container terminals, Tallinn recorded strong volume growth due to the increased use of the terminal as an alternative to Russian ports. Our Odessa terminal has been closed since Russia invaded the Ukraine on the 24th of February, but remains operational. Despite encouraging volume growth, however, the terminals in Tallinn and Trieste were only able to partially offset the volume decrease at the Odessa terminal.
That said, container throughput in the first six months was on par with the previous year at 3,368,000 TEU. Container transport rose by 2.2% to 151,000 TEU. In the first half year, in particular, due to growth in rail transport, despite challenging weather-related and construction work-related circumstances. The operating result of the Port Logistics subgroup rose in the first half of the year by 9.4% compared to the same period last year to EUR 90.7 million, mainly driven by further increased storage fee income and higher transport volumes. Ladies and gentlemen, let me now hand over to Roland, who will give you the financial figures in more detail.
Yes. Thank you, Angela, and good afternoon, everyone, also from me. I would like to start with the development of the container segment, national and international. In the first half of 2022, container throughput at all HHLA container terminals remained stable. As mentioned before, approximately 3.4 million TEU. Let us have a quick look at the breakdown to get a better understanding of different dynamics, national and international. The terminals in Hamburg, starting with the first national development, the terminals in Hamburg achieved growth of 3.1% to 3.2 million TEU. This was mainly driven by an increase in Chinese volumes and the successful acquisition of feeder services in the third quarter 2021 and in the first quarter of the current year.
On the other hand, against the backdrop of the closure of quayside container handling at the Container Terminal Odessa, as Angela outlined before, international terminals recorded a significant decline. Nevertheless, our operations in Tallinn were used as a popular alternative to Russian ports, achieved strong volume growth of more than 30% in the first half. With regard to the successful ramp up of PLT in Italy, in Trieste, volumes with regard to this operation contributed to the international development as well. All in all, as mentioned before, not capable to fully offset the stop of operations in CTO for evident reasons. Second, segment revenue increased strongly by 8.4% to EUR 438.8 million YoY.
This was due to the strong increase in storage fees at our container terminals, as well as additional revenue, as mentioned before, from our new operation in Trieste. EBIT costs increased by 5% compared to the first half last year due to a higher personnel deployment needed to cope with volume growth. I outlined the 3.1% in Hamburg before, and high utilization of the yards, dwell time development was mentioned before as well. This affected efficiency negative on our operations in Hamburg, as well as strong increase of cost of materials. The increase in the cost of materials resulted primarily from rising prices for electricity and fuel, as well as additional expenses from increased handling volumes and higher services and consulting costs. The interest-related reduction of restructuring provisions accounted for approximately EUR 7 million.
EBIT costs at our terminal in Trieste also rose significantly, compared to the first half of the previous year. Nevertheless, EBIT increased by 26.6% to EUR 80.2 million, with a double-digit margin of more than 18% in the first half of 2022. Now let's have a look at the development of our intermodal segment. Despite a challenging market environment, our intermodal companies recorded a slight overall increase of 2.2% in transport volumes. Again, it makes sense to have a closer look at the different developments of rail-bound and road transportation. While road transport continued to decline sharply, rail transportation lost growth momentum in the second quarter, but grew moderately by 4.6% YoY in H1.
The growth was mainly driven by traffic from the North German seaports, strong Polish traffic and the German-speaking region in a whole. Traffic with the Adriatic ports remained at prior-year level. Revenue increased by 11.4% to EUR 281.6 million, mainly due to a higher rail share of HHLA's total intermodal transport volume, accounting for 83.3%, as well as temporary surcharges which were needed to partly offset the sharp rise in energy costs. However, EBIT development was harmed by operational interruptions due to storm damage in February, construction work on German rail infrastructure, as well as ongoing disruptions to international transport chains and the strong rise in energy costs, which could only be passed on to the market after some delay.
Consequently, the operating results decreased by 7.1% to almost EUR 43 million in the reporting period, and the EBIT margin fell by 3 percentage points to 15.1%. Let's now turn briefly to the smallest segment, the logistics segment. In the first half of 2022, the consolidated companies reported revenue of EUR 37 million, and thus exceeded the prior year figure by 4.6%. Consulting activities and vehicle logistics in particular contributed to the positive development. However, there was an EBIT loss of EUR 6.5 million, mainly due to an impairment of around EUR 4 million in the field of new activities. At-equity earnings remained positive at EUR 1.7 million. The prior year figure was burdened by impairment at an equity investment of around EUR 1 million.
Coming back to Port Logistics subgroup as a whole, let's have a look at the cash flow development. Cash flow from operating activities decreased by approximately EUR 28 million - EUR 114.1 million as of June 30, 2022. The main driver was a higher increase in trade receivables and other assets compared to the same period last year. A lower increase in trade payables and other liabilities and the decrease in provisions where we saw a rise in the previous year. The higher EBIT compared to the same period of the previous year had an opposite effect. Investment activities resulted in a net cash outflow of approximately EUR 42 million. The development was mainly due to higher proceeds from short-term deposits and lower payments for investments in property, plant and equipment compared to the same period last year.
Free cash flow stood at EUR 72.3 million. The net cash outflow from financing activities was EUR 55.9 million, higher than previous year's figure at EUR 81.3 million, mainly due to the payment of increased cash dividends to shareholders. Overall, our available liquidity as of June 30 decreased to EUR 195.7 million. Let me now hand back to Angela Titzrath to comment on the outlook for 2022.
Yes, thank you. Thank you, Roland. Ladies and gentlemen, although we achieved good results in the first half of the year, we expect the difficult market conditions to worsen in the second half. We have therefore gradually lowered our forecast for container throughput and assume that volumes at the end of the year will be at the prior year level. For container transport, we still expect a moderate increase compared to the previous year. Our expectations for revenue and EBIT also remain unchanged. For revenue, a moderate year-on-year increase is expected for the Port Logistics subgroup, and an EBIT of between EUR 160 million and EUR 195 million is still regarded as possible for the Port Logistics subgroup in the current financial year. At segment level, we kept our EBIT expectation for the container segment unchanged.
We still assume that the EBIT contribution of the container segment will decrease strongly compared to last year. However, we have adjusted our expectation for the EBIT contribution of the intermodal segment, given the current challenging situation for hinterland transport. We now assume an operating result of the intermodal segment at the prior year level. At the beginning of the year, we expected it to increase moderately. This adjustment shows that it is not only our container terminals that are stressed by disrupted transport chains, but also how badly all German hinterland systems, including ours, are affected. We are doing our utmost to fulfill our supply mandate for Germany. Communication and cooperation are more important than ever in these troubling times.
To further increase productivity and capacity in the container intermodal segment, capital expenditure at the Port Logistics subgroup level is still expected to be in the range of EUR 270 million-EUR 320 million. However, we are still in a pandemic situation, and Russia's war of aggression in Ukraine has further complicated the predictability of the economic development. No one can currently foresee what consequences the crisis will have for the economy and society. Only an innovative and sustainable logistics network like HHLA can meet the growing demands. That is why even in these challenging times, we will continue to focus on resolutely implementing our strategy geared to growth and geared towards sustainability. With this information on our forecast and closing remarks, I would like to conclude our presentation of the interim results.
Roland and myself, we will now be happy to answer any questions if you have one. Thank you.
Ladies and gentlemen, we will now begin our question-and-answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question comes from the line of Mark Astrachan on Stifel. Please go ahead.
Hey, thank you for taking my questions. I will ask them one by one, I guess. The first one would be, we are currently reading quite a lot about low water levels at certain German rivers, especially the Rhine. Could you tell us if you see that there's a risk to the Elbe River from low water levels and that your yeah, that the Port of Hamburg might not be reached, or that the big vessels might not be able to reach the Port of Hamburg? That would be the first question.
Okay. I take the first question. The low water levels of the Rhine actually is underlining that in particular the close connection from the Rhine and Ruhr area to Rotterdam is at stake if you have to count on volumes. They have already some logistics chain disruptions coming from this again. This is actually rather an opportunity than a challenge for us. That holds true as well for the Elbe River, as not only we have already the digging, that's something actually is now asked for the Rhine as well. The digging has happened here, and we will have nothing comparable in terms of problems on the water level.
Thank you.
Actually, we still have wind, you know, basically pushing water from the sea, the river up. No problems from our side, regarding the water levels.
Okay. That's good to hear. Second question would be on working capital or let's say the balance sheet. I noticed that the receivable from related parties line showed quite a significant drop this quarter, from roughly EUR 80 million to roughly EUR 60 million. Could you comment on what has driven this drop and if this is expected to rebound in the next quarter?
You're referring to the working capital. If you look at the trade receivables, they have gone up in line with the revenue developments, i.e. in the two big segments. You know, of course, DSO remained almost stable. So it is clear if we grow on top line, this is reflected in the trade receivable development. This affects working capital accordingly. So whether it will be down or rebound, to be frank, I think in principle, it's good news. Because if revenue grows, this is reflected in increasing trade receivables. The question is whether the receivables are at risk or not. With regard to the all-time high results posted by the big shipping lines, I'm quite reluctant regarding the outstanding payments of our clients.
Thank you for that elaboration. I was referring to the receivables from related parties line in the balance sheet. Here I see actually a drop from roughly EUR 80 million in the first quarter to roughly EUR 60 million in the second quarter. I was wondering where this drop in the receivables from related parties line actually came from.
The impact with regard to group financing and, of course, they show volatility because we did a lot to cover the interest risk and fixed positions in different entities, and this is reflected in the alteration.
Okay, thank you. Last question would actually be on Odessa. I understand that the terminal is still operational, and there was some news that these grain shipments from Odessa have started again. Is this something that affects your terminal, or do these grain shipments originate from other terminals in Odessa that are not operated by you?
First of all, I think that is the huge upside that we always try to underline and we are very grateful. You can see now in the reporting of the media that the port of Odessa has no highly destroyed infrastructure, yeah. The infrastructure is destroyed in the Ukraine, but not in the port and not at our terminal. It manifests that the terminal in Odessa will be a key in terms of building up the country after the war or even during the war. This may lead to a boom in cargo flows going forward. So far, one vessel has left Odessa. It's a very, very small one. We are prepared to handle the Panamax sizes, so the big ones.
We are in preparation, or we can start, basically, any minute. The very first one did go away from a very small terminal. This was like, if I may phrase this, it was the first tryout, and they wanted to use a vessel which is very small. Basically, it was not filled with grain, but it was filled with maize. We see that this could be potentially for us a business which you don't see reflected yet in our numbers because it's still to come, and it's depending on the development of further opening up the waterways up through the Bosporus and further.
If this is developed in a stable way, you can calculate 300-500 vessels in the size of Panamax, which will be needed to get the grain out of the Ukraine. Obviously, Odessa would be then of essential interest and would play a significant role. The first one was a test and did not go from the very small quay in the terminal in the harbor.
Right. Thank you. Last question would be on the downgrade on the container throughput volume for the port. When you laid out the EUR 400 million EBIT scenario for 2025, you said that you expect pre-pandemic volumes by 2023. I guess this might be quite hard to achieve. Would you then consider revising or, let's say, adjusting this 2025 EUR 400 million EBIT scenario, or is it still a valid assumption?
First of all, if you look in the results posted so far, we have caught up with a level of pre-pandemic. As I outlined, the positive development still in Hamburg, plus 3.1% against the market environment that is declining. Angela outlined that we gained a market share in this development. It's just for your orientation where we are. The other thing is, how does it fit to an ambition for 2025 compared to where we are, apparently. If we guide you on segmental level to end up at previous years' level, we factor in, and this is why I outlined and commented a little bit on the breakdown of the two opposing effects. Of course, so far, Odessa is at risk.
On the other hand, there's a potential that was outlined before, and Angela Titzrath commented on that. It's difficult to properly forecast. On segmental level, the figures are impacted, and depend on a normalization recovery, i.e. With regard to our cost efficiency program, this has to do with natural development in the port of Hamburg mainly. The starting point is not flattish, this is +3.1%. I repeat it, according to the development in the first six months. Now coming back to what is our view on the bridge to the ambition. I think it's too early to comment on 2023, with regard to the guidance on segmental level, you have to factor in the international development.
We clearly stated that, of course, the positive development in Tallinn partly offset the decline of volumes as a consequence of the invasion so far, but is not appropriate to offset it in full. This means the other way around, we are not in negative territory in Germany. This gives you a little bit orientation of whether it is achievable still if we progress with the efficiency program to meet our targets and ambition midterm. With the clear indication that the number of impacts that need to be factored in might this way or the other lead us to an update, but it's not the issue for today.
We will come back to this if we are through with the planning, internal planning procedure this year.
Let me just add, because I think it's important to always compare to developments in the North Range. If you factor in, the Port of Rotterdam has lost in the first six months compared to 2021, same six months, - 4.4%. Port of Antwerp, - 6.2% compared to the same period of the year before. Basically, I mean, we feel that under the very, very difficult circumstances and under the unpredictability, not only of the pandemic situation, but basically the war and the sanction situation, we feel the company is very stable.
Thank you.
The next question comes from the line of Nicolai Thomsen from Kepler Cheuvreux. Please go ahead.
Good afternoon. Thank you for the presentation. I have four questions, and I'll also go one by one. The first one is against the backdrop of the collective labor negotiations. Can you remind us what kind of wage inflation is baked into your EBIT guidance? Thank you.
As we have a situation where negotiations continue, I would answer in a qualitative way and not disclose the details. Take for granted that on management level, we try to assess the potential outcome and factor it in the range that we just confirmed to the market.
Okay. Fully understood. Second question would be, what share of container EBIT is attributable to storage fees at the moment? What part of this would you expect to vanish in a normalized, whatever situation?
I would challenge you with the word of normalized. If I look back in the past five years, every single year, I could not say which year would be a normal one or a normalized one. I think that it's important as well to understand that in the volatile circumstances that we are facing since three years, basically now, that volatility and managing volatility, that means as well to have different levels of inventory, will be maybe possibly in the future, the new normal.
Fair enough. Third question would be, you called the port of Tallinn a popular alternative to Russian ports. I'm struggling a bit with understanding how that squares with sanctions that we have on trade with Russia. What amount of TEU is still attributable to Russia in the second quarter? Why is it a popular alternative? What does that mean?
Well, the first part is if you don't want to go to Russia, and you have trades and containers with you, then you leave it at the port closest to Russia. Yeah.
Okay. Is that
Yes?
To add on a bit more what we mean is don't forget, this is the last European port adjacent to the Russian border, where if you are forced to stop cargo that is banned due to the sanctions, you try to buffer it in Tallinn.
Okay.
The closest port to Russia.
We offer the services to the market and the services are highly welcome. As we outlined, container volume has gone up by more than 30%. This is one of the reasons. Yeah, 'cause you can use this port and you are in full compliance with the sanctions. On the other hand, you need space and terminal capacity, agents on the ground, but not allowed to use and continue your trade flows by using Russian ports. This is where we benefit to a certain extent, and where we are happy to offer services to the market that help them to fix the problem.
Okay. What I understand is that you have, like, you get storage fees there and, like, the owners of that cargo will eventually have to decide whether they leave it with you and continue to pay, or whether they collect it and bring it back to where it came from.
I offer you a different view on this. You need to understand that the cargo flow is changing as well. You have, in addition to this, steel and wood and everything else, which might come from Russia, is now coming from different areas, in particular the Baltic areas. You have obviously as well a small portion of containers, container storage, which gets redirected, maybe inside of the container goods, which supposed to go to Russia but no longer going to Russia, is now going to be sold to other customers and get redirected and so on. You have a total change in the trade flows, where Tallinn plays a significant role of basically circulating it.
Okay. Thank you.
Russia is no longer a market to go to.
Final question from my side is, can you tell us what activity was impaired in the logistics segment? As I remember, you presented a couple of them to us, and we might be able to remember which one.
That was the additive manufacturing activity that we have established under the name of Vionice.
Okay. Any detail what triggered the impairment?
Well, you have a very difficult market environment.
Mm-hmm. Okay.
Additive manufacturing is still to be developed. If you have a market which is very difficult for innovative goods, the first thing in terms of a difficult environment, a pandemic and war environment, was that the market was not receptive. Therefore, we have taken the cautious conservative way on evaluating this business. We still believe it's a strategic good idea to develop it, but we do it very cautiously.
Thanks for all the answers.
The next question comes from the line of Peter Hyde from Atlas. Please go ahead.
Hi. Thanks for taking my questions. Really, I wanted to focus on the intermodal business, and I've got two or three sort of related questions. The first one, could you explain in a bit more detail the reason for the EBIT decline and what you might think might be recovered? Because you're talking about increases in energy charges which have been passed through as a surcharge on revenue, but there's a lag in the system, so you haven't fully recovered these. Obviously, I'm sort of referring to slide five. Perhaps you could just give us a bit more indication of whether you're actually going to recover those energy charges in, let's say, the second half of the year.
Secondly, again, on intermodal, I was quite keen to have a quick understanding of why rail transport was up 4.6% compared to, let's say, volume throughput at Hamburg only up 3%. Does that mean you're taking that amount of market share at Hamburg? Finally, I suppose, on intermodal, do you think there will be long-term consequences of the Russia-Ukraine situation on your ability to develop an intermodal rail network? Or how do you think it might alter your view on how you develop that intermodal rail network? Thank you.
Okay. I start. We just try one-on-one. We didn't have a very good line, so you just start to see, you know, whether we have understood your questions in the right way. First, I start with your last one with regard to the development strategically on the intermodal side, whether the Ukraine and Russia conflict is posing or would be a stumbling stone. Definitely, we would not see this as a hindering point. Actually, as you can see, this year, in the first half year, in terms of volumes, we did grow significantly. This is basically based on the continuation of our very consistent investment and development strategy. We invest in people. We are basically developing people.
I mean, the scarcity of labor force in specialized areas like locomotive and others, we do it ourselves. We develop further in the rolling stock. We are developing further in relationships in the last acquisition that we just made in Poland, beginning to the end of last year. We are consequently developing further our intermodal business, and we don't see any obstacle coming now from the war. Even we see that the Silk Road development is continuing.
If I may recall, even now, the good relationship that we have built up, the partnership with the Ukrainian railway system is allowing us to have a land bridge built, which is still working and basically fueling that you get the goods in and out of the Ukraine. In terms of your question with regard to the energy surcharges, we are able to increase our prices and give those surcharges to the market successfully, and that's why we have given as well the outlook as it is. You had a third question?
Yeah. This was, I will give you the answer. Sorry, I got the point. You mentioned 4.6% that I outlined was the dynamic year-on-year with regard to volumes handled in our intermodal rail-bound systems. You asked the question, if you compare it to the 3.1% in Hamburg, what the explanation might be. Was this your point?
That we have lost market share. I think you wanted to know.
Of course, we gained market share. It is a little bit complicated because not all figures have been released so far to the market. I would, as a best guess, at max expect the development in the German coastline flattish. On the other hand, as Angela said, Benelux is declining, it is clear with growth of 4.6%, this way or the other, we must have gained market share. With regard to the high increase of gasoline prices, we might have affected the modal split as well with regard to truck and rail-bound business. There are no statistics on hand so far. In any case, positive last five, 4.6%.
Okay. Thank you.
As a reminder, if you would like to ask a question, please press star followed by one. There are no more questions at this time. I hand back to Angela Titzrath for closing comments.
Thank you very much. Ladies and gentlemen, thank you very much for your interest and your ongoing support for HHLA. Although we are living in difficult and really unsettling times, we will continue to decisively and consistently take advantage of the opportunities provided by the digital transformation and the drive towards climate neutrality in order to lead HHLA into a sustainable and economically successful future. Please stay healthy and take care. Goodbye.