Thank you, Anneli, and good afternoon, and welcome one more time to Tallink Grupp's Q3 2026 results webinar. The third quarter is our most important seasonal period, and today I will cover the operational performance, profitability, cash flow, and financial position for both Q3 and the first nine months of 2026. I will then take your questions afterwards. Let me first begin with three main takeaways from the quarter. First, the summer season delivered revenue and volume growth. Revenue increased by almost 6% to EUR 247 million. Passenger volume grew by 2.8% to 1.8 million, and cargo volume was up by close to 8%. That despite the closure of the Paldiski-Kapellskär route in May 2026. Second, operating profitability was resilient, but under clear cost pressure. Fuel cost increased by more than EUR 9 million in Q3 compared to the Q3 2025.
EBITDA was therefore EUR 68 million, one million below last year. The full phase-in of EU ETS from 70% of emissions in 2025 to 100% in 2026 added further pressure to the cost base. Q3 compared to last year Q3 increase in ETS cost was EUR 2.3 million. But despite that, net profit increased to EUR 43.8 million, which is EUR 3 million higher than Q3 2025. Thirdly, our financial position remained solid. Net debt decreased by EUR 11 million during the quarter and is now below EUR 400 million. Net debt to EBITDA improved to 3x, and total liquidity remained above EUR 100 million. Overall, Q3 demonstrated the resilience of demand and the value of disciplined fleet and balance sheet management in a difficult cost environment.
Tallink Grupp remains a leading provider of leisure and business travel, and sea transportation services in the Baltic Sea region, supported by Tallink Silja brands and the growing Club One loyalty program. At the end of Q3, we had 11 vessels, nine passenger vessels, and two shuttle vessels. Like previous quarter, we operated four regular Baltic Sea routes, had three vessels on charter, and one vessel, Romantika, is laid up at the quarter end. Our broader ecosystem includes four hotels, 19 Burger King restaurants, approximately 3.7 million Club One members, and around 4,500 employees. The business model remains diversified across passenger transport, cargo, onboard and onshore retail, hospitality and then charter income. This slide is familiar for you and shows how the fleet was deployed at the end of the quarter. Megastar, MyStar, and Victoria served the Estonian-Finland market. Baltic Queen operated Tallinn-Stockholm.
Silja Symphony and Silja Serenade operated Helsinki-Stockholm, while Baltic Princess served Turku-Stockholm route. Three vessels were chartered out. Galaxy I and Silja Europa remained in the Netherlands and have been there since 2022. St Patrick, formerly Superfast IX, has been on a 36-month charter since 1st of May 2026 with the extension and purchase options. Romantika was used actively during the summer period. It operated as an additional vessel on Tallinn-Stockholm route in July and early August, and then was temporarily chartered to Italy for accommodation and catering services during the Mediterranean Games. Afterwards it returned and has been laid up at the end of the quarter. Now looking at the key figures. Q3 passenger volume reached to 1.8 million and was up close to 3%. Cargo units increased by 7.8% to almost 65,000, while passenger car declined slightly by 1.1%.
Revenue grew close to 6%, up to EUR 246.7 million. Gross profit increased to close to EUR 70 million. EBITDA was at EUR 68 million, EUR 1 million below last year. Primarily reflecting the EUR 9.2 million increase in fuel cost and EUR 2.3 million increase in ETS cost. Net profit increased by EUR 3 million to EUR 43.8 million. For the first nine months, revenue increased by 4.5%, slightly above EUR 600 million. EBITDA rose to EUR 104 million, and net profit increased to EUR 19.4 million. Capital expenditures were EUR 3.4 million in Q3, and in first nine months, the total amount was EUR 25 million, largely in line with the previous year's figures. Capital expenditures were mainly related to vessel maintenance, repairs, interior upgrades, and IT systems. During Q3, we paid EUR 20.6 million of loan principal and interest. Dividend and related income tax payments totaled EUR 28.4 million.
Even after these payouts, the net debt fell to below EUR 400 million and liquidity was above EUR 100 million. Revenue growth was led by our two largest geographical segments. Estonia-Finland revenue increased by EUR 5.3 million to EUR 100 million. Passenger volume on Estonia-Finland route increased by 1.5%, and cargo units close to 16%. The segment result was stable at EUR 30 million. Finland-Sweden revenue increased by EUR 5.8 million, close to EUR 80 million. Passenger volumes grew by 5.3% and cargo units above 20%. At the same time, the segment result declined by EUR 1 million, reflecting the impact of higher fuel cost and higher fuel cost on the longer route. Estonia-Sweden revenue declined slightly to EUR 26 million, and the segment result was EUR 400,000 below last year result. Passenger volumes increased, but cargo volumes fell significantly because the Paldiski-Kapellskär route was closed after St Patrick entered the chartering agreement. The other segment performed strongly.
Revenue increased to EUR 42.6 million, and the segment result improved by EUR 4.8 million to EUR 14.8 million. That was supported by charter activity and lower costs following the disposal of idle vessels in 2025. Our estimated passenger market share were 48% on Estonia-Finland and 38% on Finland-Sweden, and we remained the only passenger operator between Tallinn and Stockholm. Revenue growth was broad-based across the operational segments. Restaurant and shop sales remained our largest revenue category, accounting for approximately 45% of Q3 revenue. Ticket sales contributed around 34%, cargo 9%, and charter income around 7%, with accommodation and other sales making up the rest. Compared with the Q3 last year, onboard and onshore restaurant and shop sales increased by EUR 4.2 million, ticket sales by EUR 2.4 million, and cargo sales by EUR 3.7 million. Charter revenue rose by close to EUR 3 million.
The key point is that growth did not rely on a single revenue stream. Passenger traffic, cargo, and charter activity all contributed. This slide illustrates the seasonality of our business. Q3 is the strongest quarter for passenger volumes, revenue, and earnings. The EBITDA comparison shows the effect of cost inflation. Despite higher revenue and activity, the fuel cost increase and full EU ETS implementation limited the conversion of growth into operating profit. The quarterly net result profile shows the importance of the summer season. Q3 generated a net profit of close to EUR 44 million, compared with EUR 41 million last year. For the first nine months of 2026, net profit was EUR 19.4 million, compared with EUR 5.1 million in the same period last year.
This improvement reflects stronger operating results over the nine-month period and lower depreciation following the alignment of estimated useful lives for cruise vessels and also disposal of idle vessels last year. The chart reminds us that the fourth and the first quarter are structurally softer. We therefore continue to manage low season capacity costs and fleet deployment actively. Q3 sales increased by EUR 13.6 million, as stated before. Cost base was inflated by fuel and ETS costs. Rest of the costs were rather stable. Nine-month EBITDA is EUR 2 million above 2025 result, and net profit is impacted by lower depreciation and also slightly by financial costs in 2026. Operating cash flow in Q3 was close to EUR 40 million. After capital expenditure of EUR 3.4 million, free cash flow was around EUR 36 million.
Financing cash outflow included EUR 29.2 million net effect from debt financing, EUR 4.9 million of interest and other financial items, and EUR 22.3 million of dividend payment. The issue of shares under the option program generated EUR 2.5 million positive cash flow. As a result, cash decreased by EUR 18 million during the quarter to EUR 21.8 million. This movement should be viewed together with the unused overdraft facility and the significant scheduled payments during the quarter. For the first nine months, operating cash flow was EUR 104 million and free cash flow EUR 79 million. The balance sheet remained solid. At the end of Q3, total assets were EUR 1.3 billion and shareholders equity EUR 728 million. The equity to asset ratio improved to 55%. Interest-bearing liabilities decreased to EUR 420 million. Net debt declined by EUR 11 million during the quarter and stood slightly below EUR 400 million. Net debt, as I said already before, was at three.
Cash was EUR 22 million and unused overdraft facility EUR 81 million, giving total liquidity of EUR 102.8 million. This financial flexibility is important as we enter the lower season period, continue scheduled debt service, and prepare for the second dividend installment in November. At the quarter end, long-term bank loans amounted to EUR 332.3 million. We had three loan agreements outstanding, the syndicated loan and two shipbuilding loans related to MyStar and Megastar. The portfolio includes both fixed rate and EURIBOR-based floating rate financing. During the quarter in September, we amended the syndicated loan and extended its maturity by two years until December 2030, with option for two further one-year extensions. This reduces the refinancing risk and improves the maturity profile of our debt. Unused overdraft facilities increased to EUR 81 million, while the drawn overdraft balance was close to EUR 19 million.
During Q3, loan principal and related interest payments totaled EUR 20.6 million. Debt reduction remains an important priority and balanced with maintaining sufficient liquidity and shareholder distributions. Thank you for your attention. To summarize, Q3 delivered growth in passengers, cargo, and revenue. Profitability remained resilient despite the fuel cost and ETS cost increase. We continue to reduce net debt while maintaining liquidity above EUR 100 million. We will now move to the Q&A session, and I will be pleased to answer your questions.
Thank you, Peep. As usual, I will read out the questions that we have received earlier, as well as those which have been posted to the Q&A section, and Peep will answer them. Due to some of the questions repeat each other, we have combined them and grouped them together based on similar topics. Let's start with the first question. You have increased your market shares between Finland and Sweden, and your profit has increased despite increasing costs. Your competitors claim that you have been more aggressive. What is it you have done? Is it lower prices on tickets or onboard, or just increased marketing?
I think the quick answer is a combination of everything, but we have focused on strengthening our core routes through targeted sales and marketing activities, then competitive offerings, and also maintaining a high-quality customer experience, including relevant onboard offerings in our shops, restaurants, and entertainment. The growth in passenger and cargo volumes reflects the continued demand for our services. We continuously adjust our commercial activities to market conditions. Clearly our objective is not simply to increase the volumes, but at the same time focus also on profitability. So profitable growth is still our key target.
Thank you. What is your mix of fuel at the moment?
When it comes to our cruise ferries, then we primarily operate on marine diesel oil or MDO, while our shuttle vessels use liquefied natural gas, LNG, or then the biomethane. As they are dual fuel vessels, then they also can operate on marine gas oil or marine diesel oil. If the shuttle vessels operate primarily on LNG, which has been the practice in last quarters, then fuel mix is close to 75/25 between marine diesel and LNG, and this is then based on today's schedule and routes.
Thank you. How will this affect last quarter of the fuel mix, basically, fuel prices?
Yes. Fuel cost remain one of our important operating expenses, that's for sure. The impact on the fourth quarter will depend on the fuel price development, consumption levels, and our ability to manage the costs. We continue to monitor the situation closely and focus on improving the operational efficiency.
Thank you. Is there a risk that you will temporarily cancel routes, for example, Helsinki-Stockholm? If so, when do you see this coming? Is there a special fuel price when it gets critical?
Just to remind, we closed Paldiski Kapellskär route in May, but that was mostly related to chartering out the vessel. We actually analyze constantly different options how to utilize the fleet in most efficient way. However, at this stage, we do not have any plans to suspend further routes. I'm not in a position to give any specific fuel price levels where that situation might change. But the environment is dynamic and we constantly assess the situation.
Thank you. ROMANTIKA is back in Tallinn. What is the near future for her? Is there a possibility that she will be temporarily put in traffic, like this summer? What is your evaluation of ROMANTIKA summer traffic?
First, we continue to evaluate potential chartering opportunities and alternative uses for ROMANTIKA. I would say it is unlikely to put ROMANTIKA in traffic during the low season, especially with the current fuel price environment. The vessel's deployment during the summer demonstrated the flexibility of our fleet and our ability to use vessels for different commercial opportunities. ROMANTIKA attracted new passengers during July and early August in Tallinn-Stockholm route and then had the successful chartering in Italy late August, early September as an accommodation vessel.
Thank you. You have recently warned about changing flags due to announced lower government supports. Where are you currently in these plans, and what flags and what ships would be most attractive for a change of flag if you take this further?
Thank you. First, just to clarify, there was a support during COVID years in Estonia for partial refund of employment taxes paid by Tallink. In government budget strategy for 2027, 2030, it was first put back and now, during the budgetary talks, actually taken away in actual 2027 budget. Overall, the competitiveness of the Estonian maritime sector is an important issue for us. Different national support schemes and employment-related costs can create significant differences in operating costs of vessels sailing under different flags. We have experience operating in Finland, Sweden, and Latvia in addition to Estonia. All these countries, except Estonia, have more favorable employment taxation. So 2027 government budgetary process in Estonia is currently ongoing, and we are actively monitoring the developments and also explain our viewpoints.
Our priority is to maintain competitive and sustainable operations, but any potential changes to vessel registration would require a comprehensive assessment of financial operations and regulatory implications. We have not announced any decision regarding specific vessels or alternative flags. This process will continue.
Thank you. To what extent do you expect the industry to pass on the increased fuel prices onto customer ticket prices?
As it was said, then fuel costs represent important part of our operating expenses and sustained increase inevitably put pressure on profitability. We continuously review our pricing in response to market conditions, but our ability to pass on higher costs depend on customer demand, competition, and price sensitivity. We aim to maintain a balance between competitive pricing, passenger volumes, and profitability. Therefore, we cannot assume that all increases in fuel costs can be fully passed on to customers, and we also bet that we can partly cover the additional fuel cost with the actual increased volumes.
Thank you. As Armin Penner started recently as CFO, should we expect any changes to group reporting or capital allocation priorities?
Armin Penner joined the Tallink team mid-October or early last week. I believe he will bring fresh perspectives and valuable insights into how we can further strengthen our financial management, improve efficiency, and optimize the use of our financial resources. No immediate changes are planned when it comes to the reporting.
Thank you. Perhaps you could give an update on the chartering outlook for Silja Europa and Galaxy. Is the base case to extend the chartering during next year, or is it more likely they will be chartered to new clients?
The current situation is that there is no changes planned and no news to communicate. Both chartering agreements have prolongation options available, and we do not have currently any information that these options will not be used.
Has the strong year-to-year growth in cargo remained in the beginning of Q4 2026?
Yeah. The quick answer is yes. We haven't seen any major changes there. It has continued as last couple of quarters and last months.
Thank you. We are now moving to the Q&A, questions submitted through the Q&A section in this webinar. Is there a plan to resume the Paldiski-Kapellskär route at some point?
Currently, I would say not. We have suspended the route. We have looked for the vessel, but with current fuel prices, the probability to restore this route is rather low. But we keep our capacity to return to that topic and to operate that route if the overall environment is more suitable.
Thank you. We all know that the main season in the maritime industry runs primarily from April to October. What are your ideas for maintaining healthy profitability and turnover during the low season as well?
Valid question. This is something that has been there for many years. What we do is we try to attract also passengers during the low season with different activities on board, whether it is the current Spanish festival on our cruise ships or upcoming Christmas activities. We know that the passenger numbers are lower, but all in all, the value proposition that we create also during the winter season is something that we believe that brings the passengers on board. And of course, at the same time, keeping the costs under control, especially during the low season.
Thank you. What do you consider to be your biggest competitive advantage over competitors such as Viking Line and Eckerö Line?
It depends a bit on route and vessel, but if to take the route where most passengers and cargo is actually moved, Tallinn-Helsinki route, then we have the most modern vessels, MyStar and Megastar. We have a most frequent schedule. If the biofuels are available, then we also operate with biofuels, meaning that we are the most environmentally friendly, and then we constantly look for the best price quality balance when it comes to our pricing. I would say that these are our key strengths. And if you look at the development of the market shares and growing passenger numbers and cargo volumes in Q3, then seems that this value proposition is well appreciated also by our customers.
Thank you. Are there any plans to expand or reduce the fleet?
Not immediately. As we said, we are looking for the job for ROMANTIKA, which is currently idle. As I also comment, we do not see that there is a need for extra vessel during the low season. So we are currently assessing different opportunities and if something is agreed, then also share this information with investors. When it comes to the potential new builds, then nothing specific and concrete to announce as of now. We are continuously monitor the market. Also talk to different shipyards, to understand what are the latest developments in technology and how this could be implemented in the benefit of Tallink Grupp. But nothing concrete to announce as of now.
Thank you. What was the positive impact on gross profit line in Q3 from lower D&A expense?
Just a second. I will take a look. The absolute year-over-year decrease was EUR 3.3 million, of which then 2.3 was related to the change of useful lives of the ships. So that was the activity that we did Q4 last year, where we changed the lifetime of the assets based on the useful lives of the ships back then.
What are the plans with ROMANTIKA in Q4 and over the next 12 months?
As I said, we are looking currently for the job or charter out this vessel. If we are successful, then of course it depends whether it is a short-term or long-term chartering agreement, and whether we have any opportunity and possibility to utilize this vessel during the high season in Baltic Sea or not. First, the clear goal is to find the opportunity as soon as possible, hopefully in Q4. If not, then in Q1 latest.
We have now one more question. Italian media outlets report that ROMANTIKA's contract value for the Mediterranean Games was approximately EUR 6 million. Was that amount wholly booked under charter revenue, or was it somehow split across segments?
My understanding is that it was fully booked under the charter revenue and then the ballpark number, EUR 6 million, is also correct.
Thank you. That was the last question and the last answer. On behalf of Tallink, we thank you all for joining us today and for your questions. Our fourth quarter 2026 results will be published in February next year, 2027. We do appreciate your continued interest and support, and we look forward to speaking with you again at the next results webinar. We wish you all a pleasant rest of the day, and thank you and goodbye.