Good afternoon, dear listeners. Welcome to Tallink Grupp Investor Webinar, introducing the financial results of the first quarter, 2023. My name is Anneli Simm, and I'm the Investor Relations Coordinator for Tallink, and I will be moderating today's webinar. Today, we have two presenters, Chairman of the Board of Tallink, Mr. Paavo Nõgene, and the Member of the Management Board, Mr. Harri Hanschmidt. First we will start with an overview of the first quarter and then proceed with the Q&A. We have not received any questions prior to this webinar, so in case you did send the questions and we have not received them, please post the questions on the Q&A section of this live event.
I will now give the microphone, or I will now hand over the microphone to Mr. Harri Hanschmidt, who will give overview of the first quarter results of 2023. Thank you.
Thank you so much, Anneli. My name is Harri Hanschmidt. I'm board member for Tallink Grupp, and I will introduce you the first quarter results for this year. First, a little bit for the new listeners and reminder, Tallink Grupp is the leading European provider of leisure and business travel and sea transportation services in the Baltic Sea region. We offer passenger transportation and cargo transportation as well as leisure cruises on the Baltic Sea, between Estonia, Finland, and Sweden. Tallink Grupp owns and operates a fleet of 15 vessels. Today, or in the first quarter, six of these vessels were chartered out. We operate on six ferry routes. Currently, we have one of these suspended, the Riga-Stockholm route.
We also operate four hotels. In the first quarter, the Tallink Hotel Riga was still closed because the COVID pandemic effects. Now in April, we opened the hotel. Last year, our revenues were over EUR 770 million. We transported 5.5 million passengers, over 400,000 cargo units with a 1.7 billion asset base, mainly the vessels. We had about 5,000 employees in the end of the first quarter, and our loyalty program, Club One, had over 3 million loyal program members, and it is one of the largest loyalty programs in the region. We have almost 40,000 shareholders and are listed on the Tallinn and Helsinki stock exchanges.
We operate two strong brands, the Tallink brand and the Silja Line brand. In the first quarter, the key developments we saw were that consumer and business confidence in home markets has started to improve compared to the all-time low that it was in September for basically the whole region or the three countries. There has been a slowdown of increase in global fuel and energy prices, although the levels remain quite high compared to the pre-pandemic. Right now we have seen stability and even some decrease in fuel prices as well as food products and materials.
We are in a rising interest rate environment. This means a direct effect to the costs for our floating loan portion that is tied to the Euribor. The geopolitical situation and ongoing war in Ukraine has a direct effect on our business. We are missing different passenger groups, and Asian passengers have not returned yet as well. The main events in the first quarter were the extension of two short-term charter agreements. One with the government of or the authorities of Netherlands for the Silja Europa. That is extended until June 2023, and the vessel is chartered out. As well for the cruise vessel Galaxy until October 2023.
We signed a new collective agreement with the Estonian Seamen's Independent Union for the next 4 years. This means there was a raise in salaries, at least 13.5% for the servicing personnel and 16.1% for the technical personnel. That was already implemented in 1st February this year in the first quarter. The numbers for the first quarter are as follows: We transported 44.5% more passengers. In the first quarter, we transported over 1 million passengers. 86,000 or almost 87,000 cargo units. That was slightly down, but we have also less capacity on the routes for the like, for like period.
The number of passenger cars was up 12.3%. This is with the recovery, and in the last year, we still had the COVID effect. Now we see an increase of demand and obviously no restrictions anymore. Cargo or the charter revenues increased by EUR 27.5 million and are due to the six vessels that were chartered out. Cost of sales also increased by 16.2% to EUR 20.4 million, and fuel cost increased by 6% or by EUR 1.7 million. This is not only the effect of lower fuel price, but also we consumed less fuel because of the vessels chartered out.
We had a capital expenditure of EUR 11.5 million. This was mainly for the three vessels, Silja Serenade, Silja Symphony, and Baltic Princess, that were all together chartered out in the repair works for 45 days. Also, we had some investments into the IT systems and the shore power systems of Megastar. The bridge chart shows that there was an increase from EUR 106 million to EUR 171.2 million. The majority of the recovery came from the income from charter of the vessels and restaurant and shop sales on board. Also, ticket sales and accommodation sales showed a positive increase, and cargo was slightly negative.
The restaurant shop sales increased because of a higher number of passengers, but also due to a good level of spending on board. The ticket sales, we have dynamic pricing in place, also there was this higher demand. We also received MyStar, the ship has started operating between Tallinn and Helsinki together with Megastar. In the first quarter, Star also was in operation. The cargo environment is always highly competitive. The revenue development for the geographical segments, we can see also the other is mostly the chartered out vessels, EUR 32.5 million. The biggest operational revenue came from Estonia-Finland, EUR 16.1 million, from Finland-Sweden, EUR 10 million, Estonia-Sweden increased by EUR 7.1 million.
The quarterly seasonality breakdown, we can see that now since 2020, when the crisis started, we have been gradually recovering on the passenger level. In 2020, we had 1.6 million passengers, but this quarter was already affected by COVID. In 2019, we had, I believe, almost 2 million passengers in the first quarter. Today, the level is just about 1 million cargo units, 87, so quite the same level. On the revenue level, we have already reached the 2019 level. It was EUR 179 million in 2019. This quarter, we already had EUR 171 million in the first quarter revenues.
EBITDA, EUR 27 million is already a better result than in 2019 and a very solid start to the first quarter. The seasonality level, first quarter is our low season. We have the most servicing days of the vessels. This time we can see because of the supporting effect of the charters, quite strong first quarter with the net loss of only -EUR 5 million. Typically, the net loss has been much higher the past year, -EUR 40 million, -EUR 34 million, and in 2020, it was -EUR 30 million. I think it is a very nice start to the year.
The EBITDA was EUR 27 million in the first quarter, and this means the EBITDA margin was 15.8%. We had a positive operating cash flow of EUR 26 million. The CapEx was EUR 12 million, so we ended up with a free cash flow of EUR 15 million and paid back debt about EUR 25 million. This is a net effect of the financing and interest rose as there is a higher interest rates from EUR 6 million to EUR 8 million on a year-to-year basis. In the first quarter, we ended up with a negative EUR 18 million cash flow. Our net debt to EBITDA is today 4.2x .
Today, our CEO, Paavo Nõgene, has said that comfort level starts from 4x. I'm happy to announce that we are quite close to the comfortable level of the balance of the earnings and that debt. Altogether, the net debt is EUR 735 million. Equity asset ratio 42%, and the book value was EUR 0.94. Altogether, the interest-bearing liabilities amounted to EUR 831.8 million. We have EUR 726 million today long-term debt, and have not used the overdraft. Our debt is structured into seven loan agreements and outstanding with the syndicated loans, amortizing project loans. This is basically the new vessels and working capital loans with maturities ranging from 6 months to 12 years.
The loans are in euros and some of them are fixed and some are variable floating. Amortizing or the new vessel loans tend to be fixed loans. Overdrafts, we have EUR 135 million available. These are not used. The events after the reporting period and outlook, we have done a long-term purpose charter agreement with the Canadian entity, Bridgemans Services Group. We have had positive chartering experience with Bridgemans before when Silja Europa was chartered out in the past to Australia. The long-term purpose charter agreement with Irish Continental Group was signed, chartering to shuttle vessel, Star. Here are also the dates. Isabelle is will be chartered from 1st of July to a multi-year charter agreement.
It includes a purchase option. This vessel Star, the charter agreement was signed for 20 months with the possibility to extended by 2 years, plus another 2 years. The charter agreement for the cruise vessel Victoria was extended until 15th of July, 2023. Tallink Hotel Riga was opened after 2.5 years of suspended operations on 14th of February. We changed the flag of the vessel Galaxy. And now it's called also Galaxy I . The change from the Swedish flag to Latvian flag will give us more flexibility in the future.
Due to the altogether six charters, we have started a collective redundancy process of up to 400 crew members in Estonia and up to 100 crew members in Latvia. Thank you from my side. I will give word to Paavo Nõgene, who will maybe say something, as we see today there are no questions yet.
Yes, good afternoon also from my side. Harri Hanschmidt gave a good overview, but I just want to add that Tallink's first quarter has ended, and we have every reason to be satisfied with the results for that quarter. Historically, the first quarter has always been the low season for Tallink. To achieve the best first quarter ever after three crisis years is a good outcome both for us, as well as our shareholders.
We have laid a strong foundation for the next quarters of this year. We achieve this result thanks to strong cost control, the changes we implemented during the crisis years resulting in a slim fit Tallink, good ticket and onboard sale revenues, very importantly also by having the most optimum number of vessels on the routes most suitable for them, and the profitable chartering of six of our vessels to carry out various projects across Europe. All these factors have helped us achieve the best quarter one results in our company history. I thank all my 5,000 colleagues who has been part to sail Tallink through the different crisis and helped us to reach now this kind of historical result of the company. I see that we have also now some questions.
Anneli will present the question, and I'm going to answer them.
Thank you, Paavo. The first question is, how significantly lower is the profitability for long-term charter vessels compared to short-term?
Long-term charter vessels, having the long-term impact to our results and also positive result for our results overall. Short-term are always short-term. They can be, o f course, their profitability is better, but it's always more difficult to bring vessels back to their core routes, to start hiring again the crew and all other implementation costs. Let's say that by end of the day, the result can be kind of similar with the long-term bareboat, compared with the short-term time charter.
Thank you. How big will be interest cost for 2023 if Euribor would remain at current level?
You have seen our first quarter results now about increase of the interest rates. You can calculate this yourself.
Thank you. Next question is actually includes four questions, but let's start with the first one. Any indications of extending the short-term charter agreements post-summer periods?
Yes. Sorry, I had some technical issue. We are in negotiations, and our partners have certain dates when they need to declare prolonging the contracts or not. We will let all our investors informed after we have more information. At the moment, currently, as already mentioned, Victoria is extended till 15th of July, Galaxy till October, and Silja Europa till mid-June. In coming weeks, we have most probably more information.
Thank you. Looks like you have lost some market share on the Tallinn-Helsinki routes. Could you elaborate on that, please?
Yes. We don't operate Silja Europa at the moment. This is also the reason why the market share is a bit down. If you add, just to give some numbers, Tallinn-Helsinki route was in first quarter, all operators together, in level around 79% from 2019 levels. This is actually, if we use the similar vessels operating now and operated then, Silja Europa carried first quarter 2019, 266,000 passengers, which have a big impact to the market share. We don't feel at the moment that it's possible to operate the Silja Europa in profitable basis at the moment. It can be profitable only during the summertime, and most probably maybe 1 or 2 months in autumn.
If we can, we would like to keep the Silja Europa still in charter at least until next year. As I said, we are very flexible, if they're coming up some news is in coming weeks or months.
Thank you. What's the planned CapEx for this year?
We have limitations in our loans we took during the crisis period, we can't invest more than EUR 30 million. All our CapEx investments are planned with this rule. Actually, the most significant CapEx has already done as we had several docks in the first quarter. There are not many big CapEx investments coming up later. Yes, actually maybe two vessels going to dock second half of this year, it depends again also how the charter agreements will going to end or prolonged.
Thank you. Any plans for fuel fixing?
The fuel market is very volatile. We haven't fixed any fuel prices at the moment. We monitoring the situation a daily basis. We see that there can come some good momentums to fix some LNG price, but we are not there yet. What has been changed quite significantly at the moment compared with the pre-crisis or pre-COVID times is that logistic cost for the bunkering the fuel has increased almost 2x . Which means that we need to take this into account also when going to fix the prices. This is also maybe the question we're receiving quite often that market price for fuel has gone down and why you still have the fuel surcharge for the tickets.
The reason behind that is that logistic cost for the fuel bunkering has increased because the fuel coming from other destinations compared to pre-COVID period. Fuel cost is high for the maritime sector this year and most probably also next year. If they're coming some good momentum to fix in the reasonable level, we are ready to do that, but we haven't done it yet.
Thank you. Do you see that due to chartering of several ships, the cyclicality of results of Tallink is much smaller going forward, Q1 and Q4 are not so weak, but Q2 and Q3 will not be as strong as in good years?
Definitely there are a bit small differences this year because our results are most probably more stable throughout the year. We don't have maybe so big hike in July, but most probably it will affect only the month of July because not the June or August. Let's see how the second quarter and summer comes. There are some impact for sure. If we are able to extend contracts longer then we most probably will see also very strong fourth quarter compared the previous periods. As with the previous question, we are not there yet.
How would redundancy of 500 employees impact costs in 2023 and 2024?
Difficult to say. It depends with which level capacity we are going to operate. Actually this 400 plus crew members is size of Silja Europa size vessel crew. Definitely the redundancy have a short-term impact for the results. Long term, it depends, are we going to add capacity to some routes and with what kind of level profitability this will be. I have said somewhere that we take it very carefully to add the capacity because tourism sector hasn't recovered yet for the levels we hope. Example, we operating at the moment the Tallinn-Stockholm route just with one vessel only.
If you would add second vessel today for that route, both vessels will make loss instead profitable one vessel at the moment on that route. Also the redundancy impact for the costs long-term depends actually how much we have the capacity we operating ourself.
Thank you. Can you comment on how bookings look for the Q2 spring season, how is the load factor and yield versus 2019?
Bookings look good. Definitely we are not going to give today the information about April, May, and June. Recovery is still ongoing. We definitely will not see this year the numbers of passengers we saw 2019, this is not also the goal to us. Our goal is to have all the vessels we operating operating profitable basis. At the moment, we are happy to say that all our vessels operating or are chartered out are profitable. This is the most important to keep the business sustainable. It's bookings coming in very, very last moment still and for shuttle service, we can sell 1,000 tickets for tomorrow example or 500 ticket for today. It depends about different factors.
Let's say that, if we were a bit worried a few months ago regarding the very high inflation rate in Estonia, example for our big home market, Finland, for traveling to Estonia then as Estonia and Sweden have higher inflation rate as well. Estonia is already again cheaper. It, it depends of different aspects, and it's quite difficult to predict. Our main goal is to have the all the vessels profitable, and this is for what we are working.
Thank you. With traveling activity recovering, why the marketing expenses are approximately 50% lower compared to pre-pandemic level, compared to Q1 2019?
Our team making much more efficient work and better work. This is the result. We have very tight cost control. We have achieved much better marketing results already second part of last year, and this is ongoing. We get back from every euro we spend in marketing more than before.
Thank you. I believe this question was, partly at least, addressed before, but, what are the estimated savings from the planned layoffs on an annual basis, and when will they start to kick in?
I already answered this. If we operate in the autumn same number of vessels we are doing now, in that case, the redundancy effect will come from results of month of September, not before, because we use majority of these people during the high season. Redundancy process we started will end by end of August.
Thanks. You mentioned that leverage at 4x is your new comfort level. What implications will this have on capital allocation once that level is reached?
We have said that comfort zone is four, of course, we hope that we can be, we can achieve also the better result. Our priorities at the moment to pay back the loans because the interest rates are reasonably high. We have paid already. If you take a look the net debt by end of the first quarter this year and net debt by end of the quarter last year, we have actually delivered the MyStar, and we are below in the net debt level compared last year, first quarter. It should show to all the investors that we try and pay back as much loans as possible, we plan to do it also this year.
4.0x is just comfort, but it's not the best we can achieve, and we work for better achievement.
Thank you. Any comments on how do you view the impact of changes in Estonian taxation on international and Finnish tourists in long term?
Let's wait until they implement the decisions. It's just started the discussions. Government hasn't sent any document yet to parliament. Parliament hasn't started the discussions. It's hard to predict. It's also a question what kind of changes are going to implement new government of Finland. We always need to look this kind of like together because both government new ideas having the possible impact, positive or negative impact to our business model.
Thank you. A follow-up question regarding marketing cost. Is such decrease in marketing costs sustainable, and what is the outlook for next quarter marketing costs?
Next quarters, of course, are a bit higher because we expect also more passengers, and we need a bit more invest into marketing as well. I believe that marketing cost per pax will be kind of same level or even lower. Let's see how it goes.
That was the last question we had. Hopefully, we addressed all of them. Thank you, everybody, for attending the quarterly call. We will hold another one for second quarter 2023 on the 27th of July. Thank you, and have a nice day.