Hello, dear ladies and gentlemen. Welcome to the Port of Tallinn webinar. Thank you for joining. My name is Andrus Ait. I'm the CFO of Port of Tallinn. Together with me is today Mr. Margus Vihman, who is Chief Commercial Officer and a member of the Management Board. We will introduce the results of 2023 for second quarter and six months period. During the presentation, you can submit questions by typing them in Teams. There are question mark button, and we will answer the questions after the presentation, as we have made a short break. With that, I will give the word to Margus, who will continue with the main events and operating volumes. Please.
Thank you, Andrus . Good morning, everybody. We traditionally start with the main events in the second quarter of 2023. The first one is that we signed the agreement to build a new quay in Paldiski South Harbour for constructing offshore wind farms. The contract was signed with Akciju Sabiedrība BMGS Estonian Branch and Insenerehituse AS. The contract amount is EUR 53.2 million, and together with indexation, it can be up to EUR 55.9 million. The construction has already started and should be ready in July 2025. Secondly, Icebreaker Botnica additional summer charter contract with Equinor. We managed to get additional contracts.
Unfortunately, it was a bit smaller or wasn't enough days that we prognosed, but still, quite, quite a good, good addition to the summer works. Additionally, we are now negotiating already a new deal and getting ready for the offshore works in the North Sea. The amount of the days chartered should be the same as last year. Additional trips for very regular in summer 2023, we signed a contract with Estonian Transport Administration for the additional trips, and they can order up to 536 trips, and until the mid September.
Of course, we had the annual general meeting of the shareholders, and the most important decision was the dividend payment. Dividend payment for this year was EUR 19.2 million, and this is 75% of the last year's net profit. We changed the supervisory board in TS Laevad, and we asked to come back the Ministry of Economic Affairs and Communications Representative Johann Peetre. So currently, the board of TS Laevad consists of three persons, Valdo Kalm, Andrus Ait, and our business development manager, Rene Pärt. Also, Port of Tallinn was part of establishing Hydrogen Valley Estonia.
This was signed in April. Together with us, there was a biggest Estonian energy company, Alexela, Eesti Energia, University of Tartu, signing the contract. The reason for Port of Tallinn being in there is that we see big opportunities, firstly, on transportation vehicles, inside the port, but also the cranes using hydrogen. In a longer run, this could also be ferry or ship fuel, and could be also helping us to, to move from traditional fuels and traditional fuel terminals to the new renewable energy sources.
Also, there was a transportation sector, Green Forum, where we participated, and this year, we discussed on the topics, how to build infrastructure in a greener way. Besides us, there was also Tallinn Airport, Estonian Railways, and Rail Baltic Estonia involved. We received the Gold Label from the Estonian Responsible Business Forum. We've been in touch with this forum from 2014. I personally have been involved from 2016, and every year we have received the Silver Label. This is the first time that we managed to get the highest possible recognition, and then Gold Label.
Moving forward with the trends in, in second quarter, we, we had, of course, passenger, continuing growth, and the growth number in second quarter was 13%, mainly feeded by the Tallinn–Helsinki , and Stockholm lines. Also, if you compare it with the growth in the first quarter, then it has slowed a little bit down, but we have to remember that the COVID restrictions were not there last year in the second quarter. Relevant base that we, we compare to is higher. Also we had, or, or unfortunately, we had decrease in, in access vessels calls 7%.
This is mainly coming from Silja Europa, which was moving between Tallinn and Helsinki, but has been chartered to Netherlands by Tallink from the last year's August, and will stay there at least till the end of this year. Second reason is that although the cruise passenger numbers were growing, the cruise vessel calls were decreasing in the second quarter. From the positive side, we managed to get more revenues from the parking business in the Old Town Port. We managed to get additional revenues from renting out the cruise terminal for the events.
Coming to the cargo, decline in cargo volumes were 31% in the second quarter, and the main reason for that is, of course, sanctions for the Russian transit goods, which mainly then are liquid bulk and fertilizers. The second quarter amount of the goods in tons were 3.3 million tons, which is 31% less than the last year. If, if to find something positive in here, then we have prognosed exactly the same decline in connection with the sanctions. It's, it's not bigger, and, and we see stability here now.
Secondly, when we look at the Ro-Ro amounts, then the decrease was quite high in tonnage, but we'll get the money for the pieces, so for every truck or or every trailer. The decrease in pieces was only 5%. If we compare six months, then actually, there was a small increase. We see that this Ro-Ro business is still quite active and and slowly growing. The ship calls were 8% smaller, because of the reasons that I, I just mentioned, and the revenue then 22% lower.
Uh, ferry revenue growth was six percent, um, uh, and this is coming from, uh, additional trips, but also we, uh, had the right to, uh, to the indexation because of the, uh, fuel, uh, Estonian consumer index and, uh, and also labor cost, uh, indexation. So, uh, this, this is where the revenue growth is coming from. Uh, by Other segments, uh, Botnica revenue increased by eighty-one percent. Uh, this is due to the higher charter fee, uh, on the, uh, icebreaking contract, uh, but, um, uh, also with the, uh, uh, earlier start of, uh, of the summer works with, uh, with Equinor. Uh, but on, on the negative side, we also, uh, had some additional costs, uh, which were actually planned docks, and, and it, uh, just made sense to, uh, to do them all together now.
And also we had some investments that we had to do, preparations for the new charter agreement, from which we will get revenues in the third quarter. Some charts, like I said, pax numbers are up, and 13% of that is coming from Tallinn-Helsinki line. Tallinn-Stockholm line, the pax numbers increased 22%. And like I said, even the cruise calls were decreasing then, the passenger number in cruise was growing by 28%. And you can see that the passenger ship calls were decreasing by 7.5%. And in the six months, the trend is basically the same.
We have most growth coming from Tallinn-Helsinki, Tallinn-Stockholm, and the cruise growth is 28%. Moving to the cargo volumes, you can see the biggest decrease coming from the liquid bulk, 68%. The general cargo is going down by 10%. Maybe another interesting fact is that the Ro-Ro part from the total cargo revenues is now 52%, when earlier the biggest one was liquid bulk, which is now only 14%. Looking at the six months, the trends are the same.
The only change is maybe that the six months, Ro-Ro decline is bigger, and we, we see a small recovery in the second quarter in, in Ro-Ro. At ferries, even though that they, they don't influence our revenues, it's, it's important to show that the passenger and the vehicle numbers are growing. This shows that, that, this service is needed, and, and, most probably also that the service is in high quality, and, and the passengers are happy with the quality.
In the second quarter, passenger numbers increased by 6.2%, and vehicle numbers by 4.1%, and in six months, passenger number 6.9% increase, and vehicle numbers 3.1% growth. Icebreaker Botnica, 20% growth in charter days in second quarter, and 4.4% in six months, and also the utilization rate is growing. Some comments about the future outlook. We see that the passenger business recovery will continue.
It is very important what will happen with the shipping lines in November, December, when the Christmas season is starting, but we, we have positive hopes on that, looking at the trends that are going on right now. The impact of the results from sanctions against Russia and Belarus will definitely continue. We don't see any changes there in the second half of the year. Again, if we want to see something positive in there, is that we have diagnosed exactly the amount that we have now, and, of course, it has been stabilizing, so there will be no further increase because of these sanctions. There are new possibilities in Ro-Ro and container lines.
We have been negotiating for quite a long time with many big shipping lines, and we see that we would have some positive news, maybe already in the second half of the year, but most definitely next year. Another good thing is that we are mainly promoting Muuga here, and Port of Muuga doesn't need any investments to receive these ships. We have the quays ready, we have the ramps ready, so there will be no additional costs with that. In Paldiski, we can also receive, let's say, one more line without any investments, but then the utilization of the port is already on the edge.
Definitely offshore wind farm based harbor development will go on, and, and we have a lot of communications with potential users of that and builders and the investors for the offshore wind farms. Secondly, we are looking into the building the maintenance fleet. There are no decisions yet, but maybe we will... Or we are planning to see what would be the possibilities of building CTVs or SOV ships for maintenance and operation. Preparation of the real estate business model is going on. We hope to finish the detail planning process in the end of 2024.
If that would be the fact, sir, then we would see the first revenues coming from the real estate business in 2025. Like we have said before, mainly this will still be the landlord model, but maybe in some cases, we will also be investing into this and taking a more active role in development. Here I give word to Andrus.
Thank you, Margus. I will go on with the financial results. The second quarter, the revenue decreased by 5.2% and amounted to EUR 28.8 million. The decline here is mainly attributable to the Cargo Harbour segment, as the cargo volumes decreased. We had less cargo ship calls and also revenue from cargo charges decreased. In addition to that, in Passenger Harbour segment, the number of cruise ship calls also decreased. This year, we had in the second quarter, 44 calls compared to the 68 calls in the same period last year. Due to that, revenue also decreased.
When it comes to the regular lines, we had also less ships operating on regular line between Tallinn and Helsinki, and due to that, the revenue also decreased. Thirdly, the sale of electricity decreased because of lower market price, but also the consumption has decreased mainly because of lower cargo volumes. There was also positive offsetting effect from passenger fees, as the passenger number increased by 13%. Also the revenue from the operation of our icebreaker Botnica, increased, but the decreasing effect was higher than the positive effect. When we total up, then it was - 5.2% in revenue. Adjusted EBIT decreased by 24% and amounted to EUR 11.7 million.
In addition to decrease in revenue, EBIT was also impacted by higher costs. The main impact is related to maintenance costs, especially in shipping segments. In the segment Other, or where we, where we show the results of Botnica, we had higher maintenance costs because Botnica was in May, docked in Naantali, and we renewed or upgraded the ice class of the vessel, and those costs costs we capitalized. Same time, it, it was reasonable to do some costs also for more current repairment, and therefore, also, also the cost level increased.
In Ferry segment, last year, we received indemnity payment from insurance company, with because of the dual incidents in 2021, and this decreased the reference base, and this impact was about EUR 300,000. The increase for Botnica maintenance was about EUR 1.2 million. We also had elevated costs on cleaning and upkeep of port infrastructure, and also labor costs increased. Due to that, the adjusted EBIT margin decreased by 10 percentage point and lowered from 51% to 41%.
Operating profit decreased by EUR 3.7 million and amounted to EUR 5.8 million, and this is quite similar number in euros as on EBIT level. Income tax was EUR 2.9 million compared to the EUR 4.1 million last year. We paid out less dividends. The dividend payout this year was EUR 19.2 million, last year it was EUR 25.5 million. Due to that, the income tax and dividends decreased. Profit for the period was EUR 1.4 million and decreased by EUR 3.7 million or 73%.
As we had offsetting effect from income tax, at the same time, we paid out more interests because of higher Euribor level. Due to that, the decrease on profit level was also EUR 3.7 million. In the second quarter, we invested EUR 4.6 million, which is 8.0% more than last year. The main investments were made for Botnica. We also started the new quay construction in Paldiski South Harbour, and also we reconstructed some quays in port area in Old City Harbour. On six-month level, we see that the negative impact or negative side is a bit lower due to the stronger first quarter.
Also the first quarter in 2022 was quite low because there were still impacts from COVID restrictions. Also the one-off effects from the Q2, especially in maintenance costs, didn't impact as much. The revenue increased or basically remain at the same level and amounted to EUR 57.2 million. Adjusted EBITDA decreased by 12% and amounted to EUR 25.3 million. Adjusted EBITDA margin was 44.2% and was 6.3 percentage points lower than last year at the same period. Profit for the period decreased by 42.3% and amounted to EUR 7.1 million.
In the first half of the year, we invested EUR 6.1 million, this mean the main investments were mainly made in the second quarter. In the first quarter, we invested to build a new two-story ramp in Muuga and, and also completed the surrounding area of D terminal. Last year, we had more ongoing projects therefore, the, in the first half of the year, the investment level was higher. It's low, it's lower in the second half last year. This year, we see that investment level will increase in the second half of the year. Looking at the results by segment wise, we see that that the Ferry segment was the one where the revenue and EBIT increased.
Both revenue increase was 6%, as Margus already mentioned, it was mainly due to the indexation. The decline, the growth in euros, was on revenue level higher than on EBIT level. To explain that, here is important role from the important impact from the indemnity payment, which we got last year in the 2Q. This lowered cost level last year. When we take this out, the increase in on EBIT level would be at would be similar as on revenue level. In Passenger Harbour segment, due to lower number of cruise ship calls and less ships operating regularly between Helsinki and Tallinn, the revenue increased, and also this impacted to the EBIT level.
In Cargo Harbours, cargo volumes decreased, so there was a drop, 22% on revenue and, also the, the EBIT decreased, in similar amount, in euros. In segment Other, the revenue increased because of, because of the additional summer work of Botnica, which started earlier, and, this work last five days, more than last year. Therefore, the revenue increased, and, EBIT decreased, due to the, one of, mainly one of the maintenance costs, which we have to make, let's say, after every five years, but this year it was reasonable to do it together with the dock works.
Some of the costs were also related to the additional summer works, as we make preparation for that for that works. On six-month level, revenue increased in Passenger Harbour segment and Ferry segment, and this goes also for segment for EBIT in both those segments. Ferry segment, we made a bit more trips, then indexation played a big part. In the Passenger Harbour segment, we had a stronger first quarter. Also the reference base was lower last year in first quarter. Therefore, perhaps at six-month level, the revenue increased and also the EBIT. The Cargo Harbour segment decrease was quite similar as in the second quarter.
The impact of sanctions and lower cargo volumes due to that continues. In the segment Other, revenue increased partly due to the summer work and partly due to the new contract for ice breaking services for Estonian Transport Administration, which started in December last year. We had higher revenue from that as well, when we compare to the six-month period with the last year, same period. On cash flow side, we see that cash from operating activities decreased. The receipts from the sale of goods and services decreased. At the same time, the payments to the employees and to the partners increased.
Because of that, the cash from operating activities decreased by EUR 7.6 million. Cash used in investing activities was minus EUR 4.1 million, which is quite similar level as last year. Last year, we invested EUR 3 million more, but we also received more grant payments, and therefore, the cash flow impact is quite similar compared to the years. Free cash flow for the period was EUR 18.3 million and decreased by EUR 7.1 million, mainly due to the lower cash flow from operating activities. Cash used in financing activities was minus EUR 24.9 million, which is EUR 4.3 million more positive than last year. We paid less dividends.
I mean, at the same time, we paid more interest costs and other. The other impact comes from loan repayments, which was similar between the years. The net cash flow for the period is minus EUR 6.5 million, net debt at the end of the period has decreased due to loan repayments and reimbursement of bonds. On financial position, here we, that cash and bank accounts has a bit decreased because of investments, because of dividend payments, and because of negative net cash flow. At the same time, the gross outstanding debt has decreased by EUR 3 million due to loan repayments.
On equity side, the impacts are related to the dividend payments and also profit for the period. With that, we will conclude our presentation, and we will make a short break to be back in a few minutes to answer your questions. Thank you.
Welcome back, and we are starting to answer the questions. The first one is: How are the cooperation partners doing in cargo operators of the Port of Tallinn, and is anyone leaving or are new operators joining? No, nobody's leaving. And we're constantly working on to get new operators. And we see potential in the production companies for Muuga, mainly because of the trend of nearshoring.
Also, both in Muuga and in Paldiski, we, we see that renewable energy is something where the companies are starting to invest, and this could be also one of the commodities that we will start to move later stage of next year.
... Most difficult situation, of course, is for the liquid bulk operators who have been concentrating on the transit volumes. Then again, they also have some of the volumes that are meant for the local market. These will remain, and they also slowly growing. Nobody is at the moment leaving. The volume of, the volumes are falling. Why is the number of employees not really reduced? Andrus, would you like to-
Okay. Actually, we are conducting analysis and describing our processes, and actually, we have also decreased in some position, but the number of employees is also seasonal for us. For example, when we have more passengers in our harbors, then we leave extra employees. Generally, we can say that we are working on it, and the plan is definitely to reduce the number of employees. It's important also mention that in shipping segments, this is not the plan, because there are certain rules, and those we have to follow. Generally, this is what we are working on.
Yeah. May- maybe just to add that quite a large number of these employees are in the 2 shipping companies that we have, and the results, as you can see, of the shipping companies are are good.
Yes, exactly. How do you justify the very fast wage growth, plus 16% compared to the last year, as the economic indicators are decreasing? We made the price with the salary increases over the last year. We don't plan it to do this year. Here we can bring out 2 main reasons. First, the average salary is compared to the market quite low, and we have quite many employees whose salaries are below the average and below the market level.
In this situation, when we had very high inflation in Estonia last year, we, we had to, had to react on, on that, and also, let's say, save the -- we, we ensure that the service level, high service level, which we provide to our clients. In shipping segment, the reason is that this, this segment is open to international competition, and therefore we have to follow the trends there, and, and partly the, the increases is due to that. Next question. As of the end of June 2023, there are planned future investment commitments in the amount of EUR 71 million. What are the investments behind it?
The main investment project behind it is the new quay in Paldiski South Harbour, which this project we started in June. This is the main, main project behind that. We also have some, some contracts signed to reconstruct the quays in other, other ports. Those are the main, main project behind that number. Next question. What was technical investment, and how large are the periodic maintenance costs, and how often are they scheduled? The investment in the second quarter this year was about EUR 2.4 million for Botnica. This was this upgrade of ice class and capitalized dock works.
Periodic maintenance cost was about EUR 1.2 million. Part of it was in, in a smaller extent, were preparations for additional summer boats, and and bigger part was involved with with periodic maintenance, which was reasonable to do, with, together with main dock works. How often are they, are they scheduled? Those periodic works we, we will make every year, but, but the amount of maintenance costs can vary, but, but the investment is involved also with the new 10-year contract with the Transport Administration for icebreaking services. The payback time there is 10 years.
Yeah. If you allow, I will take the next one. Is the decline in the attractiveness of the region in cruise related to stopping the visits to St. Petersburg? Yes, this is one of the reasons, and obviously, there are no cruises now going to St. Petersburg, and St. Petersburg in North America and maybe also in Germany, where a lot of our clients used to come from. Is much better known than the Tallinn Old City, for example. Also, as a lot of our clients are coming from outside of the Europe and mostly from North America, they don't feel that the area is so secure because of the Ukrainian war.
We here feel very safe, but looking it from other side of the ocean, it seems that the war is very close to the Baltic Sea. Thirdly, the reason, the economical situation in the world is not stable right now. This cruise product is more close to the or more related to the luxury, and people are not maybe using so many luxury products right now as they used to. These are the three reasons.
Take the next one. What is the forecast for this year's interest costs? Based on our, our, main scenario, we would say that the interest cost level is about EUR 7 million for this year, or a bit less.
Do you see that the second half of the year, the volumes of liquid bulk and dry bulk cargo could recover somehow, or somewhat? What is the Ro-Ro outlook for the second half of the year? If we talk about the sanctions goods, and transit goods that used to come from Belarus or Russia, then we see no change there. The only positive news, as I mentioned in the presentation, is that we have prognosed the decrease quite well, and it is exactly in the volumes that we forecasted. There will be no further influence from there.
When we talk about maybe dry bulk, then we see a maybe a small increase in the second half because of the Estonian exports and imports. If we, if we talk about the Ro-Ro, then we, we see a positive trend here and and basically because of the, you know, northwest or a north, north-south corridor increasement and also the nearshoring. So, we, we are looking positive at the second half of the year, and maybe there will be overall a small increase in in 12 months results. I will take another one. Why is the port joining the Hydrogen Union? Isn't it all still the experimental level and there are no working solutions?
Isn't it too early to enter such a field when the core business is not even functioning at the moment and costs need to be controlled? No, it's not too early, and partly the question is correct that, for example, for the large ships, there is still no hydrogen engine. There are hydrogen cars already available, trucks available, equipment for the port, like cranes or reach stackers available. Also there is small ferries that can use hydrogen. We are not so much at the moment investing into this, but we are promoting that this should be the way to go.
Plus, we expect to get, if, if we start to invest, we expect to get high levels of EU funding also there. You, you have to be a, a forerunner here, unless all these funds and and the solutions will will be taken by somebody else. I would also like to point out that, you know, one of the biggest decreases that we have is, is in the liquid bulk, and the new green energy solutions like ammonia, hydrogen, or green methanol, could be the ones that will partly replace the decrease that we have in traditional fuels.
There is one question which we missed, which we missed, yes, about the investments in the second half of the year. Do you see that in the second half of the year, the volume of... Sorry, in the amount of investments in the second half of the year, similar to the first half of the year, or is an increase expected due to the construction of the Paldiski? Yes, there will, in investments, we see increase in the second half of the year and the total amount of investments, which we, which we forecast is about EUR 26 million or more. I have to add a remark that this quay construction is, is very complicated, and it depends on conditions, on weather.
The estimation is, approximately EUR 26 million.
Are volumes in cargo segment going to decline further in quarter three or quarter four? Or has the situation already stabilized in quarter two? I would say that the situation is stable now, especially like I mentioned, the transit volumes, they cannot decrease anymore. And then we have prognosed the correct amount of decrease. Of course, there is a chance that there will be small decrease, because of the economic situation in Estonia, which is also not favorable for the cargo. But then again, we still see that, for example, the Ro-Ro is growing.
Like, I also said in my presentation that, we are working very hard to get the new container lines and new, new Ro-Ro Ro-Pax lines into the Port of Muuga and then Port of Paldiski.
Are the service price still indexed with inflation? Why did Tallink get a very favorable deal here in this inflationary situation? Some of the prices are indexed based on on consumer price index, for example, rents and building rights revenues. Also our, our prices some of our prices are... We have to follow the overall market situation and make changes based on that. Not, not all the, all the prices are not indexed based on inflation. The second half of the question, why Tallink get a very favorable deal?
With this deal, I would say, we concentrated on long run, and we see that for us, it's very important that many, as much as possible, ships are operating on regular routes. This, this was a good foundation to to build the situation that that for the Tallink, there is certainty, and for us as well. What was the main reason for weak EBITDA in the Other segment? Is the situation going to improve in the third quarter? Yes, the main reason for that was the, one of maintenance costs, and also preparation costs for additional summer works. We expect that the situation going to improve in the third quarter.
Currently, we are negotiating with about new summer work in August this year in North Sea region. We hope that we can give a good news in coming days, yeah, we see that the results will improve in the third quarter. What is the net effect from raising costs and from price increases you have made? Is the net effect from inflation positive or negative in passenger and in cargo segments? All in all, the inflation is impacted us negatively. We can't put the increase of prices directly to our services and costs and ask a higher price. Inflation was in large scale based on electricity prices as well.
The situation vice versa, that higher electricity price actually, the lower electricity price is good for us in this situation. The answer is that directly, we can't increase our service prices, but for some services, it's doable, for example, rents and building rights.
Yes, yes. How are you going to finance building of maintenance fleets for offshore wind power parks? What would be the total investment needed? I would like to point out that we're only looking into it right now, so it's very early stage to say, and the decision, the investment decision has not been made yet. So, as soon as we get into some point with that, we will give you more information. And finally, do you now say that your main target in the property development projects is going to be a landlord model? Actually, we have communicated this before, and yes, the main target would be the landlord model, but there could be a lot of exceptions in there.
If we see that there is a profitable, very secure project, we would definitely be ready also to to be, be more than the landlord in there.
We have one more question.
Okay.
Sanctions for Russia had started since end of Q1 in 2022. However, the decline continues and is more than expected, why? Actually, the sanctions started in the first quarter, but they were imposed gradually during the year. Due to that, the comparison base or reference base last year is still quite high in the second quarter. The impact from sanctions should level out by the end of this year, I would say. The decline was more than expected, like Margus mentioned, actually, decline was like we forecasted. There wasn't pickup on that. It seems that there are no more questions. Thank you for participating, and see you next time.
Thank you.