COMMENTS TO FINANCIAL RESULTS
The comments have been prepared on the basis of consolidated financial
indicators.
In 2007, the results of operations were shaped by unexpected circumstances
whereby growing cargo volume in the first half of the year declined sharply in
the middle of the year as a result of which cargo volume for the year decreased
by 13%. Cargo owners redirected the flow of liquid cargo and coal passing
through AS Tallinna Sadam and originating from Russia into Russia's own ports or
other ports in the region. The number of passengers passing through the port
also decreased somewhat. Due to the extraordinary nature of the decline in cargo
volume, it fell short of the expected volume and the Group's market share also
declined among the major ports on the eastern coast of the Baltic Sea. The
decline in cargo volume also led to the decline in sales and efficiency of
operations.
In 2007, the cargo volume passing through the ports of AS Tallinna Sadam
decreased by 5.2 million tons (or 13%), to 36 million tons. The gradual decline
of cargo volume since May occurred primarily in bulk and liquid cargo volume.
The reason behind the decline in the volume of bulk and liquid cargo was
primarily related to the redirection of cargo volume originating from Russia to
Russia's own ports for the purpose of completely utilising their capacity due to
the foreign and economic policy factors. With regard to the structure of cargo
volume, the volume of containers, rolling stock and new passenger cars grew
together with the development of consumption on the eastern coast of the Baltic
Sea and beyond. Container trade is also favoured by the growing trend of
delivering cargo in containers, which simplifies and accelerates cargo-handling
operations. The volume of these cargo groups is expected to surpass the volume
of bulk cargo at the ports of AS Tallinna Sadam already in 2008. Against a
backdrop of this trend, the share of export-driven transit originating from
Russia (primarily liquid and bulk cargo) will decline in the cargo volume of AS
Tallinna Sadam and an import-driven cargo movement is replacing it. Along with
the decline in cargo volume, the market share of AS Tallinna Sadam declined
among the major ports on the eastern coast of the Baltic Sea - from 11.9% to
9.8%. By cargo types, liquid cargo made up 62%, bulk cargo 22%, rolling stock
10% and containers 4% of cargo volume (in 2006, the respective figures were 58%,
27%, 8% and 3%). With regard to transport directions, transit made up 82%,
exports 8% and imports 10% of cargo volume (in 2006, the respective figures were
84%, 7% and 8%).
In 2007, the number of passengers travelling through the ports of AS Tallinna
Sadam was 6.51 million, declining by 250 thousand passengers or 3.6% (in 2006,
the respective figures were 6.76 million passengers and a decline of 3.5%). The
decline in the number of passengers was mostly attributed to the decline in the
number of passengers on the most important Tallinn-Helsinki line where instead
of the expected growth, the number of passengers declined by almost 170 thousand
passengers or 3%. However, the number of passengers grew steadily on the second
largest Tallinn-Stockholm line, reaching 676 thousand passengers and increasing
by almost 54 thousand passengers or a healthy 9%. However, the number of
passengers on Paldiski-Kapellskär line decreased by 86 thousand passengers or
63%. Instead of carrying passengers the transportation of rolling stock mostly
occurs on this line as a result of which the former will be of less importance
in the future. The number of cruise passengers of AS Tallinna Sadam declined for
the first time in the last five years, by 6% to 295 thousand passengers, whereas
the number of traditional cruise passengers declined by 2%. The decline in the
number of cruise passengers was primarily related to the termination of
operations of some cruise operators.
In 2007, the consolidated sales of AS Tallinna Sadam amounted to EEK 1 162
million (EUR 74.3 million), decreasing by EEK 16 million (EUR 1 million) or 1.3%
(in 2006, the respective figures were EEK 1 178 million (EUR 75.3 million) and
growth of 4.1%). The decline in sales was primarily related to the decline in
cargo volume, and partly to the decline in the number of passengers. The effect
of these negative changes on sales were somewhat alleviated by the growth in the
total capacity of vessels calling at the port and the annual indexation of port
dues in line with the change in the cost of living. Of the types of sales, the
sales directly related to the cargo volume and the number of passengers declined
due to the aforementioned changes - sales from cargo and passenger fees
decreased by EEK 19.4 million (EUR 1.2 million) or 11% and EEK 0.2 million (EUR
0.01 million) or 0.2%, respectively. The sales from port dues which are directly
related to the number of vessel calls and the gross tonnage of vessels did not
change much, increasing by EEK 3.4 million (EUR 0.2 million) or 0.5%.
The expenses related to operating activities (operating expenses, personnel
expenses as well as depreciation and impairment losses) totalled EEK 690 million
(EUR 44.1 million), increasing by EEK 57 million (EUR 3.7 million) or 9,1% in a
year. The growth of expenses was primarily related to the costs of expanding the
port operations as well as appreciation of labour costs and service prices. The
operating profit for 2007 (profit before other income and other expenses)
totalled EEK 473 million (EUR 30.2 million) which represented a decline in the
operating profit by EEK 72.9 million (EUR 4.7 million) or 13.4% as compared to
2006. The operating profit fell in conjunction with the growth of operating
expenses and decline of sales. Thus, the efficiency of the operations of AS
Tallinna Sadam expressed as the operating margin (sales divided by operating
profit) fell, declining from 46.3% to 40.7% in 2007. The Group's net profit for
2007 totalled EEK 336 million (EUR 21.5 million) which is EEK 260 million (EUR
16.6 million) less than in 2006. Considering that one-time profit from sale of
assets made up EEK 171 million (EUR 10.9 million) out of the net profit in 2006,
the net profit for 2007 declined by EEK 89 million (EUR 5.7 million).
In 2007, the return on assets of AS Tallinna Sadam (net profit divided by the
annual average volume of assets) decreased to 5.1%, which is the lowest level in
the last five years. The return on assets calculated using the adjusted net
profit (the net profit has been adjusted by the dividend income tax and profit
from sale of assets) was 6.4% which is also the lowest level in the same time
period. However, the decline in the return on assets was somewhat expected,
related to the volume growth of assets due to long-term and large-scale
investments that will yield expected gains in future periods. The decline in the
return on assets was related to an unexpected decline in cargo volume in 2007
which had a larger effect on the decline in the return on assets than asset
growth.
In 2007, the return on equity of AS Tallinna Sadam (adjusted net profit divided
by the annual average volume of equity, also adjusted by the same one-time
profit) was 9.4%. This also represented a decline in the return as compared to
the return of 10.1% previous year (which was also adjusted by the one-time
profit on the sale of assets in the amount of EEK 171 million (EUR 10.9
million)). When compared with the larger decline in the return on assets, the
return on equity was maintained due to a change which occurred in the capital
structure, as the share of debt increased somewhat (when comparing the averages
for the year). The reason for the decline in the return on equity was primarily
related to the loss in profitability of the port operations.
In 2007, the Group invested a total of EEK 853 million (EUR 54.5 million) in new
infrastructure and improvements of existing infrastructure which on the one hand
represented a growth of EEK 408 million (EUR 26.1 million) as compared to the
previous year, but on the other hand did not meet the budgeted level. Due to
much higher than anticipated appreciation of construction prices and the sharp
lowering of cargo volumes from Russia during the year, the investment plan
relating to the eastern part of Muuga Port was reviewed and no investments were
made in 2007. Most of the investments were related to the acquisition and
construction of new territories totalling EEK 268 million (EUR 17.1 million) or
31% of the total volume of investments. New territories were acquired for the
development of Muuga Port and Paldiski South Harbour and the infrastructure of
the industrial park of Muuga Port was developed further. Investments related to
marine transport facilities (quays and aquatory) totalled EEK 177 million (EUR
11.3 million) or 21% of the total volume of investments. Investments in the
development of buildings, structure and service equipment totalled EEK 233
million (EUR 14.9 million), in the foundation of railway branches and a station
park totalled EEK 81 million (EUR 5.2 million), in the necessary networks needed
for the provision of utility services and increasing security of supply of these
services totalled EEK 63 million (EUR 4 million).
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
| in thousands of | EEK | EEK | EUR | EUR |
| (unaudited) | | | | |
--------------------------------------------------------------------------------
| as at 31 December | 2007 | 2006 | 2007 | 2006 |
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| ASSETS | | | | |
--------------------------------------------------------------------------------
| Current assets | | | | |
--------------------------------------------------------------------------------
| Cash and cash | 269 641 | 514 693 | 17 233 | 32 895 |
| equivalents | | | | |
--------------------------------------------------------------------------------
| Available for sale | 2 855 | 2 855 | 182 | 182 |
| financial assets | | | | |
--------------------------------------------------------------------------------
| Other financial assets | 0 | 34 855 | 0 | 2 228 |
| at fair value through | | | | |
| profit and loss | | | | |
--------------------------------------------------------------------------------
| Derivatives | 11 427 | 9 078 | 730 | 580 |
--------------------------------------------------------------------------------
| Trade and other | 110 880 | 102 705 | 7 087 | 6 564 |
| receivables | | | | |
--------------------------------------------------------------------------------
| Total current assets | 394 803 | 664 186 | 25 232 | 42 449 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current assets | | | | |
--------------------------------------------------------------------------------
| Investments in joint | 2 673 | 0 | 171 | 0 |
| venture | | | | |
--------------------------------------------------------------------------------
| Other long-term | 6 959 | 8 585 | 445 | 549 |
| receivables | | | | |
--------------------------------------------------------------------------------
| Property, plant and | 6 385 769 | 5 757 872 | 408 125 | 367 995 |
| equipment | | | | |
--------------------------------------------------------------------------------
| Total non-current assets | 6 395 401 | 5 766 457 | 408 741 | 368 544 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | 6 790 204 | 6 430 643 | 433 973 | 410 993 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| LIABITLITIES | | | | |
--------------------------------------------------------------------------------
| Current liabilities | | | | |
--------------------------------------------------------------------------------
| Current portion of bonds | 608 435 | 185 282 | 38 886 | 11 842 |
| and long-term loans | | | | |
--------------------------------------------------------------------------------
| Short-term provisions | 18 910 | 17 189 | 1 208 | 1 099 |
--------------------------------------------------------------------------------
| Supplier and other | 195 190 | 113 267 | 12 475 | 7 238 |
| payables | | | | |
--------------------------------------------------------------------------------
| Total current | 822 535 | 315 738 | 52 569 | 20 179 |
| liabilities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current liabilities | | | | |
--------------------------------------------------------------------------------
| Long-term borrowings | 1 453 504 | 1 661 386 | 92 896 | 106 182 |
--------------------------------------------------------------------------------
| Government grants | 11 455 | 18 358 | 732 | 1 173 |
--------------------------------------------------------------------------------
| Other long-term payables | 9 400 | 6 712 | 601 | 429 |
--------------------------------------------------------------------------------
| Total non-current | 1 474 359 | 1 686 456 | 94 229 | 107 784 |
| liabilities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total liabilities | 2 296 894 | 2 002 194 | 146 798 | 127 963 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EQUITY | | | | |
--------------------------------------------------------------------------------
| Share capital at nominal | 2 786 204 | 2 755 619 | 178 071 | 176 116 |
| value | | | | |
--------------------------------------------------------------------------------
| Statutory reserve | 275 562 | 275 000 | 17 612 | 17 576 |
| capital | | | | |
--------------------------------------------------------------------------------
| Hedge reserve | 8 642 | 8 494 | 552 | 543 |
--------------------------------------------------------------------------------
| Retained earnings | 1 087 071 | 792 908 | 69 476 | 50 676 |
--------------------------------------------------------------------------------
| Net profit for the | 335 831 | 594 724 | 21 464 | 38 010 |
| financial year | | | | |
--------------------------------------------------------------------------------
| Capital and reserves | 4 493 310 | 4 426 745 | 287 175 | 282 921 |
| attributable to equity | | | | |
| holders of the Parent | | | | |
| Company | | | | |
--------------------------------------------------------------------------------
| Minority interest | 0 | 1 704 | 0 | 109 |
--------------------------------------------------------------------------------
| Total equity | 4 493 310 | 4 428 449 | 287 175 | 283 030 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total liabilities and | 6 790 204 | 6 430 643 | 433 973 | 410 993 |
| equity | | | | |
--------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT
--------------------------------------------------------------------------------
| in thousands of EEK | 2007 | 2006 | 01.07.2007- | 01.07.2006- |
| (unaudited) | | | 31.12.2007 | 31.12.2006 |
--------------------------------------------------------------------------------
| Sales | 1 162 445 | 1 177 953 | 509 955 | 549 657 |
--------------------------------------------------------------------------------
| Other income | 30 174 | 186 810 | 24 640 | 51 115 |
--------------------------------------------------------------------------------
| Operating expenses | -309 252 | -289 023 | -164 305 | -150 510 |
--------------------------------------------------------------------------------
| Personnel expenses | -176 025 | -153 651 | -106 157 | -93 216 |
--------------------------------------------------------------------------------
| Depreciation and | -204 296 | -189 545 | -105 102 | -97 328 |
| impairment | | | | |
--------------------------------------------------------------------------------
| Other expenses | -19 652 | -973 | -15 706 | -468 |
--------------------------------------------------------------------------------
| Operating profit | 483 394 | 731 571 | 143 325 | 259 250 |
--------------------------------------------------------------------------------
| Finance income and costs | | | | |
--------------------------------------------------------------------------------
| Finance income | 12 798 | 11 714 | 4 488 | 7 160 |
--------------------------------------------------------------------------------
| Finance costs | -76 645 | -62 557 | -40 401 | -33 791 |
--------------------------------------------------------------------------------
| Total finance income and | -63 847 | -50 843 | -35 913 | -26 631 |
| costs | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit/loss from | 899 | 0 | -145 | 0 |
| investments in joint | | | | |
| venture under equity | | | | |
| method of accounting | | | | |
--------------------------------------------------------------------------------
| Profit before tax | 420 446 | 680 728 | 107 267 | 232 619 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income tax expense | -84 615 | -85 130 | 0 | 0 |
--------------------------------------------------------------------------------
| Profit for the period | 335 831 | 595 598 | 107 267 | 232 619 |
--------------------------------------------------------------------------------
| attributable to: | | | | |
--------------------------------------------------------------------------------
| equity holders of the | 335 831 | 594 724 | 107 267 | 232 129 |
| Parent Company | | | | |
--------------------------------------------------------------------------------
| minority interest | 0 | 874 | 0 | 490 |
--------------------------------------------------------------------------------
| Basic earnings and | 1,21 | 2,16 | 0,39 | 0,84 |
| diluted earnings per | | | | |
| share (in EEK) | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| in thousands of EUR | 2007 | 2006 | 01.07.2007- | 01.07.2006- |
| (unaudited) | | | 31.12.2007 | 31.12.2006 |
--------------------------------------------------------------------------------
| Sales | 74 294 | 75 285 | 32 592 | 35 129 |
--------------------------------------------------------------------------------
| Other income | 1 929 | 11 939 | 1 575 | 3 267 |
--------------------------------------------------------------------------------
| Operating expenses | -19 765 | -18 472 | -10 501 | -9 619 |
--------------------------------------------------------------------------------
| Personnel expenses | -11 250 | -9 820 | -6 785 | -5 958 |
--------------------------------------------------------------------------------
| Depreciation and | -13 057 | -12 114 | -6 717 | -6 220 |
| impairment | | | | |
--------------------------------------------------------------------------------
| Other expenses | -1 256 | -62 | -1 004 | -30 |
--------------------------------------------------------------------------------
| Operating profit | 30 895 | 46 756 | 9 160 | 16 569 |
--------------------------------------------------------------------------------
| Finance income and costs | | | | |
--------------------------------------------------------------------------------
| Finance income | 818 | 749 | 287 | 458 |
--------------------------------------------------------------------------------
| Finance costs | -4 899 | -3 998 | -2 582 | -2 160 |
--------------------------------------------------------------------------------
| Total finance income and | -4 081 | -3 249 | -2 295 | -1 702 |
| costs | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit/loss from | 58 | 0 | -9 | 0 |
| investments in joint | | | | |
| venture under equity | | | | |
| method of accounting | | | | |
--------------------------------------------------------------------------------
| Profit before tax | 26 872 | 43 507 | 6 856 | 14 867 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income tax expense | -5 408 | -5 441 | 0 | 0 |
--------------------------------------------------------------------------------
| Profit for the period | 21 464 | 38 066 | 6 856 | 14 867 |
--------------------------------------------------------------------------------
| attributable to: | | | | |
--------------------------------------------------------------------------------
| equity holders of the | 21 464 | 38 010 | 6 856 | 14 836 |
| Parent Company | | | | |
--------------------------------------------------------------------------------
| minority interest | 0 | 56 | 0 | 31 |
--------------------------------------------------------------------------------
| Basic earnings and | 0,08 | 0,14 | 0,02 | 0,05 |
| diluted earnings per | | | | |
| share (in EUR) | | | | |
--------------------------------------------------------------------------------
Marko Raid
Chief Financial Officer
+372 6318047
Sven Ratassepp
Public Relations Manager
+372 6318064
