Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sequential improvements across all business segments.
- LCL business increased by almost 6% compared to the previous quarter.
- FCL business up 9% compared to the last year.
- EBITDA improved by 34% compared to the previous quarter.
- Contract logistics business revenue increased by 13% compared to the previous quarter and 22% compared to the previous year.
Negative Points
- Consolidated revenue for Q1 FY25 decreased to INR2,813 crores from INR3,271 crores in Q1 FY24.
- EBITDA for Q1 FY25 down 5% compared to Q1 FY24.
- Consolidated PAT of INR4 crores, a marginal improvement from a loss of INR12 crores in Q4 FY24.
- Express business volumes slightly increased but revenue decreased to INR358 crores from INR367 crores in the same quarter last year.
- Contract logistics EBITDA for the quarter ended June 2024 stood at INR29 crores, down from INR32 crores for the same period last year.
Q & A Highlights
Q: With regards to the Express business, what changes have been made or will be made at a broad strategy level to ensure double-digit volume growth over the next two to three years?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: The Gati Express business has seen an operational turnaround with cost efficiencies now matching industry standards. New senior commercial leaders have joined, and we remain confident that these changes will drive future growth. The management changes should work well for the business.
Q: On the contract logistics side, what is the sustainable EBITDA margin outlook for the next two years?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: The current quarter's decline in EBITDA margins is not indicative of a trend. The business profile should remain consistent, and we don't foresee significant upward or downward revisions in margin growth. The margin percentages could decline if there is accelerated growth in transport, but absolute margins should grow.
Q: In the MTO business, can the EBIT per LCL volume return to pre-COVID levels given the recent increase in long-term freight rates?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: The LCL and FCL business compositions have changed over the years. We focus on gross profit per CBM for LCL and per TEU for FCL. We expect volume growth and utilization to improve, which should positively impact the bottom line.
Q: Are all cost initiatives on the employee cost front completed, or is there more impact expected in the next quarter?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: Most cost initiatives are behind us. We have managed to contain costs despite inflationary pressures through automation and outsourcing. We expect continued volume growth to translate into profitability.
Q: Given the record container movement in the first five months of this financial year, is there a risk of demand tapering off and freight rates cooling down?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: While there has been a sharp pickup in demand, we believe the rates should remain stable until the end of the year. The supply side challenges and geopolitical situations will influence future trends, but we expect sustained demand for the remaining quarters.
Q: Were there any one-off expenditures this quarter?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: No significant one-off expenditures were reported this quarter. Cost reduction initiatives have been implemented to maintain cost levels against inflationary increases.
Q: What is the volume growth target for FY25 for the international supply chain business?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: We are not sharing specific guidance but expect to expand market share and grow faster than the market in both LCL and FCL businesses for FY25.
Q: What is the current net debt for each business segment, and what are the targets for this year and next year?
A: Deepal Shah, Group Chief Financial Officer: EQ Worldwide NV has a net debt of INR 524 crores, Gati has INR 195 crores in net cash, and ACL has INR 24 crores of net debt. We expect the debt to go down, subject to working capital requirements.
Q: Why are LCL volumes measured in CBM and FCL in TEU?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: FCL is measured in TEUs because it involves full container loads. LCL is measured in CBM because it involves less-than-container loads, where customers book part of the container.
Q: What percentage of customers in the international supply chain business are recurring?
A: Ravi Jakhar, Chief Strategy Officer and Chief of Staff: Approximately 40% of our business comes from large, recurring customers. About 60% comes from small customers, many of whom are also recurring.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
