Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mahindra Logistics Ltd (NSE:MAHLOG, Financial) reported a revenue increase of 11.5% year-on-year for Q2 FY25, indicating strong growth despite challenging market conditions.
- The 3PL contract logistics business grew by 7% year-on-year, driven by new site volume growth and healthy order intake.
- The company expanded its warehousing network, with operations commencing in new locations like Guwahati and Kolkata, contributing to a total warehousing space of 21.6 million square feet.
- Freight forwarding segment showed recovery with growth in tonnage and a favorable pricing environment, particularly in ocean freight.
- The mobility business reported a 72% increase in PAT year-on-year, reflecting improved profitability.
Negative Points
- The express business faced a challenging quarter with a 7% to 8% decline in volumes from existing customers, impacting overall performance.
- Mahindra Logistics Ltd (NSE:MAHLOG) reported a consolidated loss of INR10.8 crores for the quarter, indicating financial challenges.
- The company experienced unabsorbed white space in its warehousing operations, leading to a pretax impact of INR7.5 crores to INR8 crores.
- Rivigo, a subsidiary, continues to experience cash burn, with reported losses of INR24.2 crores for the quarter.
- The automotive sector showed mixed trends, with commercial vehicle sales remaining subdued, impacting logistics demand.
Q & A Highlights
Q: Can you explain the unabsorbed costs in the contract logistics business this quarter, and what is the cash burn at Rivigo?
A: The unabsorbed white space in contract logistics is approximately 1.1 million square feet, costing around INR7.5 crores to INR8 crores per quarter. Additionally, seasonal hiring added INR3 crores to INR4 crores in costs. Rivigo's cash burn is around INR21 crores, with a reported PAT loss of INR24 crores. We have capitalized the company with an additional INR50 crores of equity and remain committed to funding it.
Q: What is the strategy for Rivigo given the current market conditions and volume growth challenges?
A: We need a 35% to 40% increase in volume to reach EBITDA breakeven, which we aim to achieve by mid-Q4. The focus is on increasing demand and driving conversion from existing contracts. Despite market challenges, we are optimistic about achieving this target within the next few months.
Q: How has the express segment performed in terms of volume, and what are the expectations for Q3?
A: The express segment saw a 2% to 3% increase in delivered volume this quarter. We expect a seasonal lift in Q3, driven by existing customer accounts and new account additions. However, the market remains volatile, and we are cautiously optimistic.
Q: Can you provide insights into the sectoral mix and growth opportunities in e-commerce?
A: Automotive contributes 57% of revenue, with FMCG, durables, and pharma making up 20%, and e-commerce around 18% to 19%. E-commerce, particularly quick commerce, is a growing segment for us, and we are expanding our fulfillment centers to meet increasing demand.
Q: What is the impact of the current economic environment on customer volumes and the supply chain business?
A: We experienced a decline in volumes from existing customers due to market conditions, impacting revenue by approximately INR2 crores to INR3 crores. However, new site launches and a 7% growth in volume helped offset this impact. We expect recovery as market conditions improve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
