ALLCARGONSEQ3 FY23February 21, 2023

Allcargo Logistics Limited

9,484words

110turns

8analyst exchanges

3executives

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Management on call

Ravi Jakhar

CHIEF STRATEGY OFFICER, ALLCARGO LOGISTICS LIMITED

Deepal Shah

GROUP CFO, ALLCARGO LOGISTICS LIMITED

Abhijeet Purohit

PHILLIPCAPITAL (INDIA) PRIVATE LIMITED

Key numbers — 40 extracted

rs,

t should be under the TransIndia Realty. And it also does not include the contract logistics numbers, which in the coming quarters would see consolidation with the Allcargo Logistics. So

Rs. 237 crore

ng quarters would see consolidation with the Allcargo Logistics. So, therefore, the Rs. 237 crores EBITDA, including other income, which has been seen, only represents a part of what would be the

70%

, I am glad to state that our flagship business of LCL consolidation, which contributes to almost 70% of gross profit in the international supply chain business, has continued to see market share exp

15%

usiness, has continued to see market share expansion. And for the first time, we have now crossed 15% global market share in LCL as we speak today. However, in the quarter gone by, there were disru

Rs. 130 crore

ile on the 31st December, you would notice that the consolidated net debt is already down to only Rs. 130 crores post 31st December, with the Blackstone transaction being consummated approximately Rs. 295 cror

Rs. 295 crore

s. 130 crores post 31st December, with the Blackstone transaction being consummated approximately Rs. 295 crores of debt has been alienated from Allcargo books. And the company has also received ad

Rs. 135 crore

rom Allcargo books. And the company has also received additional cash inflow of about Rs. 135 crores. So, instead of being, having a, holding a net debt, we would rather be cash positive. And even

30%

evelopment from the balance sheet perspective. And it means that you would be able to acquire the 30% state from KWE in the operating express entity. I am also pleased to announce that we have been l

100%

oming weeks. And therefore, that business would also get demerged into ASCPL, which as on this is 100% subsidiary of Allcargo Logistics. What does not contribute to the numbers in the quarter gone by,

63%

digitalization front, we continue to maintain healthy export bookings on platform, which are over 63% of the total bookings, and that is an industry leading number, far ahead of the competitors opera

20%

tainer utilization, which continues to remain that way. And on the FCL, we estimated about 15% to 20% drop in utilization on a per TEU basis. And considering the historic average of 20% growth rate,

Rs. 340

So, on an overall basis, if you look at the combined EBITDA, we are looking at a number of about Rs. 340 – Rs. 350 crores, which is, of course, lower than the previous quarter, but is broadly in line wit

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Guidance — 20 items

Ravi Jakhar

opening

“So, we will be happy to hear all the questions.”

Ravi Jakhar

opening

“And we have also received the NCLT order very recently, and we will be completing the process for the demerger for that business as well over the coming weeks.”

Ravi Jakhar

opening

“But over the coming years, we believe that without any significant CAPEX investments, on the back of our global network, global relationships, and synergies with the ocean freight consolidation, you will be able to do some amount of asset-light digital platform backed airfreight consolidation business as well.”

Ravi Jakhar

opening

“And we anticipate that now we are in a position to add almost 100 trade lanes on an annual basis, which means that we would open up new avenues for growth.”

Deepal Shah

opening

“With better yield management and operational capabilities, we believe the business is progressing well and will achieve the desired goal.”

Chetan Shah

“Are you referring to a quarterly number going forward for an MTO business or a company as a whole?”

Ravi Jakhar

“But we anticipate that now post Chinese New Year, the inventory levels have depleted.”

Ravi Jakhar

“And therefore, the inventory restocking would happen, and which is where we anticipate that from March onwards, the trade should see a pickup on the back of inventory replenishments.”

Deepal Shah

“And these will be allocated at the point of demerger.”

Ravi Jakhar

“And if I can also just add to that, so while the segmental breakup will be done, but if you move away from the segmental and look at the reported numbers consolidated for the continued business, that basically reflects what would be in the consumer business and the remaining part will be in discontinued business.”

Risks & concerns — 8 flagged

On the FCL business, given the macroeconomic slowdown, we have seen a flattening of volume.

— Ravi Jakhar

There would be a marginal decline on a gross profit per cbn, but that would be almost flattish.

— Ravi Jakhar

So, new trade lanes plus the marginal decline in the volume.

— Ravi Jakhar

So, some of those robust performances is what contained our decline to, like I said, about 6%, 7% on the LCL on a quarter-on-quarter basis and 0% on a year-on-year basis.

— Ravi Jakhar

So, how confident are we given that even in Jan and Feb, there is decline in freight rate by about 15%, 20%.

— Radha

And there, it has largely been led by the Chinese supply chain concern, which led to significant reduction in market size in China.

— Ravi Jakhar

So, when you get down to the EBIT level, we are looking at the impact of two key components.

— Ravi Jakhar

So, let us hope you are in a position to upload your latest presentation as early as possible, because these things, you people are adept all those things, but to understand these things become difficult unless it is properly presented.

— Sameer Deshpande

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Q&A — 8 exchanges

Thank you for a detailed thing. Just wanted one small data point. Can you give me what is MTO's TEU equivalent both LCL and FCL combined, which was roughly Rs. 2.48 lakh in the previous quarter? What would be this number for this quarter?

Ravi Jakhar

So, on the volume side, like I mentioned, the performance for this quarter is flat as compared to the same quarter previous year. As compared to the previous quarter ending September, the FCL volumes are down about 2% to 3%, while the LCL volumes are down about 6% to 8%. And you will have the exact numbers shared in the investor presentation that will follow. No problem. And just one question, or rather let me put it this way, one small clarification. You spoke that the combined EBITDA of about Rs. 340 – 350 crores. Are you referring to a quarterly number going forward for an MTO business or a

Firstly, congratulations on getting the demerger through. So, just a small request from me. You know, if we could get the investor presentation in advance of the call, that would really help us prepare for the call. So, I understand that this time you wanted some suggestions from us. But you know, even if you were stuck to the previous format would have helped us prepare for the call. And so, one question as well from me. On the volume side, like you mentioned, the volumes are slightly lower. And on the profitability, though, on the LCL side, is that broadly maintained quarter-on-quarter?

Ravi Jakhar

The gross profit percentage margin would look, appear to be higher, but that is only because the revenue has come down. The way to look at this business would be that you would see that the revenue has come down by approximately Rs. 970 odd crores, corresponding to which the operating expenses have come down by Rs. 900 crores. So, that gap of Rs. 80 crores is what the impact is, which is, again, can be bifurcated into two parts. One is the actual loss in margin on the FCL business, which we have been stating that once the freight rates normalized, which is what they have normalized now, would

So, my first question was in terms of the EBITDA number that you mentioned, Rs. 350 crores for this quarter. So, could you give me a breakup of this EBITDA? How did you arrive at this number?

Ravi Jakhar

Yeah. So, if you look at the breakup on the continuing business results, which have been shown, it is approximately, if you add back the interest and depreciation to PBT, you could see that it totals to about Rs. 237 crores, excluding other income, that is about Rs. 229 crores. Approximately Rs. 31 crores would be the Contract Logistics, and approximately Rs. 81 crores would be the other discontinuing businesses, put together would be about Rs. 343 crores excluding other income and Rs. 351, including other income. That's a broad range. And we would share these numbers in these formats where it

So, just on the EBIT per TEU thing, the number looks pretty healthy if you build in whatever volume guidance that you are giving for the quarter. So, wanted to know that the freight index has been falling all through the quarter. So, the entire fall is captured in the performance or there is some spillover effect, which we can see in Jan, Feb of, you know, the fall that has happened until December?

Ravi Jakhar

If you look at the fall, and if you look at the continuing business numbers that we have shared, while the revenue has gone down by Rs. 979 crores, the operating expenses have also gone by almost Rs. 900 crores. So, the data is very minimal, and which is basically because the ocean freight rates are largely a pass-through except for the impact on FCL, which, as I stated earlier, of the amount of 15% to 20%. So, there is a reason why you find that the EBIT per TEU or the EBITDA per TEU would largely get maintained and be impacted more by how the SG&A costs are, how growth initiatives are being

I just missed your volume commentary. You mentioned that the volumes are flat Y-o-Y. And on a Q-o-Q basis, it was down 2% to 3% in FCL, and 6% to 8% in LCL. Did I hear it correctly?

Ravi Jakhar

Yeah. So, I would say that, you know, that's exactly what I said. But I would also say that the Y-o-Y number is less relevant, because the trade environment has been very different. The Q-o- Q numbers are more reflective of the current trend. And there, it has largely been led by the Chinese supply chain concern, which led to significant reduction in market size in China. And while globally also, other markets have seen contraction or flat numbers, the overall market has actually shrunk on a quarter-on-quarter basis, basis our internal estimate of tracking competitors across all key markets, w

See, I would like to have a clarification that it was mentioned that there is a net debt in the balance sheet as on 31st December of Rs. 130 crores. And after 31st December, we have received some money. And then now we have net cash. But again, there will be some outflow. And whether we will again go in debt or we will be having zero debt?

Ravi Jakhar

And let me clarify on the numbers and reiterate. So, as you rightly pointed out, as of 31st December, we had the consolidated net debt of approximately Rs. 188 (the figure was erroneously said; however the correct figure is Rs. 130 crores) crores, including all the Group companies, against which we have alienated the debt to Blackstone as part of the transaction, which is about Rs. 200 crores, and we have also received cash. So, total about Rs. 400 crores impact has been positive. And therefore, the net cash of over Rs.200 crores - Rs. 250 crores on the book for a net consolidated basis. Now,

So, I think till the last presentation, we were giving a slide with respect to our management aspiration for 2026. So, basically, just wanted to check the revenue and EBITDA guidance, which you are giving, that is purely on an organic basis. And with this couple of new acquisitions that we have been doing in Germany and Turkey, will these numbers increase from here on? Or basically, if you can just guide us on the volume guidance you are baking in this whole guidance?

Ravi Jakhar

Yes. So, the 2026 guidance that we have been providing remains consistent and constant. So, the same slide you would see in this Investor Presentation as well. And that takes into account only the organic growth initiatives and some of these bolt-on acquisitions, which are very small, which are not meaningful, it does not include any large acquisitions. So, they could be like $1 million, a couple of million dollars here or there which could be added. But largely, this is based on the organic business growth expansions. And the volume growth that we are baking in these revenue estimates both in

Thank you all for joining the call. And I hope we have been able to provide more clarity. And given the uniqueness of this quarter, we will endeavor to take your comments, questions and suggestions as we upload the Investor Presentation providing more clarity on all the numbers. Thanks very much for joining in.

Deepal Shah

Thank you.

Speaking time

Ravi Jakhar

Deepal Shah

Radha

Moderator

Sameer Deshpande

Ravi Mehta

Deep Master

Kashyap

Rushab Shah

Chetan Shah

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Opening remarks

Abhijeet Purohit

Thank you. Good afternoon. On behalf of PhillipCapital, I welcome you all to the Allcargo Logistics 3Q FY '23 Earnings Call. From the management, we have with us Mr. Ravi Jakhar – Group Chief Strategy Officer; and Mr. Deepal Shah – Deputy Group CFO. Now without much delay, I now hand over the call to Mr. Ravi for his opening remarks, followed by Q&A. Over to you, sir.

Ravi Jakhar

Thank you very much. I welcome you all to this conference call. And this is Ravi Jakhar here. I am joined by my colleague, Mr. Deepal Shah. Let me first take this opportunity to highlight that we have received, the order has been pronounced by the NCLT on the demerger, and it has been uploaded on their website. Because of that, while the process is still underway, and we estimate that the companies should eventually get listed in around April, we had to report the results in a slightly different format, highlighting the continuing businesses, discontinuing businesses and so on. Therefore, let me first specify that post demerger being completed, we would be having three listed entities. And since it is a mirror demerger, on each share of Allcargo, the shareholders will continue to hold 1 share of Allcargo and would get an incremental 1 share each of Allcargo Terminals and TransIndia Realty. As we will get to see the results in the coming quarters on a consolidated basis, the results sho

Deepal Shah

Thank you, Ravi. So, like you mentioned that the results now include discontinuing operations in light of the demerger order. So, these have to be combined continuing-discontinuing to come to have a comparitive clarity from the previous quarters. So, I will walk you through the financial performance. For the nine months of 2023, Allcargo Logistics Limited consolidated revenue, including the discontinuing operations for comparative purposes stands at Rs. 15,301 crores as against Rs. 14,296 crores for the previous year, registering a 7% growth year-on-year. Revenue from continuing operations stood at Rs. 4,099 crores in Q3 FY '23 as against Rs. 5,599 crores in Q3 FY '22. Revenue from combined businesses, which includes the continued businesses, discontinuing businesses and Contract Logistics stood at Rs. 4,425 crore as per presentation for FY '23 quarter three. EBITDA from the continuing operations stood at Rs. 229 crores for Q3 FY '23 as against Rs. 434 crores during the same period las

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