AllCargo Logistics – Are good time ahead?

• Consolidated revenue for Q1 FY25 was Rs. 3,813 crores, up from Rs. 3,271 crores in Q1 FY24
• EBITDA for Q1 FY25 was Rs. 133 crores, down 5% YoY but up 34% QoQ
• Reported PAT of Rs. 4 crores compared to a loss of Rs. 12 crores in Q4 FY24
• Consolidated net debt stood at Rs. 434 crores as of June 30, 2024
• International supply chain business saw 6% QoQ growth in LCL volumes and 9% YoY growth in FCL volumes
• Express business EBITDA up 33% QoQ on improved operational efficiencies
• Contract logistics revenue up 13% QoQ and 22% YoY
• Focus on standardizing operations and outsourcing to reduce costs
• Driving automation to maintain costs against inflationary pressures
• Expanding in underrepresented markets like Argentina, Uruguay and Paraguay
• Launching new products and trade lanes to drive revenue growth
• Seeing sequential improvements across all businesses
• Trade environment has been buoyant with demand exceeding expectations
• Expecting sustained recovery in trade volumes until end of year
• Freight rates expected to remain stable or range-bound in near term
• Supply chain issues like Red Sea crisis and US port congestion creating container shortages
• European economies remain subdued, but growth seen in Asia, US and South America
• Expect European demand to potentially pick up in 2025
• Expect continued positive trend in volumes and profitability for coming quarters
• Focus on expanding market share and outgrowing the market in LCL and FCL businesses
• Anticipate improvements in utilization and operating leverage to drive profitability
• Business seeing recovery after challenging 12 months
• Well-positioned to benefit from revival in global trade volumes
• Unique LCL consolidation model provides competitive advantage
• Focus on digital initiatives and automation to drive efficiencies

Management did not provide specific guidance on profit margins. However, they indicated some factors that could positively impact margins going forward:

1. Improved utilization: LCL volumes increased 6% QoQ and FCL volumes grew 9% YoY. Better utilization typically leads to improved margins.
2. Operating leverage: There is significant operating leverage in the business, meaning incremental revenue growth should disproportionately benefit profits.
3. Cost containment: The company has implemented cost reduction initiatives, outsourcing, and automation to keep SG&A costs in check despite inflationary pressures.
4. Mix improvement: Increased usage of 40-foot containers (up 9%) which are more operationally efficient.
5. Volume growth expectations:Continued volume growth for the remainder of the year, which should help spread fixed costs.
6. Yield improvements: LCL yield (gross profit per cubic meter) to improve beyond previous levels as volumes grow.