Allcargo Logistics Q4 FY24 earnings call

Where management's figures differ from the filing

• PAT: said ₹-12 cr (total PAT) vs ₹17 cr in Q3; filed ₹-5.65 cr (net profit to owners). Call quoted 'Profit after tax' which is total PAT before minority interest; filed figure is net profit attributable to owners only.

What moved the numbers, as management explained it

• ECU Worldwide EBITDA fell 12% QoQ to ₹57 cr as $1.5-2 mn severance costs were not fully offset by reductions; gross profit was largely flat QoQ. (one-off)
• Gati Express EBITDA doubled to ₹14 cr from ₹7 cr QoQ on cost optimization; volumes dipped 4% to 306 KT from 318 KT.
• Consolidated PAT swung to a ₹12 cr loss from ₹17 cr profit in Q3 on lower EBITDA, severance and working capital build.
• Net debt rose ₹193 cr to ₹407 cr on increase in working capital as freight rates began to recover.
• ECU Worldwide revenue grew 6% QoQ to ₹2,570 cr; LCL volumes flat at 2.1 mn CBM, FCL +2.5% QoQ at 156.3K TEUs.

The numbers management led with

• Gati Express EBITDA growth QoQ: ~115% QoQ
• Asia-LatAm ocean freight: Up from $2,000 to $6,000-7,000 per container in under 2 months
• Consolidated net debt: INR 407 cr on 31-Mar-24 (+INR 193 cr QoQ)
• ECU Worldwide trade lane network: 2,500 direct trade lanes globally

Guidance on this call

By business

Balance sheet, capex and funding

• Consolidated net debt ₹407 cr at 31 March 2024, up ₹193 cr QoQ; gross debt ₹960 cr.
• ECU Worldwide holds ~₹300 cr cash and ~₹300 cr debt (net debt near zero); working capital rose as freight rates recovered.
• Severance payments of $1.5-2 mn incurred in Q4 at ECU; expected to halve to ~$0.75 mn next quarter.

The industry, as management sees it

Management sees uneven global trade recovery with distinct lane-level dynamics — Asia outbound (China, Vietnam) seeing demand rebound and freight rate spikes, Europe outbound still weak, India outbound benefiting from shipping line capacity additions that have so far met demand. Inventory restocking signals and tightening warehousing capacity seen as precursors to a sustained H2 2024 demand pickup.

Risks management named

• Macro headwinds and global trade slowdown persisting into H1 FY25
• Severance costs of $1.5-2 million recurring partially in Q1 FY25
• Rising net debt on working capital build at consolidated level
• Trade lane blankings and shipping capacity re-routing due to Red Sea crisis
• Singapore/Asia-to-Europe freight rates weak; uneven recovery across lanes

Not answered directly

• Per-TEU EBITDA applicability

Asked for a number, answered without one

• Per TEU EBITDA: EBITDA per TEU not applicable as ECU combines LCL (measured in CBM) and FCL (measured in TEUs); not a metric they capture.

Every question, with its answer

1. 1. ECU Worldwide per-TEU EBITDA

   Naman, RV Investments

   Question. Can you let me know the per TEU EBITDA? Also, I saw a decrease in the assets of the ISC business — have you divested any major assets due to distressing volumes?

   Answer, Ravi Jakhar, Group Chief Strategy Officer. On assets: per Deepal, the assets have reduced because freight rates have gone down and working capital has shrunk vs FY23. On per TEU EBITDA: not applicable because ECU EBITDA comprises both LCL (CBM-based) and FCL (TEU-based); LCL is not measured in TEUs.

   Follow-up. And per TEU EBITDA specifically?

   Answer. EBITDA per TEU would not be applicable because the EBITDA comprises LCL (CBM) and FCL (TEU). LCL operates on CBM and not TEUs, therefore EBITDA per TEU is not a metric captured.

   Not answered directly.

2. 2. Global container freight rates

   Amit Kumar, Determent Investments

   Question. Could you help us understand what's driving the recent sharp spike in container freight rates in May after the Red Sea spike settled down in March?

   Answer, Ravi Jakhar, Group Chief Strategy Officer. Short-term: shipping capacity additions (~1m TEU in 4 months) net of Red Sea takeout have not been enough for demand. Inventory restocking on actual and anticipated consumer demand has tightened space; booking lead times moved from 1 week to 1 month. Asia-LatAm rates nearly 4x in less than 2 months; India-Europe flat; Asia-Europe up; Europe-out still weak. Distinct lane-level trends reflecting pure supply-demand dynamics.

   Follow-up. In your LCL business, how are you managing frequency given that shipping lines are blanking calls at ports like Pipavav?

   Answer. Different shipping lines adopt different practices; some skip ports to reduce transit time. Advantage is ECU operates the world's largest LCL network across 2,500 trade lanes directly with breadth of carriers, so we can rewire routings via direct or transshipment moves across all major global hubs to keep customers serviced.

3. 3. One-offs and severance

   Ravi Mehta, Deep Financials

   Question. Any one-offs in this quarter? You mentioned some layoff expense last quarter — was anything material this quarter?

   Answer, Ravi Jakhar, Group Chief Strategy Officer. Severance costs were present in Q4 and will continue in the next quarter. By next quarter, severance should be fully offset by savings from earlier reductions. Total impact in Q4 in the range of $1.5 to $2 million — not significant enough to materially change the flat-quarter characterisation.

   Follow-up. Will a similar number continue next quarter to complete the layoff exercise?

   Answer. Yes, but there should be some benefit accruing from costs already reduced (different severance timelines for different people). Net impact should be lower — maybe half — in the next quarter.

4. 4. LCL-FCL gross profit mix

   Ravi Mehta, Deep Financials

   Question. Any color on the gross profit mix between LCL and FCL — even a ballpark? Also, the gross profit still seems very flat; the hit is largely below gross profit, correct?

   Answer, Ravi Jakhar, Group Chief Strategy Officer. LCL contributes anywhere between 65% to 70% of gross profit and that has largely remained in that range. The ~$1.5 million severance hit gets captured there. Also flagged: post-demerger, segment treatment is changing, hence ECU Worldwide Belgium numbers provided for purer view. Considering further breakdown in future public disclosures.

   Partly answered.

5. 5. Trade lane development & utilisation

   Vikram Suryavanshi, PhillipCapital (India) Pvt Ltd

   Question. On trade lane development, how is the progress? Will the focus be on optimising network cost? Any impact from utilisation levels vs freight rate impact on profitability?

   Answer, Ravi Jakhar, Group Chief Strategy Officer. Container utilisation has remained range bound; should improve as volumes pick up from July onwards. Trade lanes are in constant flux — 5 to 10 new trade lanes under development at any time. Brazil export volumes grown manifold; new lanes launched from Brazil into different parts of the world. Also evaluating incremental opportunities out of Germany post the fair trade acquisition. New opportunities being explored between Latin America and other regions.

6. 6. China volumes and outlook

   Vikram Suryavanshi, PhillipCapital (India) Pvt Ltd

   Question. How big are China volumes for the overall international supply chain business and how is the outlook?

   Answer, Ravi Jakhar, Group Chief Strategy Officer. China contributes broadly 15% to 18% of volumes. Outlook is slightly positive — Asia outbound trade (China, Vietnam and others) seeing rebound. Even with some production shifting to Mexico, raw materials/components still move from China to Mexico. Indian trade has seen dedicated capacity additions by shipping lines, so freight rates out of India have not spiked, but Asia outbound rates have gone up materially.

7. 7. Demerger timeline

   Vikram Suryavanshi, PhillipCapital (India) Pvt Ltd

   Question. Any revised timeline on the demerger/restructuring process and listing of the restructured company?

   Answer, Ravi Jakhar, Group Chief Strategy Officer. Indicative timeline of early next year (January to March) maintained. NCLT process should be over by end of this year (FY24); typically 1-2 months for post-NCLT process. Therefore, largely maintain same timeline — anywhere between January to end February, early March we should be able to conclude the restructuring transaction.

8. 8. ECU debt and cash position

   Vikram Suryavanshi, PhillipCapital (India) Pvt Ltd

   Question. What was the gross debt and cash level on the international supply chain business — specifically at ECU?

   Answer, Deepal Shah, Group Chief Financial Officer. Total overall gross debt across the group is ₹960 cr with net debt around ₹407 cr. At ECU level, debt is very marginal; close to ₹300 cr cash and around similar amount of debt — net debt largely negligible. Working capital has increased with freight rate uptick and incremental investments, but on overall basis ECU is at a net zero position.

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