CONCOR eyes strong exports, import growth at 14-15% in Q2

In an interview to a news channel, Anil Gupta, CMD, Container Corporation of India spoke about the company’s Q1 earnings and his outlook going forward.

Q: Your volumes this time have seen quite a bit of buoyancy this time, both on EXIM, up 15 percent year-on-year (YoY), and even on the domestic side, which is up 18 percent YoY. Can you tell us what led to this kind of strong growth on volumes?

A: This is a follow up of the last quarter. Last quarter also there was a good growth. Countries exports are growing, especially the exports flowing through inland container depots (ICDs). They have been growing after very long gap and that has resulted in so-called turnaround of a bad situation that we have been facing for last five years. So, volume growth has been good. Domestic volume growth has been following the growth that we had achieved last year itself and it has been pretty good. So, overall we grew at around 15.5 percent in the volumes. Our outlook for the future also remains the same. We are expecting overall this high growth may not be there because of the higher base of last year. However, we still feel that our overall EXIM growth will be at around 12 percent. Our domestic growth will be around 15 percent and overall company’s growth in volume terms will be around 13 percent or so.

Q: On the point of realisations your EXIM realisations are down this quarter by 10 percent YoY. What led to the decline and can we attribute this to the softness, to the discount push you started a couple of quarters back to attract more volumes especially on the export front?

A: You have to look at it more closely in order to gather the reasons. One reason is the leads. Our leads, which used to be in excess of 1100 kilometers, have gone below 1000 kilometers. They are now 950 kilometers or so. This is primarily because of traffic increasing more than disproportionately for ICDs which are located at lower distances from the port than the high distance ICDs.

For instance, the ICD Ludhiana, which is the maximum distance ICD, traffic is not grown in the same proportion as for ICD Nagpur, which is only 700 kilometers or so. ICD in Ahmedabad Khodiyar is only around 580 kilometers but traffic has grown very high for these ICDs. So, our lead distances have gone down.

Second main reason is that our exports have grown at more than 22 percent, while imports have grown only at around 8 percent. As a normal process our exports are priced much lower than the imports. For instance, the differential between export and import price would even exceed around 4000-5000 in some of the streams. Exports are priced lower deliberately so that we can attract more and more exports and they can become competitive. So, more growth in exports has resulted in depressed earning growth.

However, on the other hand, if you look at the impact of this in reducing empty repositioning, it has helped us.

Q: Has there been a dip on an absolute basis this time? Can you give us some numbers for a data check?

A: If you look at the PBIT for instance, my EXIM PBIT – revenues were Rs 978 crore as against Rs 941 crore in the Q1 of last year. So, there was an increase of only 3.96 percent. What I am trying to say is that if this import growth was 22 percent also as export growth was, this increase would have been much more, it would have been around 8-8.5 percent that is what I am trying to say.

Q: Let us talk about a bit more about the import side. What kind of traction are you seeing and what are the triggers from the perspective of growth and what will be the margin levers in this space?

A: Last year Q4, the import growth was only around 2.5 percent. Exports are growing at 17 percent. This particular quarter imports also bounced back and grew at 8.5 percent. Export growth was still higher at 22.5 percent. I presume, what we gather for next three quarters if we look at the outlook of this financial year, export growth should continue. We do expect increase in manufacturing sectors output which has been tottering for last few years which has been the main problem in Indian economy, that may lead to more increase in exports. So, export growth should continue.

About imports I won’t be able to say much at this time. First year, first quarter growth was – import was 8.5 percent. Signs appear to be that this growth should also be going forward. It should be increasing import pendencies at ports are growing up. So, in next quarter at least we expect this import growth also to be around 14-15 percent. So, that should provide us slight more leeway. Overall our financial turnover which was 6.5 percent plus, I think would come to around 8.5-9 percent.

Q: I wanted to address the multimodal logistics park segment. My understanding is that you have commissioned two parks and the number could scale up to around 15 over the next three to four years. What are the return ratios for this business segment in particular, how much has this segment started contributing to your revenues as well as to your bottomline?

A: The point is looking at my existing capacities and the potential for growth, I would not have been able to grow unless I had these new facilities in place. So, main purpose of creation of these new logistics parks was increasing my capacity from existing around 3 million twenty-foot equivalent units (TEUs) to around 5 million TEUs. That is what we are achieving.

This will enable us to go for a CAGR of 10-12 percent in next three to four years. So, these logistics park we have commissioned. We have started working into; they are not fully commissioned because they are still under construction; large part is under construction. We have started functioning in two logistics parks. Other logistics parks are on stream. Their work is progressing very smoothly as per our plans. Their being in place is essential for the company to be able to achieve growth rates of 12 percent or 13 percent CAGR as we are targeting for next four to five years.