Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VRL Logistics Ltd (BOM:539118, Financial) reported substantial revenue growth of 12% year-on-year, driven by increased freight rates and volume growth.
- The company successfully implemented freight rate hikes across all sectors and geographies, improving operational margins.
- EBITDA increased by 39%, with margins improving from 14% to 17%, attributed to effective cost management and operational efficiencies.
- The company added 82 new branches, contributing to a 2.5% increase in tonnage, and plans to continue expanding its branch network.
- VRL Logistics Ltd (BOM:539118) maintained strong cash flow from operations, reducing net debt and declaring an interim dividend of INR 5 per equity share.
Negative Points
- The company faced challenges such as labor shortages and driver leaves due to general elections and heat waves, impacting operations.
- Despite revenue growth, the overall industry experienced muted or negative growth, indicating broader market challenges.
- CapEx is expected to increase significantly, with planned investments in new facilities and vehicle additions, potentially impacting cash flow.
- The company is cautious about vehicle additions due to uncertain tonnage growth, reflecting a conservative approach to capacity expansion.
- There is a risk of increased competition as other operators also announced rate hikes, potentially affecting market share.
Q & A Highlights
Q: With CapEx down 40% on an H1 to H1 basis, how do you see the CapEx trajectory in H2 and FY26?
A: Sunil Alwy, CFO: Vehicle addition will continue based on utilization levels, expecting around INR 30-40 crores investment in vehicles each quarter. For Mysuru and Bangalore facilities, investments will be around INR 22 crores and INR 240-250 crores, respectively. Total investment in the next half year will be around INR 350 crores, with cash flow expected to be around INR 240 crores.
Q: Is the current procurement cost from refineries at its upper limit, and what is the cost differential between refinery and retail?
A: Sunil Alwy, CFO: The refinery procurement is at an optimum level, with a 1-2% fluctuation possible. The price difference between refinery and retail is around INR 2-2.5 per liter.
Q: Has the competition followed your 8% price increase, and what is the price difference now?
A: Sunil Alwy, CFO: Many companies have announced rate increases following our lead. The price gap varies depending on the nature of their customers, but our service level and efficiency allow us to maintain growth alongside the rate increase.
Q: What is the contribution of new branches to overall tonnage, and how do you plan to expand further?
A: Sunil Alwy, CFO: We opened over 250 branches in the last two years, contributing 8-10% to total tonnage. We plan to add 80-100 branches annually, focusing on untapped markets in the east, north, and northeast regions.
Q: How do you manage operational complexity with a large number of employees and insourced tracking?
A: Sunil Alwy, CFO: We provide permanent employment and statutory benefits to drivers, ensuring retention and smooth operations. This approach helps us manage the acute driver availability problem in the industry.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
