Mahindra Logistics hosted a conference call on Oct 25, 2023. In the conference call the company was represented by   Rampraveen Swaminathan, CEO and Saurab Taneja, CFO.

Key takeaways of the call

Continuing growth and consolidation across the supply chain businesses with growth in some markets offsetting headwinds.

Continued focus on margin improvement resulted in earnings growth across businesses other than the MLL Express business.  Margin improvements remained on track driven by operating cost reduction and product mix improvements in 3PL, Last Mile Delivery and Mobility businesses.

Overall new order intake remained robust across the business segments of the company and the company continued to consolidate its business operations in Q2, 2024.

Higher transportation mix in the revenue and  foreclosure costs has impacted the margin in Q2FY24.

3PL Contract Logistics: Organic growth in 3PL remained positive driven by end market diversification programs, despite headwinds in the Ecommerce segment.  Revenue up 4%YoY to Rs 1090 crore driven by growth in automotive and engineering, consumer, and durables. Ecom volumes remained weak during the quarter and softness continued to roll over. However, the activity levels picked up towards the end of the quarter to prepare for a peak during the festive season in Q3FY24.

Freight Forwarding revenue up 56%YoY to Rs 53 crore with slowdown in global economy impacting volumes and continued price correction in cross-border freight. Focus of the company is to provide reliable tech-enabled freight forwarding services and deliver tailor-made solutions to customers to enhance their supply chain efficiency.

B2B Express: Revenue up 68% YoY  to Rs  87 crore with service levels back on track.  Focus on volume recovery from existing customers. Strong pipeline across corporate & retail. Infrastructure & coverage footprint increased in Q2. Despite positive momentum on customer additions, volume uptick from these customers mainly happened at the end of the quarter. The company remains focused on expanding network coverage and service levels. Lower volumes and higher transport costs during the quarter continued to drag the improvement plan.  To maintain the delivery service levels,  the company has to run vehicles more consistently even though there are less loads as well as to invest more during the quarter. So there was more transportation cost impacting margin.  Focus is to get volume back and once volume comes back the transportation cost will not go up and spread over higher volume improving margin.   Running bit behind on volume growth currently, hope will be get to ebitda breakeven by end of this year. Volume has to up 25% for rest of the year. About 3%QoQ volume growth in Q2FY24.  Requires 20-25% growth in volume to reach earlier level of volume   in express business.

Last Mile Delivery:  Consolidation in e-com space has led to account churn, covered to some extent by growth coming from key accounts. Revenue down 11% to  Rs. 49 crore.   Gross Margin at 4.2%, up 379 bps YoY.

The Mobility business continues to see an uptick on account of growth in existing customers and acquisition of new clients. The PAT has seen 133% YOY growth and the business is now PAT positive.

Contract logistics churn impact was there in ecommerce. Consolidation of capacity in mid mile logistics. Sequential velocity of growth as the churn was overcome. Consolidating in further quarters.

Have implemented appropriate actions to strengthen the network, customer service and volume enhancements in MLL Express and cross border logistics businesses. With the upcoming festive season hope to see a positive demand uptick and we remain focused on accelerating margins driven by synergies in the network business and other cost reduction programs.

Warehouse space under management stood at 19 million sq. ft. in the 3PL business. Current expansions in Chakan, Kolkata, Nasik, and Guwahati are on track.

Launch of 6.5 lakh sq. ft. multi-client warehouse in Bhiwandi, Mumbai to manage the fulfillment and distribution for automotive, e-commerce and FMCG industries.

The overall logistics industry is well poised driven by long term focus on infrastructure, manufacturing, consumption growth and positive regulatory trajectory.

Commissioned Bhiwandi facility with 6.5 lakh sqft. Construction is on plan as far as expansion. About 18.1 million sft is capacity as end of Sep 2023 for warehousing.

9%yoy growth in overall auto sector.

FMCG -  not see significant change seeing faultiness industry upcoming elections some positive moves.

Mobility on track for early stated (during meru) target turnaround of mobility business by end of FY24 (30 min)

Weak Q3/Q4 FY23 last year in terms of order intake due to churn. The pipe line is good.

Qoq lower margin is largely due to mix in case of standalone.  Onetime payment of shutdown of fulfillment centre in eastern part impact is 20 bps.