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Mahindra Logistics has registered 3% fall in consolidated sales to Rs 899.03 crore for the quarter ended June 2019. But with 10 bps expansion in OPM to 4.5%, the fall at operating profit was restricted at 1% to Rs 40.06 crore. Gained by 143% jump in other income the PBIDT was up by 8% to Rs 47.07 crore. However with interest cost and depreciation stand higher by 361% (to Rs 3.55 crore) and 194% (to Rs 14.87 crore) the PBT was down by 24% to Rs 28.65 crore. But with taxation stand lower by 25% to Rs 9.97 crore the fall at PAT was restricted at 23% to Rs 18.68 crore. The share of loss from JV was higher at Rs 0.12 lakh (against nil) and the minority interest was share of loss of Rs 0.08 crore (against a share of profit of Rs 0.30 crore). Thus the net profit (attributable to owners) was lower by 22% to Rs 18.64 crore.
The Company has adopted Ind AS 116 'Leases' with the date of initial application being April 1, 2019 using the modified retrospective approach. The Company has-applied the standard to its leases with the cumulative impact recognized on the date of initial application. Accordingly, previous period information has not been restated. This has resulted in recognizing a right-of-use asset of Rs 112.17 crore, Net Investment in Lease of Rs 1.76 crore and a corresponding lease liability of Rs 121.72 crore by adjusting retained earnings of Rs 10.52 crore (including the impact of deferred tax created of- Rs 2.72 crore) as at April 1, 2019. In the profit and loss for the current year, the lease rent which was hitherto accounted under "Operating Expenses" and "Other Expenses" in previous periods has now been accounted as depreciation cost for "right — of — use" of asset and finance cost for the interest accrued on lease liability. Accordingly, profit for the current quarter is lower by Rs 0.93 crore.
- Downside in Operating income was largely due to supply chain management (SCM) business. The segment revenue of people transportation solution (PTS) was up by 9% to Rs 98.07 crore. Segment revenue of SCM was down by 4% to Rs 800.96 crore hit by slowdown in automotive sector. In SCM both M&M and non M&M revenue has registered fall with former down by 6% (to Rs 489 crore) and latter down by 2% (to Rs 312 crore). The fall in non M&M business is also largely due to auto sector (down 5% to Rs 81 crore) as non auto registered a flat growth to stand at Rs 231 crore.
- EBIT was down by 4% to Rs 73.68 crore with EBIT of SCM down by 5% to Rs 64.19 crore hit largely by lower sales. Segment margin of SCM stood flat at 8%. However despite higher sales the segment profit of PTS was flat at Rs 9.49 crore with its segment margin erode by 90 bps to 9.7%.
- OPM expanded by 10 bps to 4.5% and that was largely due to lower Opex. Opex as proportion to sales net of stocks was down by 190 bps to 64.9%. And that of staff cost was higher by 180 bps to 8.3%. But the OE was flat at 1.9%. Lower Opex and flat OE was largely due to Marginal rise was due to adoption of Ind AS 116 'Leases'.
- Other income was higher by 143% to Rs 7.01 crore and thus the PBIDT was up by 8% to Rs 47.07 crore. The interest cost jumped by 361% to Rs 3.55 crore. And the depreciation leaped up by 194% to Rs 14.87 crore. Jump in interest and depreciation is largely due to adoption of Ind AS 116 'Leases'. Thus the PBT before EO was down by 24% to Rs 28.65 crore.
The standalone sales for the quarter ended June 2019 was down by 3% to Rs 854.75 crore with SCM revenue down by 4% (to Rs 756.68 crore) and PTS up 9% (to Rs 98.07 crore). Lower SCM sales were largely, as growth in verticals focused on auto industry impacted due to unprecedented slowdown in the automotive sector. The bulk vertical in SCM revenue was impacted due to shrinkage in business from a large customer. EBIT was down by 3% to Rs 68.25 crore with segment profit of SCM down by 4% to Rs 58.76 crore. The segment profit of PTS was flat at Rs 9.49 crore. Eventually the PAT was down by 21% to Rs 18.59 crore.
Management comment
Commenting on the performance, Pirojshaw Sarkari (Phil), CEO of Mahindra Logistics, said, "This quarter saw a mixed performance from the end use sectors. Auto industry is facing its worst slowdown in a long time. This impacted our SCM business – M&M and Non M&M. On the other hand, Consumer & Pharma, Ecommerce verticals continued to grow. I am confident about long-term growth prospects of the organized 3PL industry in the country. Keeping that in mind, we have continued to invest in our digital and transformation projects."
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