Gati Q2 profits fall 26 per cent
Jan 23, 2007, 02.00 PM IST
Operating margins of India���s largest express logistics company, Gati were flat, at 9.1% for the second quarter ended December ���06 against 9% for the quarter ended December ���05.
Gati follows the June year-end. Net sales were up 20%, to Rs 138.9 crore, but increased spends on operations, marketing, re-branding costs, saw net profits fall 26% to Rs 4.3 crore.
Total expenses were Rs 126.3 crore, up 21%. The re-branding exercise, completed in November-December ���06, cost Rs 2.9 crore, included as extraordinary expenses. Within the expense head, operations cost was Rs 25.3 crore for the December ���06 quarter, a rise of 30.4%.
With the logistics industry booming, staff attrition has risen. With the result that most logistics companies are seeing staff retention costs is also rising. Gati was no exception: its staff costs rose 9.8% to Rs 13.4 crore over the year.
Over the past year, the company has been aggressively investing in capital-intensive warehousing facilities across India, with the intention of moving into value added logistics solutions from just express distribution. The impact of those investments appears to be visible this quarter.
The company has raised capital in 2006, from private equity investor AMP Capital, totaling to over Rs 90 crore, plus a series of other activities, diluting stakes and so on. The company says it plans over Rs 400 crore as investment into its business of expanding into India and overseas.
On a segment basis, the core express distribution and supply chain segment had sales of Rs 98.9 crore, up 19%, with a gross margin of 11%, against 10.5% a year ago. This segment accounted for 71% of quarter revenues, more or less the same ratio as for the full year.
The second largest segment, coast to coast shipping, had revenues of Rs 14.3 crore, up 15%, with gross margins of 17% against 23% a year ago. This segment, 10% of quarter sales, appears to have let the overall numbers down, with gross profit dipping to Rs 2.4 crore from Rs 2.9 crore a year ago.
The third segment, fuel stations, is already on the block, with Gati applying for hiving off the four stations as separate entities. For the quarter, fuel stations generated Rs 25.7 crore, up 30%, showing the result of rising pump prices for fuel. At gross margins of 1%, more or less the same as last year, Gati is keen to hive it off as its non-core to its express logistics business and neither does it contribute heavily to the bottom line.
Gati���s stock opened at Rs 95 on Tuesday, having closed at Rs 94.3 on Monday. It traded at Rs 96 in mid-day trade on the BSE. Gati���s 2005-06 full year sales were Rs 456 crore with profit before tax of Rs 27.5 crore.
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