Concor: Company's capex will take 3 years to make an impact

A healthy growth in export-import volumes and higher interest income helped Container Corporation of India ( Concor) report decent results at a time of declining operating margins.

Adjusting a one-time prior period tax adjustment of Rs 46 crore, Concor reported an increase in net profits by 7.5% YoY to Rs 222 crore.

In the quarter ended September 2011, EXIM volumes increased 10% YoY to 5.43 lakh twenty foot equivalents (TEUs). Realisations declined 1% YoY on account of reduction in lead distances for loaded containers. Also, margins on EXIM segment decreased by 47 basis points because of export import imbalance in the western ports. Export volumes were higher at Mundra port whereas volumes at JNPT and Pipavav ports were largely for imports.

This resulted in empty running of rakes between the ports. Operating margins from the export-import segment is likely to improve in the coming quarters with the commencement of double stack trains between Patli in the national capital region and Mundra port. This route is one of the major contributors for export-import volumes for the company.

In the domestic segment, volumes decreased by 14.5 % YoY to 1.13 Lakh TEUs. This is mainly due to an increase in surcharge by the railways which was passed on to domestic routes. The Railways further increased development surcharge by 3% to 5% and the busy season surcharge from 3% to 10% in October this year. The combined impact of these rates will increase overall freight rates by 6%. The company might not be able to pass on the entire price rise to customers due to competition from private operators.

At the end of September 30, 2011, the company had a cash balance of Rs 2,747 crore. In the quarter under review, interest income on its cash and other investments contributed substantially to the other income of Rs 75 crore. Tax expense was higher on account of additional tax liability of Rs 46 crore for FY11. The company had not provided for tax liability under MAT but the liability was provided in this quarter which impacted profits.

Concor plans to increase its share of revenues from value-added services. Rail freight now contributes 75% of revenues which the company wants to bring down to 70%. For this, the company has planned a capex of Rs 550 crore this year to build logistic parks and related infrastructure. However, it would take at least three years for any significant impact on its financials from these investments.