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Container Corporation: A Weak Quarter - Views on News from Equitymaster
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Container Corporation: A Weak Quarter
Dec 7, 2016

Container Corporation of India Ltd has announced its results for the quarter ended September 2016 (2QFY17). The company has reported 8.2% year on year (YoY) decline in the topline and 31.9% YoY decline in the bottom-line for the quarter. Here is our analysis of the results.

Performance Summary
  • Revenues for the quarter were down 8.2% YoY. The company witnessed an overall growth of 4% YoY in the handling volumes, 4.6% YoY growth in the international handling volumes and 0.5% YoY growth in the domestic volumes during the quarter. The company handled 6.78 lac Twenty Foot Equivalent units(TEUs) and 1,04,000 TEUs in the domestic segment. For EXIM and domestic segment, the decline in the revenues stood at 8.6% YoY and 6.2% YoY respectively.
  • Operating margins during the quarter declined to 16.6%, from 20.7% in 2QFY16, mainly driven by decline in the margins in the EXIM segment from 19.3% to 15.7% on a year on year basis. The margins in the domestic segment, however, witnessed slight expansion (YoY) from 2.1% to 2.8%.
  • Margins were down due to empty running costs, lower lead distances, competition from the road segment and increase in the land license fees (in the EXIM segment, part of other expenses) and other expenses like CSR, rebates and repair expenses. In the domestic segment, the empty running improved. But imbalance in the imports and exports led to higher empty running in the EXIM segment. The company is facing significant competition from the road segment due to the subdued diesel prices. As such, the company is finding it difficult to pass on the increase in cost and trying to balance the situation by focusing on double stacking.
  • Because of the weak operating performance, the net income for the quarter is down 32% YoY while the margins have contracted to 11.4% from 15.4% in the corresponding quarter last year. Interest income for the quarter also declined due to low interest rates in the markets.

    Standalone Financial Performance
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Sales 15,018 13,786 -8.2% 29,222 27,178 -7.0%
    Expenditure 11,910 11,498 -3.5% 23,263 22,271 -4.3%
    Operating profit (EBDITA) 3,108 2,288 -26.4% 5,959 4,907 -17.7%
    EBDITA margin (%) 20.7% 16.6% 20.4% 18.1%
    Other income 863 763 -11.6% 1,671 1,455 -12.9%
    Depreciation 852 873 2.5% 1,735 1,714 -1.2%
    Interest (net) 1 3 400.0% 1 3 400.0%
    Profit before tax 3,119 2,175 -30.3% 5,894 4,644 -21.2%
    Pretax margin (%) 20.8% 15.8% 20.2% 17.1%
    Tax 802 596 -25.7% 1,505 1,281 -14.8%
    Effective tax rate (%) 25.7% 27.4% 25.5% 27.6%
    Normal Profit after tax/(loss) 2,317 1,578 -31.9% 4,390 3,363 -23.4%
    Normal Net profit margin (%) 15.4% 11.4% 15.0% 12.4%
    No. of shares (m) 195
    Diluted earnings per share (Rs)* 35
    Price to earnings ratio (x)* 31.7

    Segmental breakup
    Rs m 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    EXIM
    Revenue 12,365 11,298 -8.6% 23,930 22,209 -7.2%
    Operating Profits (EBIT) 2,392 1,769 -26.0% 4,543 3,806 -16.2%
    Operating profit margins (EBIT margin %) 19.3% 15.7% 19.0% 17.1%
    Domestic
    Revenue 2,653 2,488 -6.2% 5,292 4,970 -6.1%
    Operating Profits (EBIT) 55 70 26.7% 103 109 5.6%
    Operating profit margins (EBIT Margin %) 2.1% 2.8% 2.0% 2.2%

    Cost breakup
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Rail freight expenses 9,456 8,497 -10.1% 18,418 16,989 -7.8%
    as a % of sales 63.0% 61.6% 63.0% 62.5%
    Employee costs 388 405 4.4% 757 785 3.7%
    as a % of sales 2.6% 2.9% 2.6% 2.9%
    Other expenses 2,066 2,597 25.7% 4,088 4,497 10.0%
    as a % of sales 13.8% 18.8% 14.0% 16.5%
    Total expenses 11,910 11,498 -3.5% 23,263 22,271 -4.3%
    as a % of sales 79.3% 83.4% 79.6% 81.9%
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