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Adani Ports poised to clock 20% jump in container volumes for FY 2018

Clutch of rational and radical initiatives including  going after high-value cargo, reducing coal volume, diversifying cargo mix, enhancing port & ICD capacities could deliver a 20% jump in container volumes  and 12%~14% surge in cargo volumes in FY18, say Adani Ports and Special Economic Zone Ltd(APSEZ)  in a note on 16th August. “We estimate a rise in EBITDA margins from 69% to 70% through the enhanced use of technology, diversified cargo mix and higher capacity utilization. We will continue to actively reduce our interest cost by raising funds from global bond markets. These measures will position us to register profit growth of 18%-20% in FY18”, said Mr Karan Adani, Chief Executive Officer, APSEZ .

 Performance in 2016-17

 Adani Ports reported yet another year of profitable growth in FY17. The company’s revenue increased 19% to Rs 8,439 crore (FY16: Rs 7,109 crore) and EBIDTA rose 24% to Rs 5,692 crore (FY16: Rs 4,574 crore). “While we had estimated a conservative 10-15% increase in profit after tax, our FY17 net income grew by a phenomenal 35% to Rs 3,920 crore (FY16: Rs 2,914 crore). Once again in FY17, our overall cargo throughput and container handling capacity improved and outperformed those of our peers in India”.

 Adani pips peers

 While all-India cargo grew by 8%, cargo handled by all Adani ports rose 11% to 169 MMT. These strong financials stem from our robust operations and our unending commitment to improve efficiencies, to scale our use of technology and lower our finance costs. The company’s proactive approach to mechanization, automation and cutting-edge technology such as mobile technology, Internet of Things and Robotics, has changed the way we manage and move cargo.

 Higher profitability on cards for FY18

 The resulting operational efficiency led to reduced operating costs and thus enhanced EBITDA margins. Further, net finance cost dropped from Rs 460 crore to Rs 323 crore and net debt reduced by Rs 1,827 crore despite the Rs 1,450 crore payout towards Kattupalli port, which we acquired last year from L&T Shipbuilding. Our net debt as on 31st March 2017 stood at Rs 18,600 crore. “With these factors combined, we exceeded our expectations to deliver higher profitability. In line with our goal to reduce dependence on individual commodities and to offset the decline in coal imports following the government’s revised policy, we ramped our efforts to diversify our cargo mix and increase container volumes”.

 For the first time, APSEZ handled more than 4 million Twenty Foot Equivalent Units (TEUs) of containers, growing our container volumes by 27% YoY against the 10% growth achieved by ports all-India, thus expanding our market share from 27% to 31%. This was made possible by the commissioning of CT-4 at Mundra, higher container volumes at Kattupalli and Hazira, and the addition of services at Mundra, Hazira and Kattupalli, which resulted from our strategic partnerships with MSC, CMA CGM, and Maersk.

 Long-term contracts boost cargo volumes

 The company also began providing coastal transhipment services from Dhamra port to the southern ports. Further, they shifted its game-plan from short-term contracts to long-term multi-year coal supply arrangements for a large number of customers. In FY17, 62% of our cargo volumes materialized from long-term contracts. As a result of these strategies, Adani saw a growth in agriculture, iron, steel, and project cargo volumes, which contributed to a healthy cargo mix and higher margins. FY17 saw containers constitute 37% of our total cargo, compared to 32% in FY16. Coal now comprises 36% of our cargo, compared to 41% last year. Crude and other cargo, which grew by 17%, now constitute 27% of the total cargo.

 End-to-end logistics play pays rich operational dividends

 The company also took strides to provide endto-end logistics solutions to domestic and multinational customers through our tailor-made service offerings. In the logistics space, Adani Logistics Ltd (ALL) continues to be the single largest private rail operator in the country, operating 24 rakes. Our container rail operations span across all the ports in India. In FY17, our total rail volumes grew 57% to 180,000 TEUs. ALL handled 300,000 TEUs of terminal volumes, which grew 26% YoY.

 Adani also began commercial operations at our Inland Container Depot (ICD) at Kilaraipur in Punjab in addition to our existing ICDs in Patli and Kishangarh, thereby offering a greater scope of warehousing solutions to our customers. Our SEZ at Mundra has seen a rise in enquiries from diverse sectors such as ancillary manufacturing units of packaging, silver, battery inverter and solar panel industries. Adani expect these businesses to materialize in FY18. Owing to excellent integrated rail, road and airport connectivity, and the Government’s thrust on coastal shipping, the company has been able to service large clients such as Britannia Ltd., Credo Minerals, and Oilfield

 Mundra Port high on EXIM radar

 Warehousing Services (OWS) among others, in this past year. This, in turn, will increase the export-import cargo of Mundra Port in the years to come. Adani Ports retains its position as the only Indian infrastructure company to be assigned an international investment grade rating by the three major international ratings agencies: BBB- by Standard & Poor’s, BAA3 by Moody’s and BBB- by Fitch Ratings. However, in FY17, Adani addressed the risks perceived by S&P and Moody’s on related-party loans, advances and deposits. The company has now completely recovered our exposure of Rs 3,500 crore to related parties.

 Looking ahead

 APSEZ has evolved from an infrastructure entity to an end into a multi-commodity port. The extension of CT-3 at Mundra will also be completed in FY18. The private port major will be developing India’s first international deep water seaport at Vizhinjam (Kerala) in partnership with the state government. Vizhinjam will help position India as a competitive global transhipment hub and stake a claim on the 2 million+ TEUs of Indian cargo transhipped annually through the Indian ocean.

 Enhancing our logistics footprint across India, The company will also be commencing construction of three new ICDs in the country, enhancing our total number of ICDs to 6. The LNG terminal at Mundra is likely to become operational in December 2017, attracting gas-based units to set up at Mundra SEZ. This, along with our cluster development approach at Mundra SEZ, is expected to give fillip to industrial development in the area.

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