Q2 2020 Adani Ports and Special Economic Zone Ltd Earnings Call
Ahmedabad Dec 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Adani Ports and Special Economic Zone Ltd earnings conference call or presentation Monday, November 11, 2019 at 10:59:00am GMT
TEXT version of Transcript
* Deepak Maheshwari
Adani Ports and Special Economic Zone Limited - CFO
* Karan G. Adani
Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director
Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director 
Good evening, ladies and gentlemen. Welcome to the conference call to discuss H1 FY '20, operational and financial performance of Adani Port and SEZ Ltd.
We have uploaded our presentation on website and hope you had sufficient time to go through the same. In H1 FY '20, we created another record of handling highest cargo throughput in a half year. During this period, our ports achieved a throughput of 109 million metric tonne, translating into a year-on-year cargo volume growth of 9%. This is against 5% cargo volume growth registered by all India ports. Similarly, in container, our ports handled 3.1 million TEUs, registering a growth of 10%. This is against 7% container growth registered by all India ports.
Our market share in H1 FY '20 has increased by 100 basis points to 22% of all India cargo volume and to 35% of all India container volume. The consistent gaining of market share reflects our resilience and ability to grow across all our operating ports.
Port revenue during the half year grew by 13%. Similarly, port EBITDA also grew by 13%. We have not been -- we have not seen any pressure on our realization and have been able to maintain port EBITDA margins of 70%. Deepak will take you through the details of the financial in the later part of the presentation.
We continue to focus on environment, social and governance aspects of the business. Efficient use of water and energy from cleaner sources, reduction of emission level and 0 tolerance for fatalities at our ports continue to be our top priorities. Details of progress made in H1 FY '20 are shared in our presentation.
In H1 FY '20, APSEZ successfully completed its first buyback of 3.92 crores equity shares at an offer price of INR 500 per share. This payout was in addition to the 10% dividend paid to the investors for FY '19. Thus, the total payout to the shareholders for FY '19 was 50% of PAT compared to 11% of PAT in FY '18.
Our focus on diversifying and strengthening our board by inducting professionals from diverse fields continues. I'm happy to announce that we have inducted Mr. Bharat Sheth as an independent director with effect from 15th October 2019. As you all know, Mr. Bharat Sheth is the MD of Great Eastern Shipping Company, which is the largest shipping company in India with a rich history of 72 years. He has been inducted in place of Mr. Sanjay Lalbhai, who retired on completion of his term.
Going forward, we have set in motion process for formal board member evaluation, establishment of Disclosure Committee and establishment of Global Code and Policy Committee, and these will be completed before March of 2021.
Let me now share some updates on operational aspects. Mundra port commissioned a new container terminal with an initial capacity of 0.5 million TEUs. And we expect to expand this to 1 million TEUs in next 1 year. We also commenced LPG operation at Mundra in October 2019 with an initial capacity of 3.2 million metric tonne.
As part of further diversification, I'm happy to announce that Kattupalli Port has Commissioned liquid terminal with an initial capacity of 60,000 KL. At Hazira Port, additional liquid tank farms with a capacity of 24,000 KL was operationalized and a new container service, Indian West Coastal, was commenced.
We continue to diversify and handle different types of cargo. For instance, Dhamra port has started handling project cargo and steel billets. Similarly, Mundra port has started NAFTA exports, Dahej port has entered into a medium-term contract to handle coal for Grasim, and we continue to explore similar opportunities and add new customers to our fore. This makes us more resilient and not dependent upon any single type of cargo.
Now I would like to share some information on Dhamra, Hazira and Mundra port. Coming to Dhamra port, our strategy to focus on improving evacuation by road and rail at Dhamra port continues to yield positive results. As a strategy, we invested in General Purpose Wagon Investment Scheme to increase rake availability. As a result, Adani Logistics Limited is operating 6 rakes under the scheme for Dhamra port. In H1 of FY '20, Adani Logistics Limited has transported 500,000 metric tonne of cargo through these rakes.
During H1 of FY '20, Dhamra port registered a growth of 46%. In 1 FY '20, Dhamra port handled 13 million tonnes versus 9 million tonnes in H1 of FY '19. All types of cargoes registered a double-digit growth. The port continues to focus on adding new types of cargo. Fertilizer and clinker imports is now handled through road. As guided earlier, from FY '20 onwards, we expect Dhamra port to grow by at least 20% to 25% every year.
Coming to Hazira port, during H1 FY '20, liquid handling at the port increased by 23%. This resulted in port reporting a higher EBITDA of 77% in H1 FY '20, an increase of 200 basis points year-on-year. We expect Hazira to continue to have similar margins in future as well. In FY '20, cargo volumes at Hazira is expected to grow in the range of 10% to 15%.
Coming to Mundra port. In Q2 FY '20, coal and crude volumes were lower than anticipated. However, container volumes at Mundra rebounded in quarter 2 of FY '20. In quarter 2 of FY '20, we saw a 10% growth in container volumes versus 3% in quarter 1 of FY '20. I'm also really happy to announce that in September 2019, Mundra port, for the first time, became the largest container handling port in the country. We were able to surpass JNPT in terms of monthly handling of volume.
Coal volume was lower due to lower import of APL, CGPL and Adani Enterprise (sic) [Enterprises] Limited. Crude volume was lower due to shutdown of refineries by IOCL and HMEL for upgrading to BS VI norms. We expect both coal and crude volumes to recover in H2 FY '20. We have spoken to our long-term coal customers, and they are confident of higher volumes in H2 FY '20. Similarly, crude volumes will be higher as IOC and HMEL refineries are now fully operational.
In Q2, FY '20, one coastal container line service, which we had lost to Kandla, has been reinstated. In addition, from Q3 FY '20, 3 more EXIM services, mainly [MIX, which is West Africa Service, FGSI and MBX] Middle East Service, will start calling Mundra terminal. This service will bring in additional container volumes of 70,000 TEUs for H2 FY '20.
With the commissioning of the T2 container terminal and new services added, container volumes at Mundra is expected to grow in H2 FY '20. By end of FY '20, Mundra would become the largest container handling port and surpass JNPT. Thus, Mundra port will register a high single-digit growth in FY '20.
Coming to logistics, operations on year-on-year basis for real volumes handled by ALL registered a growth of 79% and revenue registered a growth of 43%. Rail volumes were higher due to additional rake capacity, new routes and acquisition of B2B Logistics.
Adani Logistics Limited is currently operating 50 rigs. These include 37 container rakes and 6 bulk cargo rakes. It also operates 7 grain trains under Own Your Wagon Scheme through its subsidiary at Adani Agri Logistics, acquired in March 2019.
During H2 FY '20, ALL has ordered 11 new container rakes and 2 rakes under GPWIS. Thus Adani Logistics Limited is on track of operating 60-plus rakes by end of FY '20.
Coming to operations of Adani Agri Logistics Limited. It handled 0.6 million metric tonne of cargo in H1 of FY '20, registering a year-on-year growth of 26% and is on track towards a target of 1.3 million metric tonne in FY '20.
Currently, AALL has 8 silo units under implementation. It has participated in tenders floated by FCI in 7 locations in West Bengal. It will also participate in upcoming tenders to grow its market share, one of which is upcoming in Q3 of FY '20 in UP.
Coming to update on logistics parks, 2 more logistics parks are under construction at Bangalore and Nagpur. Thus, by end of FY '20, Adani Logistics will operate 6 logistics parks, this is in addition to ALL developing warehouses at Kattupalli, Taloja and Mundra.
To conclude, Adani Logistics is on track towards its strategy of expanding logistics footprint across India, building multimodal logistics parks, warehousing, rail network and distribution in order to be a leading integrated logistics service provider in India. ALL continues to explore opportunities for acquisition of similar nature in India.
Coming to SEZ, in H1 FY '20, we have earned an income of INR 28 crores in SEZ. This includes land lease and upfront lease. In H2 FY '20, we will be leasing LNG terminal at Mundra and Dhamra and earn port infrastructure development income of INR 800 crores to INR 1,000 crores, thus achieving our guidance for FY '20.
In conclusion, our pan-India presence and ability to handle multi cargo at our larger ports, enables us to gain market share in India and achieve 1.5x of all India cargo volume growth on a consistent basis. For FY '20, we expect cargo volumes to be around 224 million to 228 million metric tonne. We expect our port revenues to grow by 12% to 14% and port EBITDA to grow by 12% to 14%.
Now I request Deepak to take you through the financial numbers.
Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO 
Thank you, Karan, and welcome to all participants. During H1 FY '20, consolidated revenue grew by 12% to INR 5,616 crores from INR 5,019 crores. And consolidated EBITDA grew by 10% to INR 3,634 crores from INR 3,292 crores.
Our consolidated EBITDA margin continued to be at 65%. Port revenue has grown by 13% on account of 9% cargo volume growth and improvement in realizations. Port EBITDA margin was maintained at 70%. This has resulted in the profit before tax increasing by 31% to INR 2,248 crores and PAT by 58% to INR 2,055 crores.
Depreciation has increased by INR 127 crores due to the capitalization of assets at Mundra, Dhamra and Kattupalli in addition to acquisitions of B2B Logistics and AALL.
During H1 FY '20, we raised 2 U.S. dollar-denominated bonds. Both the issuances received overwhelming response from institutional investors. The successful issuance is a testimony of the continued trust of investors in APSEZ's strong business model and financials.
During H1 FY '20, the gross interest cost increased due to the premium paid towards refinancing of USD 650 million bond and additional interest on account of the new bond issuance of USD 750 million. Pursuant to the recent amendment made in taxation law from April 1, 2019, domestic companies have the option to pay corporate tax rate at 22% plus applicable surcharge and [cess] subject to conditions. APSEZ has chosen to exercise the option of new tax rate for certain subsidiary companies and to continue with the existing tax structure for the rest of the companies until accumulated minimum alternate tax credit is fully utilized.
APSEZ has remeasured the outstanding deferred tax liability that is expected to be reversed in the future. Accordingly, an amount of INR 304 crores has been written back in the consolidated statement of profit and loss.
During the year, we have spent an amount of INR 2,117 crores towards capital expenditure. Our capital expenditure program for FY '20 will be within our guided amount of INR 4,000 crores. Free cash flow from operations after adjusting for working capital changes and investing activities was INR 1,641 crores in H1 FY '20, as compared to INR 957 crores in H1 FY '19 and INR 1,570 crores in FY '19.
In Q1 FY '20, a provision of INR 59 crores was taken towards storage charges claimed by Mormugao Port Trust. We are in discussions with the Port Trust for waiver of such charges.
Trade receivables have come down marginally, and APL receivables continue to be approximately INR 450 crores. Our gross debt as of 30th September 2019 stands at INR 31,262 crores. The change is on account of the restatement of the ForEx debt, additional debt on the books on account of B2B acquisition and the USD 750 million bond issuance.
The total cash and cash equivalent as of September 30, 2019, is INR 8,779 crores. This cash balance reflects proceeds from USD 750 million bond issuance as well as liquidity for probable acquisitions. The net debt as of September 30, 2019, is INR 22,483 crores, and our leverage ratio of 3x continues to be within our desired range of 3x to 3.5x.
Subsequent to the recent bond issuances, the average long-term debt maturity has elongated from 4.08 years in March 2019 to 5.92 years in September 2019. The corporate guarantee given by APSEZ for Abbot Point has been released.
To conclude, let me also give you an update on recent acquisitions. Myanmar, the project is on track and construction has commenced post receipt of all approvals, with the first phase expected to be completed during FY '22. Dighi Port, the company has been selected as a preferred bidder by the committee of creditors. The acquisition can be completed after ongoing proceedings at NCLT and NCLAT are completed.
With this, we open the lines for question and answers.