India’s largest ports and logistics conglomerate, Adani Ports and Special Economic Zone (NSE: AdaniPorts) has reported second quarter company revenues of 33.27 billion Indian rupees ($470.81 million) as of September 30, 2019. That’s a year-on-year increase of about 13.84% when compared to the same time in 2018.
Adani’s financial year runs from April to March. Accordingly, the company has just reported results for its second quarter rather than its third quarter.
The company also revealed its first half financial year results for the six months from April through to September. On a half-yearly basis, the company generated revenue of 74.72 billion rupees ($131.35 million) as of the end of September this year, which is a whopping 19.87% increase when compared to the same timeframe last year.
About 85% of the company’s second quarter revenues and 88% of the company’s half-year revenues were generated from operations. The rest was generated from “other income.”
Expenses
Running such a large enterprise is costly. And it appears to be getting more expensive with the passage of time. In the company’s second quarter, Adani burned through 24.41 billion rupees ($345.38 million) of funds, which was a 14.97% increase on the same timeframe in 2018. The picture is much better on a half-yearly basis; the company burned through 42.37 billion rupees, which was an 8.52% year-on-year increase in costs.
Profitability
But incurring extra costs appears to have been worthwhile as Adani reported a huge 72.44% increase in company profit during the second quarter. Profit for the quarter stood at 10.59 billion rupees ($149.89 million).
On a half-year basis, the profit boost was not quite as spectacular but was nonetheless, still pretty massive. In the six months to the end of September 30, Adani reported 20.88 billion rupees ($295.57 million) of revenues, which is a 59.18% increase from the prior corresponding period in 2018.
Seaports and economic zone revenue
The vast majority of Adani’s revenue is generated by its ports and special economic zone (SEZ) operations. In the company’s second quarter, the “Ports and SEZ” business generated 25.22 billion rupees ($356.86 million) of revenues and they accounted for about 89% of the company’s “revenue from operations.” Adani’s second quarter Ports and SEZ revenues showed a 3.10% year-on-year increase. On a half-year basis, Adani’s Ports and SEZ business generated 50.48 billion rupees ($714.33 million), which accounted for about 77% of the company’s revenues from operations during the first six months of its financial year. The company’s Ports and SEZ business reported a 7.91% year-on-year increase when compared to the same timeframe in 2018.
Adani’s Ports and SEZ business was very profitable. In the three months ending September 30, 2019, it generated about 8.86 billion rupees ($124.43 million) of profit before tax, which represented a 10.85% year-on-year increase. On a half-year basis, Adani’s profit before tax was 22.48 billion rupees ($318.17 million), which was a 30.57% year-on-year increase.
Commentary
In a separate written statement, Adani reported that it is gaining market share and is experiencing overall cargo growth. The company said it “continues to handle record cargo” and that the throughput in its financial first-half year, i.e. the six months to September 30, 2019, stood at 109 million mass tonnes (MMT). That performance beat the growth of India as a whole, the company added.
Furthermore, Adani estimates that its operations accounted for about 21.55% of India’s overall cargo throughput and 35% of the country’s container throughput.
Looking forward, management envisages continued cargo growth to 208 million mass tonnes in the current financial year and 400 million mass tonnes by the 2025 financial year.
Commenting on the results, CEO Karan Adani said that the company “continues to gain market share due to a strategy of having multi-commodity ports across key locations. Our market share in [the first half of fiscal year 2020] has increased by 100 [basis points] to 22% of all India cargo volume and to 35% of all India container volume. Though [the second quarter of fiscal year 2020] was subdued container volume continues to be strong. We expect [the second half of fiscal year 2020] to be better and [we are] confident of achieving 224-228 MMT of cargo throughput in FY20.”
Adani added, “With the recent cut in Repo rate, corporate tax reduction and resolve of the Government to accelerate economic growth, we expect [the] economy to revive from [the first quarter of fiscal year 2021]… [we] are confident of achieving 10 to 12% compound annual growth rate [in] cargo volume growth for the next few years. Automation and [the] use of technology to handle cargo, sweating of enhanced capacity and better cargo mix will continue to drive margin expansion.”
Analysts responded positively. Lucror Analytics of Singapore researches corporate credit risk and it publishes its insight via the Smartkarma platform.
“Adani Ports’ H1/19-20 results were in line with expectations. Positively, the core Ports segment continued to report healthy earnings growth, thanks to higher cargo volumes. The company also saw robust revenue growth at the Logistics segment, supported by the contributions of recent acquisitions. These good results helped offset a sharp decline in SEZ segment earnings,” the analyst firm said, adding that the company’s overall financial profile remains “manageable.” However, the researchers did sound a note of caution in that the company’s financial profile had weakened “slightly” on higher debt.
Commenting on Adani’s cargo mix, Lucror commented that it was “well-balanced” with diversification by cargo type and business segment. The company also has “relatively stable margins and financial metrics,” the researchers added.
About Adani
Ahmedabad, Gujarat-based Adani operates 10 ports and terminals across India. Its flagship operation is Mundra Port, in the state of Gujarat, which handles a wide range of cargo including bulk, break bulk, various liquids, crude oil and petrochemicals, containers, and liquefied natural gas among others. Mundra has four container terminals with a combined capacity of 7.5 million twenty-foot equivalent units, or TEUs.
In Gujarat, the other ports and terminals are Tuna Terminal (bulk and break bulk); Dahej Port (bulk and break bulk); Hazira Port (bulk, break bulk, liquids and containers). In the state of Tamil Nadu, Adani operates Kattupalli Port (bulk, break bulk and boxes) and also Ennore Terminal (containers).
Other ports include Vizhinjam Port in Kerala (containers) along with Vizag Terminal in Andhra Pradesh (bulk) and Dhamra Port (bulk, break bulk and liquid cargo).
Adani also operates several logistics parks across India with terminal capacities up to 400,000 TEU. Logistics park facilities at a further two locations are expected to become operational this year.
Read more stories by Jim Wilson. Jim is based in Australia but he mostly covers Asia’s maritime sectors. He can be reached with comments, suggestions and tips via [email protected].
