Container Corp sees flat profit in FY10

Container Corp sees flat profit in FY10

New Delhi: Container Corporation of India expects to end FY10 with a flat or marginal rise in profit on higher depreciation and slow recovery in exports and a 6-7% growth in sales, a top official said.

The state-run logistics firm however sees an improvement next year as recovery takes root and India’s external trade picks up.

The company expects a 5-6% rise in profit and a 8-9% growth in sales next fiscal which could improve by another 3% if the market situation improved, managing director Anil K Gupta told Reuters in an interview on Wednesday.

Slack growth in India’s foreign trade in the fiscal year 2008-09 and sluggish domestic activity had shrunk Concor’s volumes by 5.7% last year.

“I’m being slightly cautious (on bottomline growth) because now... main growth will come from value-added activities (warehouisng, distribution centres) where margins are low. Rail freight growth may not be that much," he said.

The company expects to maintain an operating margin of about 27% next fiscal.

“In the domestic market we have grown by 20% plus in the first 10-11 months of this financial year. In international market there is a recovery on the import front. Exports are still lagging behind," he said. Domestic market contributes only a fifth of Concor’s revenue.

The imbalance between import and export means the company has to run empty trains many a time from inland depots to the ports adding to the cost and putting pressure on margins.

“We are not able to increase our charges (on importers) because as it is there is recession and if we increase charges traffic may go down further," he said, adding a higher charge may divert traffic to roads.

Exports from India were down 17.8% at $131.9 billion, while imports fell 19.7% to $218.5 billion between April 2009 and January 2010.

Concor will spend Rs500 crore in FY11 to add wagons and set up logistics parks, Gupta said. The capex will be funded through internal accruals. The company spent Rs380-400 crore on addition of new wagons and purchase of equipment this fiscal.

“As a result of induction (of new wagons), our depreciation has gone up and if we remove that our net profit could have been slightly higher (in FY10)," Gupta said.

This year, the company expects to maintain its last year’s profit of Rs791 crore or marginally improve it to Rs800 crore.

The company plans to set up five logistics parks across the country, including two that will become partly operational next fiscal. It also plans to tie up with private players for some of the specialised activities in these parks.