Expolanka 2Q performance hit by slowing global demand, decline in freight rates

Expolanka Holdings PLC saw its financial performance for the quarter ended September 30, 2023 (2Q24) impacted by slowdown in global demand and sharp decline in freight rates after the pandemic.
During the quarter under review, Expolanka Holdings reported a revenue of Rs. 61.5 billion, with a gross profit of Rs. 12 billion and a net loss of Rs. 1.5 billion. For the first half of FY24, the company recorded a revenue of Rs. 117 billion, a gross profit of Rs. 23.3 billion and a net loss of Rs. 7.1 billion.

The company said persistent market challenges continued into the quarter, including high inflation, geopolitical tensions, protectionism, climate concerns and elevated energy costs, causing curtailed demand. 
“The weakening in worldwide commerce due to uncertainty and inflationary pressures dampened consumer and business spending. The economic outlook remained clouded due to the complexity of issues weighing on global growth,” a press release by Expolanka said.

Performance for the quarter was driven by the logistics sector, having recorded a revenue of Rs.59.2 billion and a Gross profit of Rs. 11.3 billion. Air and ocean freight volumes declined due to low consumer demand and high retail inventory levels impacting the results. 

However, Expolanka’s strong customer relationships and network enabled it to maintain market share. The sector delivered a revenue of Rs. 112.6 billion, a gross profit of Rs 21.9 billion and a net loss of Rs.7.4 billion for the first half of the financial year.
In the period under review, low consumer demand and elevated retail inventory levels have led to reduced retail orders, impacting the group’s freight forwarding subsidiary EFL Global’s volumes in both air and ocean portfolios.

While freight capacityimproved from its pandemic premium, the increase created excess capacity, causing a sharp decline in freight rates. 
However, EFL Global has adapted to the challenging market conditions by maintaining close relationships with existing key accounts and actively pursuing new customers. Despite a decline in volumes due to reduced imports, the company’s strong network presence and customer-centric approach has enabled it to navigate the challenging times. 

Expolanka’s strategic focus on enhancing the service portfolio and domestic logistics capabilities have also yielded positive results, with many customers benefiting from the offerings. Recent acquisitions, Trans American Global and the LEI Group, have met expectations, and integration efforts are progressing well.
The group’s leisure sector operations reported robust growth, with a revenue of Rs. 838 million, a gross profit of Rs. 688 million and profit after tax of Rs. 262 million for the quarter. Performance was led by the corporate travel business. 

Bolstered by the continued success of its corporate travel services, the sector’s inbound and leisure businesses also gained positive traction, allowing the sector to solidify its standing in the market. This resulted in a buoyant first half with the sector, posting a revenue of Rs. 1.5 billion, a gross profit of Rs 1.3 billion and a profit after tax of Rs. 515 million.
Other investments,which consist of the IT and fresh produce business units,contributed a revenue of Rs. 1.4 billion, a gross profit of Rs. 46 million for the quarter under review. With the export operations having stabilized and IT-related business making gradual progress, year-to-date revenue and a gross profit recorded Rs 2.8 billion and Rs. 59 million, respectively.

Expolanka continued to focus on working capital and cash flow management, supported by efficient working capital management initiatives. Gearing remained low, while a Rs. 6.88 billion dividend was paid during the quarter.
The group also settled a parent company debt of Rs 5.1 billion during the quarter.
SG Holdings Global Pte. Ltd. holds 82.43 percent of the issued shares of the company.