Allcargo Logistics Ltd (NSE: ALLCARGO) Q2 2025 Earnings Call dated Nov. 14, 2024
Corporate Participants:
Ravi Jakhar — Chief Strategy Officer
Deepal Shah — Group Chief Financial Officer
Analysts:
Shailash Raja — Analyst
Radha — Analyst
Sunny Gosher — Analyst
Rajesh Agarwal — Analyst
Sara — Analyst
Shivaji — Analyst
Presentation:
Operator
Ladies and gentlemen, good day. And welcome to the Allcargo Logistics Q2 NH one F 525 earnings conference call hosted by B&K Securities. [Operator Instructions] This conference may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call, these statements do not guarantee the future performance of the company and it may involve risk and uncertainties that are difficult to predict.
I now hand the conference over to Mr Shailash Raja from B&K Securities. Thank you and over to you, sir.
Shailash Raja — Analyst
Yeah, thank you, Slok Good afternoon to all on behalf of the NK Securities. I would like to welcome you all to the Algo Logistics to 2QFY 25. From the management side, we’ll be hearing from Mr Rali doctor Chief Strategy Officer and Mr the group CFO without taking much time, I’ll hand over the call to Mr Ravi for the initial and post, which we will open up for the two or three.
Ravi Jakhar — Chief Strategy Officer
Yeah, thanks Shelly. It’s a pleasure to be on this call and talking to everyone. The second quarter for the financial year ’25 has been quite an eventful quarter in many ways. And I would give a bit of a perspective on what’s happening across each of the businesses. And then I’ll invite my colleague people to take you through the financial highlights and talk about the key numbers. But basically, if you look at, there are three businesses that we have been operating the international supply chain and the domestic supply chain, which comprises Express and contract logistics business.
On the international supply chain business, we have had the most challenging few quarters. Until recently, I would say this is possibly the bottom, which could be over the last two decades, that only a couple of such instances have happened in terms of the market environment that we faced. And I’m really glad that we have been resilient and we have been able to come out well of this period. And when we look at some of our competition and industry benchmarks, we see that there have been immense challenges in maintaining the profitability.
However, we have done much better and that is primarily being driven by being very proactive on cost reduction initiative on technology initiatives and constant service delivery to the customers, which has allowed us to maintain and grow the market share. And that has really helped us through tough periods. Now, as we look forward, we have seen the beginning of the better times as we have been reporting on a monthly basis and also for the quarter, we have seen improved volumes over the last quarter as well as over the last year.
And with the global economic environment improving, we could potentially see this trend to follow. There are of course several geopolitical events happening around us and they would shape the future of world trade. But prima facie, we believe that global trade will only continue to strengthen from here. And from a company perspective, we have a very, very sharp regional focus and a unique strategy for each region we have in the past been talking about growing our presence in Latin America where we have been historically, having limited market share.
And I’m glad that this was a quarter where we actually took significant initiatives. So between July to September this quarter, we onboarded an entire new team in Argentina, Paraguay and Uruguay, which will add to the business in the region. It is already doing well in the first two months of operations, having grown the business significantly, almost doubling the business in two months itself. We are also this is the quarter when we finalized our joint ventures in Colombia and Ecuador, which will bring in local expertise and combining with the global network.
We expect these markets to also grow faster and this faster growth in new products and volumes would lead to impact on the financial performance as well as in these countries. Particularly considering that at this point in time, Colombia and Ecuador combined, we’re not contributing anything on the bottom line. This partnership would lead to that scenario changing, we have more from initiatives to be taken. But I’m glad that six important markets in Latin America were acted upon with strategic initiatives in this quarter.
When we look at European markets where we have historically enjoyed market leadership for a long period of time, particularly in Western Europe and northern Europe. We saw a continued strong performance in Northern Europe in UK and France and Scandinavia region as well, which has bounced back. Well, the larger part of Europe still remains a bit challenging because the economic environment is still subdued and it might take another six months before the economic environment starts to improve. And we would see how the Russia Ukraine conflict plays out with the change geopolitical dynamics and that could potentially lead to revival of European trade.
Meanwhile, what we are trying to do is we recognize that Europe in particular is a high cost environment and we are trying to standardize the operating processes further. And we had spoken in the last quarter about our outsourcing from us into Mexico. And we are looking at how we could centralize some of the core operations in Europe and move them into a low cost near shore country, not very far off so that the time zones could be managed. So that should be our strategy to improve profit margins in Europe.
Since as far as the core business is concerned in this region, we do not see very high growth rates, what we could potentially see in Asia, Latin America, Middle East or to an extent us and China where our market shares are relatively smaller, closer to home. In India. All the businesses have done a fantastic and both LC and C continue to grow steadily and we maintain our market leadership by far in the LFI business and we are climbing up in the FC business significantly as well. Now, comparing with the top three in India, on the Asian side, we recognize that there could be changes with the dynamics of us, China trade changing.
But we have seen that in the past as well about five years ago or five, 5.5 years ago, we have seen that there were tariffs and sanctions and certain initiatives being implemented and that had led to an increased trade from China to Vietnam. We are seeing imports into Vietnam office growing and also expose all of wen into us. So we believe that structurally trade flows will continue the trade lanes can change. But as a company, we are well present across the world and that should work out well for us today. When we look at the competitive landscape, there is nobody close to our entity equal worldwide from a technology and network perspective.
And that’s something we should continue to create the flywheel of success where these capabilities lead to higher volume and market share, higher volume and market share continue to keep us more competitive. And you know, we continue to drive growth. So as the economic environment is now starting to improve, and we remain hopeful of a better environment in the calendar at range 25 I think that business is well placed to continue to show momentum and growth. On the second business in Express, we are now already you know, at par with the best in the industry.
As far as the cost of operations is concerned, we have recently announced a general pricing fees which will align us to improve the revenues and therefore improve the profit margins and a lot of the turnaround work which was done over the years is now concluded on the operational side. And we have had some great leaders joining in the business to drive commercial operations and we remain very confident of expert business, which is constantly shown significant improvement in the E BETA over the last three quarters.
If we compare the December quarter versus the September quarter, that progress is already visible. And the impact can be seen. The third business of contact logistics in that business. We built on a legacy chemical contract logistics business and expanded into new horizons, new domains. And today, when we look at the split of business, we are very pleased to note that despite continued growth, chemical logistics today comprises only 23% of our business, which means that company has been successful in expanding its business into new domains, auto and engineering, which is now as big as the chemical in terms of the total revenue mix.
And the largest section for us now is our e-commerce business. And this is a business which is high growth business. And at the same time, we have not compromised on the prosperity. So this is a business where in largely at any customer level, at any location level, we remain positive. We are investing in the capacity, which means that historically, our white space was possibly in the range of three to 4%. Now that is 10 to 11% but that is required as we drive growth and momentum. But in terms of the businesses, it is aligned with the fast growing industries.
Today, we manage significant capacities in warehouses and dark stores for some of the fastest growing quick commerce companies. And we are also working for various e-commerce companies. So this is a, this is a business which is now aligned very well to the growing e-commerce. Markets while remaining the strong foot in chemical business where we retain the market leadership in India and a rapid growth in auto engine as well. So this is a business which has seen a considerable growth. If you look at the performance on a quarterly basis, we have grown from a revenue of about INR76 crores INR111 crores year on year, which is a significant growth.
And we believe that this momentum can continue for the next few years because the opportunities are significant to expand the contract logistics business footprint, particularly in e-commerce, auto engineering and other industries that we are now expanding into. So on an overall basis. If I look at various businesses, the management is confident that we are well placed vis a vis competitive landscape. We believe that the market environment is either good in Indian businesses or significantly improving in the global business.
And we believe that our investments in technology and focus on cost reduction operating costs in case of the Gui business and C&A costs. In case of eu worldwide, the international business should work well for us. On the corporate side, we are also glad that this quarter has seen moment in our restructuring scheme which we received the no objection from the exchanges and the scheme has now been filed with NC LP. So we believe that we would conclude the process in the estimated timelines and by April 2025. We should have the international and domestic businesses demerged and listed separately.
So that is the broad summary. I would now request my colleague Deepal to take you to the financial highlights and we will then open the floor for questions. Thank you over to you people.
Deepal Shah — Group Chief Financial Officer
Thank you, Ravi. I will now discuss the performance for Q2 FY25. The consolidated revenue for Q2 FY25 stood at INR4,301 Crores as compared to INR333.07 Crores for Q2 FY24 representing a growth of 30% for the Q1 FY25. The revenues stood at INR3,813 crores. The consolidated operating EBITDA for Q2 FY25 stood at INR125 Crores as compared to INR118 Crores for Q2 FY24 representing a growth of 14% for Q1 FY25. The same stood at INR123 crores.
The company has reported a profit after tax of INR38 crores during the quarter representing a growth of over 130% as compared to the same period last year. The consolidated debt net debt for the quarter ended September 24 stood at INR553 crores. The net debt has gone up mainly on account of working capital increase. Moving to the segmental performance. I’ll start by discussing the performance of the international supply chain business, the LCL volume, the container container volume for the quarter ended September 21st at 2.37 million CBM depicting a 4% growth over the quarter ended September 23 and 5% over the previous quarter.
And this is the June quarter 2024 FC volume for the quarter to 164 KT up 7% over the same period last year and 5% over the quarter ended June 24th air volume for the quarter ended September 21st stood at 2.65 million kgs. This represents a growth of fully in person as compared to last year and a marginal decline as compared to the last quarter. Volume growth also witnessed during the quarter. On the back of improved global trade and company growth initiatives. A seasonal decline was experienced across regions towards the end of the quarter.
For Q2 FY25. The IC business reported a revenue of INR3,770 crores representing a growth of 35% as compared to the same period last year for the previous quarter, isc segment revenue stood at INR3,320 Crores Ebitda for Q2 FY25 stood at INR79 crores as compared to INR65 crores during Q2 FY24 representing a growth of 22% Q1 FY 25. The same stood at INR81 crores moving on to express business operating under the GCPL brand JCPL company.
The volumes for Q2 FY25 stood at 317,000 tons as compared to 333,000 tons during the same period last year for the quarter reported revenue stood at INR374 crores as compared to INR385 crores in the same quarter. Last year, the EBITDA for the quarter ended September 2024 amounted to INR19 crores as compared to INR15 crores for the same period last year.
Moving on to the contract logistics business with it under the old cargo supply chain. Company, a wholly owned subsidiary of all cargo logistics contract logistics revenue for Q2 FY25 stood at INR111 crores as compared to INR76 crores for the same period last year, representing a growth of 45% for the Q1 FY25. The revenue stood at INR91 crores. The growth has come on back of new client editions. EBITDA for Q2 FY25 stood at INR32 crores as compared to INR36 crores during Q2 FY24, Q1 FY25 the same INR29 crores in line with this disclosure practices, we have been consistently providing other key comparative financial performances and operational indicators in our investor presentation.
One can refer that for more details with this, I would like to open the floor for questions and answers. If any.
Questions and Answers:
Operator
Thank you, sir, we will now begin the question and answer session. [Operator Instructions] The first question is from the line of Radha [Phonetic] from GGI investments. Please go ahead.
Radha
Hi, sir. Thank you for the. So my first question is that in this quarter, we have given Joby while gross profit contribution for the International Suprising Business. So we appreciate the better disclosure, disclosure efforts of the company. However, can you please help us with the similar number for H2 FY24 as well as the first half of FY 24?
Ravi Jakhar
Yeah. So this was, you know, requested by several, you know, shareholders and analysts. And that’s why we thought of including in this because we want the information to be distributed equally to everyone. And therefore, we have shared the geographic split, we can possibly share the story as well. So I will ask the team to take note of this and add the trends and you know, contributions of regions as well. We will include that going forward.
But from a broad direction perspective, I can share the comment that, you know, historically Europe used to be a significant contributor of gross profit. And in the environment, we have been finding that Europe has not contributed that well within Americas, let America remain steady, but the US contribution has gone down which we expect to revive.
So I would believe that Americas and Europe should the growth in the America and should see some growth in percentage because Europe may still not grow at the same rate as which you know, other countries would grow. So I would imagine Europe should remain steady. It would remain low compared to what it was last year or two years ago, America with North America now improving should increase and in Latin America as well.
Radha
Okay. The second question is that and in this first half, you can see that the short term debt in the quarter is INR1,200 crores, which is the highest it has ever been. If I see the numbers on a full year basis, it is even higher than the full year. FY22 levels, we were all time high. So just wanted to know why has the short term that increase? And by the year end, what would be your target?
Ravi Jakhar
Yeah, deepal if you would come in on the short term debt and provide a perspective on how it is.
Deepal Shah
No, sure. So you mentioned that the short term debt has gone up to INR1,200 crores. That is not correct. The gross debt is INR1,352 crores, a short term debt is around only INR850 crores out of it. Almost INR495 crores is long term debt. So I don’t know where you get got the INR1,200 crores of short term debt number. Secondly, yes. So like we mentioned, I did mention in my speech that there were, there were freight rates which had gone up for which some additional working capital was used.
So these are temporary, these kind of go back to back with the freight rates. So once the freight defleet, I mean go down the these the working capital that also to deflate and that’s all what we have seen also through 22 or 21-22 where, you know, short term debt had gone up for working capital and then you know, towards the end of 23 it had again bereted. So, so this is you know, the freight rates are cyclical in nature and and the short term debt kind of apes that you know, from a amount perspective. Yeah, sorry go.
Ravi Jakhar
Yeah, just to add that actually, we should see this net number going down towards the end of the year broadly. My personal estimate would be around 20% lower than where we sit today.
Deepal Shah
Yes, sir. We are seeing, you know, some freight rates also kind of come down a little in some of the trade lanes. So yes, you’re right, we can.
Ravi Jakhar
Yeah, cash within the business will also bring this down with some money further to come with the non core disposals. Yeah, that’s right. That’s all.
Radha
Yes, sir. Regarding the noncore asset disposal, so that Ho are taken Horc, we are selling I think about INR115 Crores. So how would you replace the monthly fee from there?
Ravi Jakhar
Sorry, I think you’re asking the impact on Horc. So I couldn’t hear your question completely clearly.
Radha
The property, the location plan for the money that we received from take care.
Ravi Jakhar
So there is no as you are aware, all the businesses are asset light and do not require any significant capital. So we have been using capital to retire debt or to, you know, provide dividends to the shareholders and the company has maintained the distribution of cash flow by your dividends as you would have seen in the quarter gone by as well. There are no significant G plans even on the expansion.
One significant change, which has happened, I would say in a way in our strategy is that we are now investing in people in a way rather than acquiring companies and therefore some of those investments also in a way flow through the P&L. So what I mean to say is for an instance, instead of acquiring a company, we are now on board in this entire team, I was talking about an example in Argentina, Paraguay and Uruguay. This certainly means that the first couple of months entire G&A goes out without any business.
And then as the business starts to come in, it is still a build up phase. But that is the kind of investment which you’re putting in to drive the business growth, but that flows through the PNL itself because all those investments are now in staff costs and expenses as compared to acquiring any company. So therefore, from a capex point of view, there’s no significant capex beyond the ordinary capex that you’ve been doing from a layout perspective.
Radha
Okay, sir. Thanks and all the best.
Ravi Jakhar
Thanks.
Operator
Thank you, sir. The next question is from the line of Sunny Gosher sir, from MK Ventures [Operator Instructions] Mr Sunny. Please go ahead.
Sunny Gosher
Yes, thanks for taking my question. My first question is regarding the Glow International Supply Chain Business. So basically this quarter saw a good bounce back in terms of the volume performance and also the corresponding improvement in the graphic. However, the flu. So to EBITDA could not be seen and it looks like that part of that impact is from the acquisition, maybe that you have done in Latin America or South America.
So, is it possible to give some perspective in terms of how much negative drag on ebitda was there from the acquisition? And what we could also see from the P&L is that your employee cost has increased by INR32 crores on a QOQ basis. So is is this relating to that acquisition? So any perspective on this would be really helpful?
Ravi Jakhar
Yeah, so the in season staff cost is primarily driven by one like you rightly mentioned onboarding new people such as about 30 plus people in the Argentina region that I mentioned about and a few more people in other geographies as well, which have been onboarded for growth. The second impact is a lot of countries have July to June cycles where in the bonuses are paid in the June, July to September quarter. So that is the second contributor as well. And the third is there have been also one off severance costs. So we have had the severance cost in letting go people. I I’m not able to exactly quantify how much of this quarter.
But over the last two quarters, the seven cost of key leadership changes that you’ve done itself, I should be in the magnitude of over $2 million. So we’re talking about roughly about INR1,820 crores kind of an impact distri over the last couple of quarters on this evidence cost paid as well. So these are some of the costs which are reflecting in the increase staff costs. Having said that like I mentioned earlier, there’s a very sharp focus to retain these costs at the optimal level. And that’s where we’re looking at outsourcing centralization of European operations. And we are also, we have already rolled out the financial system which was required to centralize finance.
But that is something which we contributed recently across key markets. And now we’re already working on program to bring down the finance cost by we are outsourcing all the financial rules as well. So our intent is to not allow the staff cost to grow whatever investments we need to make for growth would be counter acted upon by reduction in staff caused by way of outsourcing or tech automation, etcetera. That’s the broad strategy at our end so that whatever growth we can achieve in volumes and gross profits can flow down to the EBITDA. But there would be time delays in account of impact of cost saving actions versus investments that we put in.
Sunny Gosher
Got it. That’s quite helpful. So two questions relating to this is the severance cost largely behind or could there be more in the coming quarters as well?
Ravi Jakhar
So I would say we could have more severence costs. But what we would do is we would provide perhaps going forward a specific carve out on the seven cost number. And the way we look at the seven costs, it’s not a liability, but an investment, I explained what I mean by that. So if we have a situation where we’ve been able to drive tech automation or we believe that the business can be made more efficient or for whatever reason, we can reduce the head count in a particular country.
And as you would know, in Europe and Latin America and some of these countries, the severance cost could be significant particularly for long serving employees. But the way we look at this is even if we are paying, you know, six months to 12 months, we will say 18 months in some cases worth of payments for severance. It is almost like an investment which pays back within six to 18 months and therefore is a great investment.
So we would continue to you know, reduce head count wherever possible. Wherever we see, it’s it’s not a replacement of cost, but it is an actual saving and there could be a six,12,18 months time line which would be there. But that’s the investment we need to make to make the company more efficient in the long run. But like I mentioned next quarter onwards, we will carve out the events cost to provide the clarity on that.
Sunny Gosher
And just.
Deepal Shah
To add the cost is $1 million for this quarter, almost $1 million.
Ravi Jakhar
So the exact number.
Sunny Gosher
That’s helpful and basically going forward, how should we look at the fixed cost on a quarterly basis? So the base is somewhere around 600 for the international supply chain business is about INR600 to INR610 crores. So is this for at least the next few quarter kind of a peak number? And any improvement in gross profit from here on will go through to the EBITDA or there could be some more additions to the fixed cost in the next few quarters.
Ravi Jakhar
So like I said, there would be no additions to fixed cost, but it is almost like the intent is to, you know, keep them in equilibrium so that the gross profit can slow down. The negative impact would be in terms of from a cost perspective would be the investments in people. The second would be severance costs and restructuring. And third, negative impact would be appraisals and linked, you know, pay role improvements for people, which means higher cost for the company.
The way to offset that is outsourcing, tech automation and the business that comes from investments in people. So that is how I would see that the intent would be to not allow the cost to grow at a higher percentage intent would be to control it to the similar base levels. And therefore the gross profits and slow down. But there could be GAAP of, you know, a quarter here or there in terms of, you know how it plays out.
Sunny Gosher
Yeah. And one last question before I get back to the queue. So you mentioned about non code asset monetization and the scale of like a one asset which realize about 100 INR110 crores. So, are, are there some identified tool of non core asset? And is it possible to quantify, assuming that they liquidated over the coming quarters? What could be the quantum of noncore acid realization?
Ravi Jakhar
So across all cargo on a consolidated basis, which includes all cargo and guty as well. Broadly, there could be non core cash flows coming into the extent of 75-INR100 crores. That’s the broad estimate.
Sunny Gosher
Got it. That’s helpful. And I I must appreciate that the level of disclosure has improved significantly over the last many quarters. And I hope it keeps improving going forward because it helps us to understand the business.
Ravi Jakhar
Because the way we would continue to work on that is if we see a request from one or two persons, we try to answer them on the call or during the meeting. If we see the same request from more than five or 60 people, we include that in the presentation and we’ll do that.
Sunny Gosher
Yeah. Thank you so much and all the best for the coming.
Ravi Jakhar
Yeah, thanks.
Operator
[Operator Instructions] The next question is from the line of from Moneyore. From one year. Please go ahead.
Rajesh Agarwal
When. And how do we get the operating leverage in terms of EBITDA going down to the bottom line?
Ravi Jakhar
Across each business, the operating leverage is going to play out more on the international business. In the Express Business contract logistics is more of a similar budget profile to continue on the Express business. Like I mentioned, the staff costs and the G&A cost is already accounted for in terms of the future growth. And therefore, we do not need to invest further in that and therefore the increased gross margin and the revenue is leading to operating leverage.
So if you see the last three quarters, it has consistently played out and we have seen improved EBITDA over the last two- three quarters and this would continue as we increase the volumes. We have made a monthly disclosure. The October is the highest ever monthly volume for the excess business. And therefore we remain that that we should continue and therefore that should play down to the Abita.
So we’re talking about impact already being, as far as the international business is concerned, we have seen the past in better markets, how the staff costs and the fixed costs remain consistent while the improvements in gross profit have slowed down to the bottom line. Last few quarters were back, we’ve only seen the recovery in the last few quarters, beginning. And as I mentioned, just in my previous response, the improvements in gross profit here on should come down to the bottom line.
Rajesh Agarwal
But the improvement will be substantial or what is the time period for that? What is the time period with marketing for.
Ravi Jakhar
I would reference the specific guidance but like I would have mentioned over the last two quarters and we have delivered on that guidance is that we would see sequential improvement.
Rajesh Agarwal
So how did you see, suppose there is a shortage of container and everything? So you don’t feel the tendency of the customers moving more to ac business which is a good high margin business for us. Are you seeing the changes in that?
Ravi Jakhar
So typically the way it operates is whenever customers have you know, not enough load to fill in the container they operate on the LCL. There are situations where in if there is lack of availability of containers on a particular trade lane. Okay. See when they try to move to LCN, we also have to accept the booking. If somebody comes in with a 40 cubic meter booking, we generally don’t accept that booking because for our business, the business is profitable and we have three to four cubic meter kind of an average shipment size because you know your money that you make on documentation per bill of reading, etc, is justified that way. So cl business can’t truly translate into LCL. But yes, people ship in smaller loads and therefore the LCL business in such cycle does grow more.
Rajesh Agarwal
And sir last question when the Trump has come to power now, the T is imposed on China and other iag countries. How do you see the traffic, international cargo moving and the volumes gross profit volumes which we are doing in the USA now? Is it for export from us or import to us?
Ravi Jakhar
Yeah, so I’m happy to share my personal perspective on it. There’s no company view on what the geopolitical environment could shape up. But as far as our US business is concerned, it comprises both export and import. As I was mentioning earlier, we believe that any tariff restrictions which come in particular to a certain country, those tariff restrictions could lead to diverted tariff flows. And we might see more cargo coming in from other countries. As compared to China.
For an instance, we have seen that in the past also when such measures were adopted with more cargo flowing through Vietnam, Indonesia and some of the countries near China from a long term perspective, most companies have anyway been diversifying supply chains that should work well. In terms of any of the manufacturing itself moving into us. We believe that it is not the entire ecosystem which would move any manufacturing would still mean that the raw material components will still be coming in.
If there was assembling to be done in us, you would still have components flowing in. So we have seen what a period of last 3-4 decades, if you go back, you know, changes in manufacturing locations haven’t really reduced the trade flow. They only increase the trade flow because your supply chains become more spread out. The only key impact in the worst case scenario for, you know, cross border trade could be Mexico to us state, but that is largely road trade and we do not participate in that as yet.
Rajesh Agarwal
Okay, sir. Thank you. Is there any other questions? I’ll come back to the clinic. So.
Operator
Thank you a reminder to all participants to press star and one if you wish to ask any questions. The next question is from the line of Sara [Phonetic], an individual investor. Please go ahead.
Sara
Hello, thank you for the opportunity, ma’am.
Operator
Please come closer To your microphone. Thank you.
Sara
Hello. Thank you for the opportunity, sir. Sir, if we do a quarter on quarter comparison, that is from second quarter versus the first quarter of FY25 for the international supply chain business. The company has achieved all time quarterly volume in second quarter with 5% volume growth. The product mix was also favorable towards LCL realizations have also gone up 8% quarter on quarter, container utilization index has improved quarter on quarter, CTFI container usage has improved quarter on quarter. So all dynamics seems favorable for the company. And additionally, the company has done a lot of cost cutting measures from the last few quarters. However, the EBITDA by TU has come down 17% quarter on quarter. Please help us understand what has led to this, sir.
Ravi Jakhar
Yeah, so two points there. One, let me comment that yes, there has been a continued improvement in utilization and all these factors. But you’re looking at a 12 month trend and we are recovering from the lows. We believe that if the trade flows become more robust, we should see a continued upward move on utilization and ease because utilization is the most critical part that drives the fundamental profitability in our business. And as far as the EBITDA is concerned, I would not break it down.
But you because the LC and C business operate on CBM and P you in a different way. But from an overall perspective, as you have seen the volume if you compare has gone up 4% similar quarter year on year while the on the quarter on quarter, while the gross profit has gone up about 7-8% which means that there has been an improved profitability as well on the back of comparatively better utilization. However, as I was explaining to you, there have been some one off costs such as $1 million in severance costs and a few other investments in people which are also throwing flowing through the P&L and some bonus payments, etcetera leading to higher staff costs.
And therefore the number is coming down what we anticipate from here on over a longer term perspective. I’m talking about say one year out when we look at the same quarter, next financial year, we should see improved volume and gross profit by, we should fundamentally see similar cost level and therefore the marketing level should kick in.
Sara
Okay. Okay, sir, thanks. That was helpful. So my next question is sir as an in as an investor, this company has so many subsidiaries and associates operate in so many geographies and there is no correlation between free tech also. So the only way for us to estimate future number is on the basis of your guidance and con calls. So in last quarter, you had mentioned that there is a lag effect of four to six weeks and hence margins should have improved in the second quarter. However, it hasn’t played out that way. So,why can’t we see improved performance in terms of profitability?
Ravi Jakhar
Yeah. So I’ll take the second question first and then comment on the first one. And the second part is concerned the profitability in the business is gross profit per unit of volume of trade that we carry. And I was just explaining that the gross profit has gone grown at a faster and higher percentage than the volume growth, which means that there has been an improvement in the gross profit per cubic meter in LCR or the gross profit, but even the SCL business as well.
That’s the first part. So there has been an improvement in that you’re only looking at the ABI which has been paid out by CN A where we believe, like I mentioned, we should see an improvement on the back of improved overall gross profit while retaining the machine. A cost is the same level coming on the first part. As far as various subsidiaries are concerned, these are operating units which are required to be established in these countries to conduct business. We cannot operate with you know, limited entities across the world. We are present in more than 65 countries in our own offices and therefore these operating units are required from a structural point of view.
As you’re aware, the scheme of rearrangement is under progress and that would lead to all the international business coming under one entity. And as far as the domestic business is concerned, there is no need to have these subsidiaries because you can operate all the businesses under one operating unit. And therefore, we would just have one listed entity which will also be the operating entity. So all these subsidies will disappear on the domestic business side because there’s only one country that we operate in. On the international side, we have no option but to retain operating entities across the world in terms of following up.
I would say that there are multiple factors that you could look at which impact our business. You can follow the global economic environment which has a bearing on the global trade. As the inventories build up, we see continued increased flow of trade that has a significant impact on the volume side. The impact on the cost side is largely driven by inflation. We have several countries in Europe for an example wherein iation have to be increased in line with the inflation in indices. So I would say the growth in global trade is a common indicator of our business opportunity and inflation is somewhat a reflection on the cost side.
And within these two, we are always trying to see how we can, you know compensate for inflation by way of technology and how we can compensate for any volatility in the market environment by expanding market share. So these are the two company specific initiatives where we are happy to provide guidance. But on the broader basis, you can always follow how global trade is doing in our inflationary trend as being there. And there are several container indices available published by various research agencies which also provide a perspective on the container freight rates and the volumes which are being moved through global trade corridors.
Sara
So, that was helpful but subsidiaries and associates and many geographies are okay. But we have, we haven’t mentioned or guided same thing in the last quarter that will be in severance and expenses for this in the second quarter or for the forth coming quarter.
Ravi Jakhar
So like I mentioned, the seven course decisions are taken based on the you know, restructuring investment decisions that we make like you’ve done in Latin America, we have spoken about the severance cost in the past as well. I’m not sure if it was a quarter last one or the one before that because we have had such you know, and costs in the past as well.
And like I mentioned, I would like to reach to avoid any confusion. We would continue to look at staff cost reduction where we see it’s a significant investment for us on the back of severance cost which leads to a reduction in G&A cost. And if the payback is effective and if you’re able to drive that with technology, you would continue to do that. And also like I mentioned earlier, we’ll provide a separate five out number on that.
Sara
All right, sir. And the last question we are hearing from sources that promoted is wanting to sell some stake in the company. Why is he planning to do this stuff?
Ravi Jakhar
I cannot comment upon here and there is no comment that I can provide on that.
Deepal Shah
Yeah, we cannot comment on behalf of the promoter. So I mean to the company at the moment.
Sara
Okay. So sir, what is, how is the outlook in terms of demand for 3rd and 4th quarter?
Ravi Jakhar
I already answered that we expect the strong demand environment in some of the select countries to continue and Europe may take more than two quarters to revive, but globally there’s a better momentum in the market.
Sara
All right. So thank you so much.
Operator
Yeah, thank you. [Operator Instructions] The next question is from the line of Shivaji [Phonetic], an individual investor. Please go ahead.
Shivaji
Hi, thank you for the opportunity. So we’re seeing a huge increase in the number of ships that are getting added to the global capacity in the current year. This combined with the fact that global demand is growing in low single digits. Do you expect? And also if you kind of add to this, the fact that with the new US President, if the Middle East wars would come, would probably come to an end somewhere, say in 2025. And the Red Sea, you know, the Red Sea would kind of normalize. Do you think that the freight rates can can take a hit going ahead.
Ravi Jakhar
So we believe that freight rates will remain range bound. There are various things pointing towards an upward momentum and things pointing towards up some of the new appropriately mentioned. What we follow from various, you know, maritime research projections is that there’s also a lot of capacity coming up for scrapping and on an overall basis. July which is a leading maritime research company publishes its and your expectations on the freight environment and the capacity. So what we read through is that net net, the trade demand could absorb the entire capacity coming in. That’s the narrative we’ve been you know, reading through and taking note of.
Shivaji
That was helpful. And my last question is on the a bit but I know you’ve added the SCL business recently. But if I just do like for like comparison say, you know, say in 2019 or 2018, when you had an, a bit for cl of about 1.45 is that something that you would target going ahead also just on the cl business, if you strip out the SCL business out of the international segment is that, are you trending towards those numbers?
Ravi Jakhar
So I would say, you know, we do not see our business in edit for you because business is conducted in different units and there is not a measure followed in the company internally. So I cannot you know, relate to those numbers or comment upon that. But like I said, the simple intent going forward is to create volume growth which exceeds the market growth. So we have seen a flat market when we’ve been growing at about four to 5%. We have in the past quarter seen a declining market where the market declined by 12 to 15% and we had gone down by seven to 8%.
So we’ve been kind of consistently been maintaining a data of four to 5%. Historically. If you look at the long term averages, the global trade on containerized trade has been growing at 3% and at about five to 6%. So our intent is to maintain the data of four to 5% on these global trade growth rates. And as the trade revised, our growth rate can move into you know, double digit for LCN and CN, we have consistently grown at close to 18 to 20%. If you look at even the last six-seven years of a compounded annual growth rate.
Shivaji
That was very helpful and wishing you all the Very best.
Ravi Jakhar
Thank you.
Operator
Thank you. [Operator Instructions] So as there are no further questions from the participants. I would now like to hand the conference over to Mr Shede Raja from B&K Securities or do you so?
Shailash Raja
Yeah, thank you all for attending this session. We especially thank the Algo logistic team for their time or is there any closing comment? Would you like to make?
Ravi Jakhar
No thanks Shailash for hosting us and thank you everyone for joining in. Like I mentioned, we intend to provide as much disclosure as we can where there are confidentiality concerns, keeping competitive dynamics. We try to find a work around and provide at least the lead indicators. So we are happy to get more queries from you with, from our investor relations team and happy to provide you as much perspective as we can hope for today’s call was helpful in this direction. And thank you very much once again for joining in.
Operator
[Operator Closing Remarks]