After losses, Snowman Logistics chalks out sturdy turnaround plan for FY19

Snowman Logistics, the cold chain and temperature-controlled logistics service provider, has chalked out a sturdy turnaround plan for itself. “You will see us in profits this year in FY19,” says Sunil Nair, chief executive officer of the company. 
 

Having made losses for two consecutive years, the Bengaluru-based company aims to up its revenue stream by 15 per cent in the current financial year amid cost controls efforts that would lead to better-operating margins and profiting bottom line.
 

“We have changed our business model slightly and are now offering transportation and warehousing services as an integrated solution to the customer from selling (these services) separately earlier. This is yielding us higher premiums,” Nair told Business Standard.
 

In FY18, the company reported a loss of Rs 33.8 million as against a loss of Rs 48 million in the corresponding period last year as revenues grew just about 2.6 per cent even as expenses remained high and stiff during both financial years. 
 

“We have also cut down on low-revenue customers as well as categories and are focusing only on high-end customers and product verticals,” informed Nair. 
 

Low revenue category products include fruits, vegetables and other agri-products while high-end product vertical comprises pharma and seafood.
 

“A third change we have brought is an improvement of utilisation levels which has moved to 85 per cent from 70 per cent last year,” he added.
 

As per the FY17 annual report, the Gateway Distriparks subsidiary has 33 warehouses spread across the country — which means a 103,600 pallet capacity — and employs 293 vehicles for transportation services.
 

Going ahead, however, there are limitations to further improve utilisations as the company has to keep some capacity for stock movement, and given their presence in 15 cities, some regions are also expected to underperform occasionally. 
 

“The current run rate is 85 per cent utilisation and it is a respectable number. We will maintain this utilisation level in coming quarters as well,” informed Nair.
 

While the plan to up its revenue stream is clearly chalked out, Snowman has also identified cost parameters, which, when controlled, can result in beefy operating profits. 
 

“We have relooked at our power consumption pattern, packaging material consumption and also worked on a time-motion study of employees, mainly the blue-collared workers,” said Nair without divulging the percentage drop in the cost of production.
 

In temperature-controlled logistics industry, power, fuel and labour are the biggest cost contributors in the cost of production. The company has had to lower headcount in the last few quarters in order to rein in inefficiency in the system and cut unnecessary costs. While Nair refrained from letting know the contractual labour the company did away with, he informed that going ahead there will be no more loss of jobs.
 

“Job cuts were only in blue-collared jobs, no reduction in headcount was made in white-collared jobs. Since we identified inefficiencies in certain locations, we corrected that,” Nair explained his stance.
 

The company has also set a Rs 800 million capex as it plans to set up three warehouses in Siliguri, Coimbatore and Krishnapatnam. “We are currently identifying land parcels and these facilities will be up in another nine months,” Nair informed.
 

With a healthy debt: equity ratio of less than 1, the company aims to fund this capex via internal accruals and loan, the ratio of which still remain undecided.
 

The domestic temperature-controlled logistics industry, of which Snowman Logistics is one of the key players, is highly unorganised. However, with GST and food safety norms asking for compliance, the segment in the next two to five years is expected to witness a more organised structure. Snowman currently competes with other domestic regional players such as Coldman, Coldstar and Coldex, among others, but the industry overall has no pan-India player so far.