VRL Logistics to scrap 700 trucks to keep costs in check in ‘lost year’

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VRL Logistics Ltd, which owns the largest fleet of commercial vehicles in India, plans to eliminate its fleet of old trucks to rein in repair costs amid a nascent recovery in demand.

The operator of about 5,000 vehicles, including tankers, cranes and buses, has identified some 700 low capacity trucks for possible scrappage.

“The firm ‘hopes’ to report a profit for the year starting April 01 by cutting costs and halting fresh investment,” said Chief Financial Officer Sunil Nalavadi during a conference call, reports Bloomberg.

To be sure, the company’s proposal hinges on the government’s policy for scrapping vehicles, which is yet to be finalised, Nalavadi said, “If vehicles older than 15 years are to be scrapped, we have 700 such vehicles. If it is 20 years, we have about 200.”

The Karnataka-based firm which is operating at about 75% capacity, gets more than a third of its business from small- and medium-sized firms that are most vulnerable to the economic slump, and plans to remove routes that aren’t seeing enough demand. “While business is improving from sectors like pharmaceuticals and farming, demand from textiles and automobiles is weak,” Nalavadi was was quoted as saying.

VRL started operations with a single truck in 1976 and its shares rose more than 40% on debut in 2015. The stock has lost 45% of its value this year, set for a third straight annual decline. The company reported net loss of Rs 62.71 crore in Q1 as against net profit of Rs 27.45 crore in Q1 June 2019, while net sales slumped 70.3% to Rs 160.09 crore compared with Rs 539.64 crore.

Looking at VRL Logistics’ annual financial report for 2019-20, the company’s Chairman & Managing Director Vijay Sankeshwar said, “We expect that 2020 will be a lost year for earnings growth. Our first priority is to keep our employees out of harm’s way. Second is our duty as an essential provider of transportation and logistics services, we continue to help businesses move their freight so the economy can get back on its feet.”

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