UTi Worldwide’s latest earnings mirror a struggling freight forwarding market

UTi Worldwide’s latest earnings report echoed a similar theme – declining airfreight revenue and a modal shift from air to ocean.  However, its Distribution segment proved to be a positive in an otherwise negative earnings report.

For the quarter ending January 31, 2013, total revenue declined almost 5% to $1.1bn. Airfreight forwarding revenue declined almost 11%; Ocean freight revenue increased 1.5%; Contract logistics declined almost 10% and Distribution increased almost 6%.

For the fiscal year ending January 31, 2013, total revenue declined 6.2% to $4.9bn. Airfreight forwarding revenue declined over 16%; Ocean freight revenue increased 3%; Contract logistics revenue declined just slightly and Distribution revenue increased over 7%.

Freight forwarding remains the company’s largest segment, comprising 58% of total revenue. Like other freight forwarders, UTi also noted market pricing negatively affected its revenue. For the fourth quarter, net revenue per kilo in airfreight declined 15%, while net revenue per TEU in ocean freight declined 13%.

This is comparable to Expeditors International which also noted revenue declines. For 2012, Expeditors reported net revenue per kilo for air freight declined 7% and net revenue per container (FEU) declined 4%.

Although many major freight forwarders noted declines in airfreight tonnage for fourth quarter, UTi’s decline of almost 11% was a bit alarming. This may be due to the time period of the company’s earnings which is for November through January as compared to October through December for most other providers.

Airfreight Tonnage Comparison (Quarterly Percentage Change)

Source: Ti Dashboard

UTi’s ocean freight tonnage increased 6.1% for fourth quarter. This was a higher increase than that of other freight forwarders for the quarter. This may indicate the company’s ability to react quicker to the shift towards ocean freight and/or it could be due to its customer mix.

Ocean Freight Tonnage Comparison (Quarterly Percentage Change)

Source: Ti Dashboard

The outlook for first quarter 2013 does not appear to be optimistic for UTi Worldwide. According to its CEO, Eric Kirchner, combined January and February airfreight tonnage may be down around 11%, while ocean freight tonnage may be down about 5%. March may be a bit better give or take 2%-3%, up or down from March of 2012.

Overall, freight forwarders continue to face a tough market – despite pockets of optimism, the overall global economy remains questionable, tradelane shifts, capacity shifts/cuts and modal shifts are all affecting the freight forwarding market. As shippers opt for cost over time to ship goods, will a consolidation within the freight forwarding market occur or will we see new solutions as freight forwarding companies strive to differentiate themselves from the rest of the pack?

This brief utilises data from Ti’s Dashboard facility. The Ti Dashboard provides over 80 charts and tables of the most important macro and industry specific indicators from around the world, keeping you right up to date with the latest trends and developments in the logistics industry. Click here for more information.

This brief appeared in Ti’s Logistics Briefing Americas newsletter. To receive this free regional newsletter which contains exclusive content, click here.