In an exclusive interview with Ti, CEVA’s CEO says that its latest results show that its customers can have confidence in its future.
CEVA was able to keep its head above water over the last financial quarter due to a big windfall from restructuring its debt. Although the underlying business had a tough time, with freight forwarding badly hit by the slump in the electronic sector between the US and China, management pointed out that it had recovered from its profits slump beginning in Q1 of 2012 and has almost hit the levels of EBITDA (Earnings Before Interest, Depreciation and Amortisation) seen in the same period last year. Revenue was $2,148m, down 7.4% year-on-year, and EBITDA was down 10.1% to US$80m (CEVA has now switched from reporting in Euros to US dollars). Crucially, the company made a gain of $277m as a result of its financial re-engineering and this pushed it into a profit of $205m for the quarter.
There are some signs that CEVA has got a grip of its Contract Logistics business, with ‘adjusted EBITDA’ up from the $50m seen in Q2 2012 to $58m in this year’s Q2. Speaking to Ti, Marvin Schlanger, CEVA’s CEO, commented that this reflected CEVA’s successful attempts to eliminate “the bleeding” and “improve other contracts either operationally or commercially”. Other than southern Europe, contract logistics volumes were markedly improving in areas such as North American or North European automotive leading Mr Schlanger to comment that the cost reduction measures would continue to deliver results in “Q3 and beyond”.
Things in freight forwarding were more difficult. Revenue fell by 11.7% to $951m, whilst adjusted EBITDA decreased by 43.6% to $22m. Although the difficult market conditions between North America and China, particularly those in the electronics sector, were the back story, Mr Schlanger highlighted several areas which had led CEVA to underperform the market. “A portion of the shortfall was the result of commercial decisions made earlier that had not panned-out,” he said. This was combined with, “past under-resourcing of the air freight forwarding group”. This was already in the process of being reversed with more support to the sales force and more “boots on the ground,” said Mr Schlanger. He also tacitly acknowledged that the re-financing had affected the air-forwarding market’s confidence in CEVA, but its resolution should result in renewed confidence in CEVA by customers.Mr Schlanger also acknowledged that there had been some changes in the senior management at CEVA, with the loss of several people at vice-president level. He commented that this was to “be expected when you had a new CEO”, but he also acknowledged that the equity right-offs which resulted from the re-structuring also had an impact. Yet, he emphasised that the people actually doing the work are unchanged. He concluded that, “The logistics and supply chain market-place needs to recognise that CEVA is in a better place and customers can grow with CEVA”.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)