UTi: Turning the corner?

Uti Worldwide’s recent quarterly earnings have the industry wondering if it has turned a corner towards a positive direction. However, if you look at just the financial results, it still looks a mess:

  • Total revenue down 6.8% to $973m
  • Total net revenue down 10.8% to $329.5m
  • Contract Logistics and Distribution net revenue down 4.7% to $192.2m
  • Freight Forwarding net revenues down 18.1% to $137.3m

Still, the management team painted a promising picture during its quarterly earnings call. For example, within its Contract Logistics and Distribution division, there was good performance in Europe, India and other markets in South East Asia.

Within the Freight Forwarding division, despite overall lower yields, the company benefited from the US West coast port congestion and exceeded market growth in some countries. In fact, it noted it gained some market share back that was lost during the second half of last year. Growth areas cited were Germany, India and North Asia.

In terms of volume, quarterly ocean TEUs were down 6% and air freight was down 4%. An interesting point made in the earnings discussion though was that UTi picked up 3.5 points of volume related to the port disruptions.

And while UTi’s quarterly earnings are off by a month, a comparison to Expeditors International of Washington in terms of freight forwarding is still quite telling. For Expeditors, first quarter volumes increased in double digits with ocean up 12% and air up 13%. In terms of revenue, air and ocean revenue combined increased by 14.1%. If Customs Brokerage and Others Services are added in, the total revenue was up 12.5%. Net revenue for these three groups combined is even more impressive, up 27.5%.

There was, however, a hint of caution on the part of Expeditors. Expeditors’ CEO, in what was reminiscent of the days of former CEO Peter Rose, described the quarter as “one of those quarters” and could be a hard act to repeat for the rest of the year.

So what does all this mean for UTi? It’s still hard to tell but despite customers returning as UTi stated during its earnings call, it seems that not enough have returned yet to create a positive impact. It is also possible that their pricing for freight is still not where it should be.

UTi is engaged with yet another turnaround plan to improve profitability. In the Freight Forwarding division the company is working on improving customer service, costs and most interestingly, multi-modal solutions. The interest in multi-modal solutions is on the rise as shippers are price sensitive but still have a need for some of the more expensive modes of transport, often in combination with less expensive modes. These multi-modal solutions are not just for the cost conscience, in fact some of these solutions could also save on time without breaking the bank.

Armed with this new plan UTi is facing a tough logistics market and one that is highly competitive. But keeping things simple, becoming more nimble and focusing on its strengths is most likely to help the company develop in a fierce and hungry market.

UTi is an important player in the global freight forwarding market. Transport Intelligence is currently undertaking research in preparation for the latest Global Freight Forwarding report due for publication in July. If you would like to know more about this report, or to register your interest in it, please contact Michael Clover.