Divergent performances in a difficult market. Expeditors International saw a typically buoyant first half of the year with both sales and profits growing strongly. In contrast recovering UTi has been hit by flat demand.
US-based freight forwarding company Expeditors International has released its latest set of financial figures which revealed that its half –year revenues rose by 9% and its net revenue (gross profit) was up 14% year-on-year. Operating income increased 27%. This was on the back of single digit increases in volume, with ocean freight in TEUs (Twenty-foot Equivalent Units) up 5% for the quarter whilst airfreight tonnage was up 9%.
What amplified Expeditors margins was its ability to exploit the volatility in the market, which management called, “favourable spot market buying opportunities”. The company added that one of the reasons behind its growth in airfreight volumes was the West Coast port strikes which delivered an “unquantifiable benefit to airfreight”. However the company’s management cautioned that there was “no doubt that global trade has slowed from its peak period” and that this would affect business in the second half of the year.
One of the aspects of these numbers that is striking is the ability of Expeditors to exploit volatile prices to their own advantage, something that even the likes of Kuehne + Nagel have struggled to do.
UTi Worldwide had a rougher time. Over the second quarter revenue fell by 9% and net revenue (gross profit) fell by 5%. The problems were focused in particular on the forwarding rather than its contract logistics division, with revenue here down by 12%. UTi pointed-out that yields in air forwarding improved towards the mid-20% and in ocean forwarding to the mid-teens. However the price of these hardening yields appears to be falling market share. The effect was that, before exceptional adjustment, the company saw a EBITDA (Earnings Before Interest, Depreciation and Amortisation) loss for the quarter of US$40.8m, whilst after adjustments it saw an EBITDA of US$11m, compared to last year’s US$24m.
UTi now expects to see full year’s profits of between US$75m-100m, although Edward Feitzinger expressed optimism for the second half of the year based on new contracts that the company had received. UTi’s share price has fallen heavily and the company is now priced at around half of what it was when DSV was discussing buying the company.
