CEVA sees stronger sea freight but contract logistics problems slow its ambitions

CEVA Logo

The new CEVA Logistics, which is about to enter its combination with CMA CGM, published its full year figures for 2018 last week. The results show that company continues to expand its sales but problems with profitability continue to pop up.

The ‘Freight Management’ forwarding business saw quite healthy revenue increase for the full year, up 7.3% to US$3.5bn, whilst EBITDA (Earnings Before Interest Depreciation and Amortisation) before ‘exceptional’ items was up 27% year-on-year at US$93m. Margins strengthened. The performance of the Ocean freight forwarding was notable in that over the year it grew at 9.6%, faster than the air freight forwarding business. This is interesting as CEVA is usually stronger in air freight forwarding and the air freight market generally has seen better growth over the past year. 

Contract Logistics was more troubled. It saw revenue grow at 5.4% to US$3.8bn but problems in Italy hit profits badly. EBITDA fell by almost a third to $105m although CEVA said that stripping out the Italian problems would have resulted in a modest EBITDA increase of $3m over last years number of $154m. Even without such issues, CEVA is still someway off its ambition of a 5% EBITDA margin, with the 2018 margin still hovering at around 4%.

One item of particular interest was the breaking-out of the Anji-CEVA numbers. This joint venture in China, with a particular exposure to the automotive sector has grown impressively over the past decade and is now a considerable business in its own right. The results may have been flattered by property gains, however revenue was up 23.7% at $1.4bn whilst underlying EBITDA was up 22%, with CEVA’s half of the profits hitting $11m. That said the Q4 numbers hinted things may be becoming more difficult here.

Overall CEVA Logistics saw revenue increase by 5.2% over the year to $7.356bn but EBITDA fell by $64m to $121m and on an adjusted basis EBITDA is down 7.1%. Importantly debt has fallen but net income is still negative by $242m. CEVA’s management are emphatic that they are still on-course with CEO, Xavier Urbain commenting that “the organization is on track to accelerate its transformation and turnaround action plan in the next three years and beyond. Our expectations for 2021 are to exceed US$9bn of revenue and reach an Adjusted EBITDA of US$470-490m which corresponds to an EBITDA margin of 4.5 to 5%”. This is not an unreasonable ambition but things at CEVA still requires hard work.

Source: Transport Intelligence, March 5, 2019

Author: Thomas Cullen