CEVA stable but some problems at contract logistics

The latest figures from CEVA show that it is being buffeted by currency movements but its forwarding business is standing-up better than its contract logistics business.

Revenue for the whole company edged down by 1.2% year-on-year, influenced by lower fuel and freight costs at the freight forwarding business. EBITDA (Earnings Before Interest Depreciation and Amortisation) was also down markedly, by $7m year-on-year to US$65m, although in constant currency terms the fall was less. Contributions from joint ventures, possibly Anji-CEVA, did increase from $8m to $10m.

The lower revenue at freight forwarding was complicated by currency affects and the lingering impact of the disposal of the Italian SITTAM business. In terms of profits, EBITDA rose from $24m in Q3 2015 to $29m Q3 2016. This confirms a trend seen through the year so far. CEVA says that its air freight volumes have risen 10.3% and ocean freight volumes 4.4% year-on-year, this has resulted in EBITDA rising by $3m to $27m year-on-year. Adjusted for currency this implies an increase of over 20%. Much of this profit increase was due to better cost control.

Contract logistics saw revenues increase by 0.4%, with CEVA claiming an underlying currency adjusted increase of 3%. EBITDA, however, fell from $48m in Q3 last year to $38m this year. This appears to be an extension of a continuing problem for CEVA, with higher costs in certain contracts, although it is a problem that is being mitigated according to the company.

Leaving aside the continuing problem of CEVA’s finances which is really a problem for its shareholders, the company delivered a moderately stable performance. In truth the underlying profitability of its freight forwarding business is probably improving better than CEVA is letting on, driven by the very low freight rates. That volume is increasing suggests that this side of the business has recovered its health. The cost problems at contract logistics are more concerning but it is hoped that these are temporary issues, rather than systemic management weakness.

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Source: Transport Intelligence, November 15, 2016

Author: Thomas Cullen