CEVA sustains quality earnings

Bearing in mind the state of the freight forwarding market, CEVA’s results could have been a lot worse. The Netherlands-based company saw revenue in the first quarter 2016 fall by 11.8% but this number was complicated both by the sale of an Italian transport business and some currency fluctuations. Yet despite this, profits rose with EBITDA (Earnings Before Interest, Depreciation and Amortisation) up by US$4m year-on-year to $46m for the quarter and margins as a proportion of sales firming by 0.5%.

At the top line the freight forwarding business saw falling revenue. It fell by 15.1% year-on-year to $680m for the quarter, as a result of currency effects, lower fuel costs and lower freight rates. EBITDA in contrast climbed by $3m to $10m, which CEVA assert was depressed by currency effects. Higher profits were down to better quality of business in both air and sea as well as improvements in productivity. It may also be that CEVA, like a few of the stronger forwarders, has relearned the trick of widening margins in a weak market.

At first sight, the 9.1% fall year-on-year in revenue to $886m at contract logistics was slightly more concerning. This was blamed by CEVA on currency effects, with underlying revenue being more or less flat. EBITDA, however, climbed slightly from $35m to $36m year-on-year, which CEVA calculated as being an 11.4% rise after currency effects were stripped-out. Even so there was a considerable amount of noise in these numbers caused by asset sales, better utilisation and restructuring costs.

Although CEVA is not quite hitting the class leading level of profitability that the CEO Xavier Urbain has set as his target, it continues to turn-in respectable performances with a focus on quality of earnings. Whilst freight forwarding is still a difficult market generally CEVA ought to be doing well in contract logistics as its key market in automotive assembly is buoyant and has good growth prospects. An important test will be if the company can sustain its trajectory in terms of operational results in coming quarters, however it is still a little too early to be entirely confident just yet.

Source: Transport Intelligence, 4th May 2016

Author: Thomas Cullen