FREE BRIEF: CEVA and CMA CGM outline new relationship and strategy

CEVA has been outlining a new strategic direction and it is one that seems to place its shareholder CMA CGM, at the centre of the company.

In a presentation entitled “A New Chapter for CEVA”, the now Swiss-based logistics service provider articulated its wish to accelerate the growth of the company by emphasising its relationship with CMA CGM and “leveraging” the shipping company’s “operational and commercial expertise”. This will be strengthened by the absorption of CMA CGM Logistics, formerly part of APL in an agreement worth $105m. Despite this close relationship with CMA CGM, which is a major shareholder, CEVA emphasised that it wished to be “an independent and standalone listed company”.

The relationship between the two companies is slightly unusual. The presentation emphasises that CMA CGM is a “strategic partner” of CEVA and has the ability to deliver “performance improvement”, citing the previous example of its acquisition of APL. Nicolas Sartini who formerly ran APL/CMA CGM Log, will also become deputy CEO of CEVA and be responsible for driving these changes through. Yet CMA CGM is a minority shareholder in CEVA, which is a publicly quoted company.

As for the evolution of CEVA’s position in the market the most notable feature will be a change in the mix between forwarding and contract logistics, with the latter’s relative position in the business shrinking from 54% at present to 49% by 2021. This will demand growth in sea freight forwarding in particular.

Such a strategy may strike some as a little surprising bearing in mind CEVA’s strength in contract logistics. Not only is CEVA’s contract logistics business large, it also generally has high levels of profitability for the sector. Rather, the new strategy appears to reflect CMA CGM’s perspectives. It also raises the question of how CEVA forwarding will go about buying sea freight when a container shipping company has such an influence on its management structure.

The new strategic plan targets an annual revenue growth of 5% and an EBITDA (Earnings Before Interest, Depreciation and Amortisation) margin of 4.5-5%. This is not so unrealistic, however it should be noted that CEVA’s finances might still be described as vulnerable. It is tempting to think there may be more action to come as regards both CEVA’s ownership and its capitalisation.

Source: Transport Intelligence, November 27, 2018

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