CEVA Logistics reported second-quarter revenues rose 5.5 percent to €1,808 million, led by growth in ocean freight. However, that was not enough to preserve profits and second-quarter earnings before interest, taxes, depreciation and amortization (EBIDTA) declined to €70 million.
The company characterized the performance saying improvements in Asia were offset by weakness in Southern Europe and the Americas.
“This was a difficult quarter, characterized by flat markets and customer caution, partially offset by our efficiency programs, global footprint and robust business model,” said John Pattullo, CEO.
“Transpacific volume and weakness in Southern Europe remain a concern,” Pattullo continued. “As a result, we have introduced an even more rigorous approach to cost management to support delivery of our strategic plan.”
Year-to-date results were also mixed. Revenue increased 3.5 percent for the first six months of 2012, but EBITDA dropped by 10.5 percent. Revenues were €3,520 million and adjusted earnings were €136 million.
On a positive note, the company reported its freight management sector grew revenues by nine percent, in large part due to growth in the ocean freight business. CEVA CEO Pattullo had announced late in 2011 that the company would take steps to improve its capabilities in ocean freight as part of its growth strategy.
Contract logistics revenues increased three percent.
As Pattullo described it, there was solid performance in freight management, which maintained EBITDA at the same level as the prior year. However, this was offset by declines in contract logistics, where business was affected by the general economic downturn, most evidently in Southern Europe, as well as certain one-off items, mainly in the prior year quarter, which accounted for approximately one third of the decline.
“We are taking action to address the decline in profitability with a program addressing both direct and indirect costs and have identified substantial cost reduction opportunities in our freight management network and certain underperforming contract logistics contracts. This is over and above recent initiatives like Program UNO, where business processes have been standardized to achieve best-in-class customer service.”
The company also noted its balance sheet was strengthened significantly in the first quarter via a transformational refinancing, eliminating over €500 million of CEVA indebtedness and over €350 million of CEVA Investments Limited securities. On 2 May 2012, CEVA refinanced its synthetic letter of credit facility due 2013 by increasing its existing tranche B term loan due 2016 by US$150 million. As a result of these transactions, CEVA has strengthened its balance sheet and lowered interest costs.