Supply Chain News / 3PLs & 4PLs / Air Cargo

Ceva Reports Lower Profit on Increased Revenues

Continued weak economic conditions weigh on customer sentiment, says CEO.

November 28, 2012

“Our Business Development activity has accelerated, resulting in our best quarter for contract wins since 2009. This is an important endorsement from the market of our unique operational capabilities and excellent service and value proposition,” said Marvin O. Schlanger, CEO of Ceva Logistics. He reported third-quarter revenues of €1.844 billion, up 5.1 percent over the same period in 2011.

Schlanger also said the company had made “solid progress” with business development, securing €532 million in “new wins” during the quarter.

Year to date, Ceva Logistics improved revenues by 4.1 percent to €5.364 billion but reported profits dropped 13.4 percent to €206 million (compared with €238 for the same period in 2011).

“Weak economic conditions continued to weigh on customer sentiment in the Third Quarter,” said Schlanger. “With no real prospect of a significant and sustained market recovery in the short term, we continue to focus our efforts on cost control to maintain our efficiency and on new business development to secure our future revenues and ensure we are ready to take advantage of any improvements in global markets.”

In its contract logistics segment, Ceva reported weakness in Southern Europe and the Middle East and Africa. Addressing some of the growth in Northern Europe, Schlanger said, “It is not as much that the market has grown as it is that we are capturing business that was conducted by others.” His diplomatic approach to pointing out that Ceva has been taking over more operations that had been handled internal to a customer or by another 3PL is intended to clarify that Ceva’s growth has not come from any general improvement in the regional market.

And, on the subject of regional markets, Schlanger added, “In terms of some geographies, we’re reviewing the strategic value of some countries where we have a relatively small representation and, frankly, we don’t necessarily believe there will be a financial benefit for doing what we’re doing today.” He is quick to add that the company has not yet reached any conclusions, but the review is part of a broader cost control effort underway at Ceva to improve its margins.

Clearly, Ceva had previously benefitted from efforts to concentrate on going deeper with its larger customers, identified as Century Accounts. As part of that initiative, it had also examined the accounts it considered to be underperforming. Applying a similar approach to some country operations where the cost to serve outweighs the value retained should help Ceva’s profits. Schlanger is quick to point out that many of the developing economies are still strategically important to Ceva. An obvious case is China. But, he noted, Ceva has also recently expanded an air facility in Malaysia.

The commitment to air is important to Ceva, he continued. Just as the company had focused on raising the level of its ocean forwarding business, it is embarking on an aggressive air program. “We not only want to grow with our existing customers, but we want to broaden our customer base,” he said.

Schlanger feels the cost control effort that has been launched is well underway and he said he will be focusing much of his attention on business development.

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