CEVA profit grows, markets 4PL capability

CEVA profit grows, markets 4PL capability    CEVA Logistics, the fifth-largest provider of global logistics services, reported Monday that second quarter operating profit increased 25 percent to 81 million euros ($116.8 million) and 35 percent after factoring out currency fluctuations, compared to the same period a year ago.
   The company, based in Hoofddorp, The Netherlands, achieved healthy growth in new contracts, which also bodes well for future earnings. It said it won 17 percent more forwarding business in the quarter, with revenue gains from new or follow-on contracts most noticeable in the technology, automotive and energy sectors. During the first half of the year it pulled in 1 billion euros ($1.4 billion) in revenue from new contracts, especially from customers doing business in China and from its Century customers — a group of about 100 large multinationals that represent more than half of the company's revenue base.
   The second quarter is a busy period when many shippers select transportation providers for the upcoming year or beyond.
   The revenue decline of 1.8 percent in real terms to 1.7 billion euros ($2.5 billion) had more to do with the weakening of the U.S. dollar versus the euro as underlying business volumes actually ticked up.
   CEVA said demand for its freight management services softened in the quarter in line with the broader market, driven mainly by lower air freight volumes predominantly in the Asia/U.S. and Asia/Europe lanes, Chief Financial Officer Reuben McDougal said. Volume on intra-Asia lanes continued to be robust.
   Year-over-year the amount of air cargo booked with airlines was flat compared to a strong 2010, he added.
   The air freight forwarding group also improved its operating margins from 2.2 percent to 3.9 percent as it exercised more discipline on pricing and culling old accounts that did not generate much profit, McDougal said.
   A slight improvement in ocean volume compensated for the dip in air freight. The weakest lane in recent months is Asia to Europe, which is reflected in second quarter gross domestic product figures for the euro zone of 0.2 percent on a quarterly basis.
   Contract logistics revenue increased 9 percent on a constant basis versus the second quarter of 2010 on the strength of new contract wins and more services sold to existing customers, CEVA said. In March, for example, CEVA signed a three-year deal to distribute spare parts over-the-road for Mercedes-Benz and its smart car division in Italy.
   McDougal told American Shipper the third-party logistics provider has seen a slight bump in volume to start the third quarter and anticipates volumes to grow moderately from the second quarter. But 'we expect a more moderate peak season versus 2010, which was a pronounced peak' due to pent up demand following the recession, he said.
   The performance builds on structural changes the company made in 2010 and strong results the previous three quarters. Last quarter, earnings before interest, taxes and depreciation increased 35 percent from a year earlier to 71 million euros on revenue of 1.7 billion euros. Operating income grew 30 percent in the fourth quarter of 2010.
   CEVA exceeded the average of 7 percent to 8 percent in the logistics market with its 13.3 percent revenue gains the first quarter.
   For the first half of the year, CEVA posted a 30 percent profit gain (34.2 percent in constant terms) to $152 million euros ($219.2 million) on 3.4 billion euros. Revenues increased 5.2 percent (6.8 percent currency adjusted).
   CEVA is privately held, but reports partial results because some of its debt is publicly owned. It's pre-tax earnings exclude non-recurring items such as restructuring costs.
   McDougal said the SMART solution unveiled in early May has not had a material impact on financial results yet because it's a more comprehensive and complex product that takes longer to sell to customers than a discrete logistics operation like warehouse storage or truck transport. Customer awareness about the product is growing, he added.

Pattullo

   The idea behind SMART is to manage a shipment from origin to destination using a global team that oversees every function handled by CEVA or other logistics suppliers, much like a general contractor or fourth-party logistics provider, Chief Executive Officer John Pattullo explained earlier this summer.
   In effect, CEVA has taken existing processes and technology, along with its five control towers around the world and 185 employees, to provide overarching logistics coverage for large, global shippers rather than having its regional units separately handle logistics for them in each region. CEVA has implemented a comprehensive, global logistics sourcing strategy for a several customers on a standalone basis, but has identified the best IT systems and operating practices, put them under one roof to leverage its scale and created a repeatable, standardized process it can market to others rather than designing a unique — more expensive — solution each time.
   The regional control towers typically direct supply chain flows to include ordering transportation, monitoring deliveries, providing real-time data views, and reporting performance statistics for customers such as General Motors.
   CEVA handles GM's inbound logistics. In the case of European retail outlets, CEVA manages the flow of Chinese and Vietnamese garments from the manufacturer to distribution centers in northern Europe.
   Being located in major export areas allows CEVA, and other 3PLs, to constantly monitor logistics processes and quickly make decisions such as when to consolidate or expedite shipments rather than trying to stay abreast of activity from a different time zone. Having a single point of contact and a local presence can remove a lot of hassle for retailers and manufacturers that source products overseas.
   'What we've done with this move is bring together under one leadership team all the people and systems and put together a single operating playbook,' Pattullo said in an interview. Many logistics companies provide end-to-end service for some discrete logistics functions, such as procuring freight transport, 'but not in this organized, global way,' he claimed.
   SMART goes beyond freight forwarding to include inventory management, vendor management, warehouse network design, warehouse management, customs brokerage, determining buffer levels and providing visibility at the order, line item or part level throughout the supply chain — all combined with analytics to measure whether operations meet requirements.
   CEVA can now design optimal solutions, 'not just accept the providers and operating design that a customer has at the start,' Pattullo said.
   'Because of the constant changes in their supply chains, they (global customers) need a party like us to address these constantly changing needs,' from the highest level down to the purchase order level, depending on their need, Jan-Martin Witbreuk, vice president of global supply chain solutions, said. ' Eric Kulisch