American Shipper

Agility suffers 2nd quarter profit drain

Agility suffers 2nd quarter profit drain

   Kuwait-based Agility said the U.S. troop drawdown in Iraq, the winding down of several large logistics contracts with the U.S. military and Justice Department legal charges contributed to large second quarter profit declines.

   The third-party logistics provider said second quarter operating profit plunged 50 percent to 21 million Kuwaiti dinar ($72.5 million) and net profit dropped 53 percent to 18 million KD ($62.2 million) compared to the second quarter of 2009. Revenue increased 6 percent to 428 million KD ($1.48 billion), Agility said in its earnings report.

   On a quarter-to-quarter basis, operating profit increased 2 million KD ($6.9 million) and net profit stayed flat. Agility contends the quarterly view more accurately reflects the nature of its government business in which large contracts decline in value as they reach the end of their contractual term.

   The financial results coincide with a report by auditors stating that the prolonged suspension of Agility from bidding on U.S. government contracts while a fraud indictment remains unresolved could have a material impact on Agility Defense & Government Services, Reuters reported.

   The auditor's statement repeats the company's warning in 2009 that the case could impair its business.

      A grand jury indicted Agility last year for allegedly submitting inflated bills and false claims under a large food procurement and delivery contract with the Defense Department to serve troops stationed in Iraq and Kuwait. Agility has repeatedly stated it views the case as a civil dispute, not a criminal matter, and that it's prices, choice of suppliers and business practices were all approved by the military.

   Last month, the U.S. attorney in Georgia's northern district moved to dismiss the case against Agility Defense & Government Services Holdings on a technicality related to which corporate entity actually was served court papers, but has indicated that the broader case remains against Agility's parent, Public Warehousing Co. and its operating division, DGS Logistics Services.

   Agility, one of the world's top 10 logistics providers based on revenue, reiterated that its commercial division, Global Integrated Logistics, is being emphasized as the primary driver of growth given the uncertainty facing the Defense & Government Services business. It said DGS would continue to pursue non-U.S. government work.

   DGS revenues declined 5 percent compared to the first quarter while GIL revenue increased 23 percent compared to the same quarter in 2009, which it attributed to growth of the freight forwarding market and to new customers.

   Meanwhile, Agility announced that the U.S. Defense Logistics Agency has determined the company can continue to procure and deliver food supplies until Dec. 4, when the existing contract is naturally set to expire.

   The company had been scheduled to relinquish the task ahead of schedule to Dubai-based Anham, which won the follow-on prime contract in April, but award protests by other bidders delayed the transition.

   American Shipper previously reported that protests were filed by Kuwait Global Link, a management consulting and technology services firm, and Intermarkets Global, a Jordanian conglomerate.

   The DLA in May determined that a 'compelling need' existed for Agility to continue on the job until December to ensure support for U.S. troops, but Agility said it did not receive written confirmation of the decision until last week.

   Agility has held the prime food supply contract since 2003. Last year it achieved $5.9 billion in sales. ' Eric Kulisch