CEVA Holdings LLC (“CEVA” or the “Company”), one of the world’s leading non‐asset based supply chain management companies, today reported results for the three months ended 30 September 2014.
| Key Financials ($ millions) | Quarter | |||
|---|---|---|---|---|
| | Q2 2014 | Q3 2014 | % Change | |
| Revenue | 1,978 | 1,992 | 0.7% | |
| Adjusted EBITDA1 | 60 | 64 | 6.7% | |
Accelerating volume trends in Freight Management (“FM”) illustrated the traction that CEVA’s new strategy is achieving in the market. Both Airfreight and Oceanfreight delivered on CEVA’s strategy to grow above the market, with Airfreight delivering year-over-year volume growth of 5% and Oceanfreight outperforming the market at 11% volume growth in the third quarter.
“This quarter we continued to make important strides in executing our strategy,” said Xavier Urbain, CEO of CEVA. “Our focus over the course of 2014 has been very deliberate: we have rebuilt the management team with executive leaders who know the industry which has had an immediate impact, and have organized our go-to-market plan based upon our major business lines – Airfreight, Oceanfreight and Contract Logistics – to enhance customer value. Now, we are announcing the transformation of our operating model to increase the velocity of our business by adopting a local, rather than region-based, operating model. For our customers, local ownership of execution is very good news, enabling faster decision-making and greater responsiveness to their needs.”
Third quarter revenue of $1,992 million was up 0.7% sequentially from Q2 2014 revenues, representing a significant improvement over recent quarters due to positive FM volume trends. Adjusted EBITDA increased 6.7% sequentially. Contract Logistics realized above market EBITDA margin driven by strong performance in the U.S. market, offset by soft volumes in the Asia Pacific automotive market and certain new contract short-term challenges during implementation. Tightening Airfreight capacity on TransPacific trade lanes created FM margin pressures in the quarter, offsetting the increase in volumes.
Total new business wins year to date were up 20% year-over-year, with Contract Logistics wins increasing 19% and Freight Management wins rising 20% year-over-year. The Company continued to see the benefits of strategic investments in business line alignment, tender management, enhanced trade lane focus and additional field sales personnel.
In the FM business, another major milestone was reached in the third quarter with the implementation of CEVA Matrix One Freight System (“OFS”) in Brazil, with Colombia and Chile following in October, and Argentina in early November. FM operations and finance functions globally, with the exception of the U.S., now operate on CEVA’s global FM platform, demonstrating the Company’s commitment to continuous improvement. The U.S. transitions to Matrix OFS in 2015.
Delivering Impeccable Execution
As the next step in executing its strategy, CEVA is adopting a new operating model which eliminates the existing region-based structures across the globe, opting instead for an operating model consisting of 17 local geographic clusters of countries with standardized governance and business rules across all clusters. Clusters may consist of a single large country, such as China, or may consist of several countries in close proximity. The new structure takes effect 1 January 2015.
“This is a transformative announcement for CEVA,” Urbain said. “The new operating model supports our objective to be the most professional logistics company by enhancing our ability to provide Impeccable Execution to our customers. We expect it to increase our velocity across the board, enhance customer responsiveness, enable faster decision-making and provide numerous opportunities to leverage speed as a competitive advantage.”
The new operating model will drive increased network efficiency and productivity by eliminating duplicate work and functions, as well as strengthen communication across the business.
In addition to announcing a new operating model, CEVA implemented a number of cost-saving initiatives during the course of the third quarter which are expected to show savings results in the second half of 2014 and into 2015. These measures include restructuring in a number of European countries, inauguration of e-auctions to drive transport savings, continued focus on SG&A reductions and site consolidation in Singapore, among others.
Executive Moves
The Company also announced that Michael Schaecher, previously Chief Operating Officer, Global Airfreight, has assumed leadership of both CEVA’s Airfreight and Oceanfreight business lines. Schaecher, who joined CEVA in April of this year, is a senior industry executive with extensive Freight Management experience in companies including DHL Global Forwarding, Star Broker AG, and Panalpina World Transport GmbH. In addition to his current role, he takes on the previous responsibilities of Dominik Tichelkamp, formerly Chief Operating Officer, Global Oceanfreight, who has left the Company.
1 Excludes the impact of specific items which are significant non-recurring items such as restructuring and certain legal expenses.
