CEVA Logistics posts 4.6 percent first quarter gain in constant currency

Netherlands-based global third-party logistics (3PL) services provider CEVA Logistics reported mostly positive first quarter earnings results this week.

First quarter revenue of $1.776 billion was down 4.8 percent annually but up 4.6 percent in constant currency. And adjusted EBITDA at $51 million saw an 18.6 percent annual gain, with a 23.3 percent increase in constant currency.

Company officials said that the quarterly earnings results were paced by the execution of its new Business Line model. As previously reported, this model, which went live on January 1, 2015, is a go-to-market strategy based upon Business Lines in Freight Management (Air Freight and Ocean Freight) and Contract Logistics to enhance customer value.  This local-based operating model drives operations excellence in CEVA’s global network and to be a more responsive and innovative partner to its customers, CEVA CEO Xavier Urbain said in early March.

“The decision to move to a Business Line/Cluster operating model has energized the company,” said Xavier Urbain, CEO of CEVA, in a statement. “We are seeing the visible impact of the operational improvements, ongoing streamlining of processes and greater responsiveness to our customers’ needs enabled by the new operating model. Our customers are responding favorably, as demonstrated by our First Quarter performance.”

CEVA’s Freight Management (FM) group had a strong first quarter, with revenue up 6.1 percent in constant currency, coupled with strong volume trends, as airfreight and ocean freight volumes were up 5.2 percent and 5.0 percent, respectively. The FM group also saw significant gains in new business, up 55 percent annually.

On the Contract Logistics side, CEVA saw a 4.9 percent gain in EBITDA and a 3.4 percent constant currency revenue increase, while new business wins saw a 15 percent increase.

“We thought the quarter went very well,” said CEVA CFO Rubin McDougal in an interview. “We are very pleased with our performance in both air and ocean and we comfortably exceeded industry norms presented by competitors in terms of volume. And we also managed to improve FM margins by almost 2 percent, which is impressive considering that the gains in the first quarter are usually smaller than the gains in the fourth quarter.”

The changes in CEVA’s Business Line model saw the company leverage best practices for Contract Logistics in which it could apply them from one part of its global operations to another, he explained, on a both a customer and product basis, which the CFO described as hugely powerful.

In the company’s FM business, on the air and ocean side, McDougal said that CEVA experienced a bit of a mini Peak Season.

“Because of the U.S. West Coast port disruption, what we saw was a bit of a boon in air volume, which helped air volumes and also meant that while we did not see as much margin benefit as we would have liked, we also saw a nice volume benefit,” he said. “Ocean had lower volumes than we normally would have seen, but margins performed well. And with this business interruption on the West Coast, it provided us with several opportunities to dig customers out of problems they were experiencing. In some cases, other 3PLs had us step in to get their customers’ freight into the U.S. when they could not, which will help open new doors for us in the future.”