Q3 results impacted by significant provisions in Italy – Plan to deepen strategic relationship with CMA CGM
CEVA Logistics AG (“CEVA” or the “Company”) announced on November 13 its results for the third quarter and the first nine months ended 30 September 2018.
- Revenue up 5% YTD in constant currency; good new business momentum
- Adjusted EBITDA of USD 55 million for Q3 and USD 198 million YTD, down USD 27 million and USD 8 million respectively in constant currency mainly due to provisions for Italian Contract Logistics business
- Excellence & cost-saving programs intensified
- Refinancing successfully completed in August 2018
- Agreement on a significant strengthening of strategic partnership with CMA CGM to be implemented in coming months
|Key Financials for Q3 |
|Q3 2018||Q3 2017||Change YoY||Change YoY constant FX|
|EBITDA margin||1.6%||3.9%||-230 bps||-220 bps|
|Adjusted EBITDA (b)||55||85||-35.3%||-32.9%|
|Key Financials for 9 Months |
|9M 2018||9M 2017||Change YoY||Change YoY constant FX|
|EBITDA margin||2.7%||3.4%||-70 bps||-50 bps|
|Adjusted EBITDA (b)||198||209||-5.3%||-3.9%|
(a) EBITDA excludes specific items and share-based compensation cost (SBC) in the table and in the whole document
(b) Adjusted EBITDA includes the 50% proportional contribution of the ANJI-CEVA joint venture and excludes specific items and share-based compensation cost
“CEVA continues to reduce its cost base, with a strong focus on productivity addressing underperforming activities both in FM and CL. Most of our operations continue to perform well and our new business performance is promising. However, in the third quarter, margins have been adversely impacted by one-time provisions taken in Contract Logistics in Italy. Looking ahead, we are confident that we will further improve our performance and meet our medium-term targets. More importantly, we plan to intensify the cooperation with our strategic partner CMA CGM which will bring additional value for all our stakeholders,” says Xavier Urbain, CEO of CEVA Logistics.
CEVA’s revenue increased by 4.7% in constant currency in the third quarter and by 5.0% in constant currency in the first nine months of 2018. Excluding one-time provisions impacting the Italian Contract Logistics operation, business continued to perform broadly in line with management’s expectations with an adjusted EBITDA of USD 55 million in the third quarter and USD 198 million in the first nine months of 2018. Progress was made in productivity, cost reduction and other margin improvement initiatives.
Revenue in Freight Management increased by 4.9% on a reported basis and by 6.8% in constant currency in the third quarter of 2018 compared to the same period in the prior year. Freight Management EBITDA decreased by USD 3 million at constant currency to USD 22 million in the third quarter of 2018 with better revenues offset by challenges in North America relating to the increased cost of transportation in our Ground business due to driver shortages, partly mitigated by improvements in the VAS (Value added Services) operation. For the nine months of 2018, EBITDA was USD 64 million, up USD 9 million year on year in constant currency.
Revenue in Contract Logistics increased by 2.8% in constant currency, but decreased by 1.4% on a reported basis in the third quarter of 2018. Contract Logistics EBITDA was USD 7 million for the three months ended 30 September 2018 compared with USD 43 million in the same quarter of 2017. Despite many productivity improvements across many contracts and geographies, and continued productivity gains on focus contracts, two contracts in Italy and the bankruptcy of a local Italian partner for temporary staff have resulted in additional unplanned costs of USD 26 million in the third quarter and USD 42 million for the first nine months. A plan is currently being executed to address and resolve the issues in Italy. For the first nine months of 2018, revenue in Contract Logistics increased by 3.4% in constant currency and EBITDA was USD 84 million, down USD 29 million in constant currency year-on-year.
Anji-CEVA (CEVA’s share is 50%)
In the first nine months of 2018, revenue at Anji-CEVA amounted to USD 1,069 million, an increase of 17.6% in constant currency, compared to the prior year. This healthy revenue increase was fuelled by strong volumes growth in existing contracts, new contract implementations and the transfer of the Chinese CEVA CL business in July 2017. In particular the new Non-Automotive Division is gathering pace and winning significant new business. EBITDA for the first nine months of 2018 was USD 99 million including a capital gain from a fixed asset disposal of USD 28 million in Q3 2018 compared to a capital gain of USD 12 million in Q3 2017.
Good Business Momentum
CEVA experienced continued strong momentum across all sales segments and business lines, with new business wins up approximately 8% YTD. Significant new contracts and extensions were won in the third quarter: in Air and Ocean freight, CEVA won contracts with Technology and Automotive customers, in Contract Logistics this was mostly with Automotive, Healthcare, Consumer & Retail clients. The partnership with CMA CGM started to deliver additional opportunities. Finally, the company is investing in its salesforce in order to accelerate sustainable growth in strategic geographies and segments.
Repayment of Debt and Refinancing
CEVA has successfully completed its comprehensive refinancing in August 2018. Through the IPO and the refinancing, CEVA has raised approximately USD 1.2 billion in equity and approximately USD 1.4 billion in new debt facilities. Following the deleveraging from the IPO proceeds and refinancing, CEVA expects to reduce its finance charges by more than USD 100 million annually, subject to prevailing interest rates and currency drawings.
The Board of Directors of CEVA announced on 25 October 2018 that it will broaden the strategic partnership with CMA CGM. As part of this initiative, CEVA will acquire the freight management business of CMA CGM, subject to anti-trust approval. The two companies will generate new commercial opportunities supported by investment in IT and digital transformation and further increase operational efficiency to deliver a strong and sustainable value creation for all stakeholders. Furthermore, the Board of CEVA has agreed with CMA CGM, that CMA CGM will offer to CEVA’s shareholders wishing to exit their investment in CEVA to purchase their shares for CHF 30.00 per share.
The Board of Directors of CEVA strongly believes that the partnership with CMA CGM will provide an attractive value proposition to shareholders in the mid and long term. CEVA Logistics and CMA CGM have agreed that CEVA Logistics will remain a listed company with an arm’s length business relationship with CMA CGM.
Although 2018 FY results will be impacted by the contract logistics issues in Italy, CEVA is confirming its medium term targets to grow revenue above market and to increase EBITDA margins from the 3.3% achieved in 2017 to at least 4%; which should result in an additional approximately USD 100 million in adjusted EBITDA, excluding any additional benefits from the much closer cooperation with CMA CGM.