UTi Worldwide Inc. (UTIW)
F2Q2013 Results Earnings Call
September 6, 2012 11:00 AM ET
Jeff Misakian - Vice President, Investor Relations
Eric Kirchner - Chief Executive Officer
Lawrence Samuels - Chief Financial Officer
Ed Feitzinger - Executive Vice President, Contract Logistics and Distribution
Ben Hartford - Robert W. Baird
William Greene - Morgan Stanley
Ed Wolfe - Wolfe Trahan
Peter Nesvold - Jefferies & Company
Alex Johnson - J.P. Morgan
Connor Hustava - Stephens
David Ross - Stifel Nicolaus
Nate Brochmann - William Blair & Company
David Campbell - Thompson Davis & Company
Kevin Sterling - BB&T Capital Markets
Todd Fowler - KeyBanc Capital Markets
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the UTi Second Quarter Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions)
This conference is being recorded today, September 6, 2012. I would now like to turn the conference over to Jeff Misakian, Vice President of Investor Relations. Please go ahead, sir.
Thank you, Irene, and good morning, everyone. Welcome to UTi Worldwide’s fiscal 2013 second quarter results conference call. Joining us on the call today are Eric Kirchner, Chief Executive Officer; and Lawrence Samuels, Chief Financial Officer. Ed Feitzinger, Executive Vice President, Contract Logistics and Distribution, is also here and available to answer questions during the Q&A session.
Before we begin the presentation, I would like to point out that certain statements made in today’s call are not historical facts. They may be deemed therefore to be forward-looking statements under the Private Litigation Reform Act of 1995. Many important factors may cause the company’s actual results to differ materially from those discussed in any forward-looking statements.
These risks and uncertainties are described in further detail in the company’s filings with the Securities and Exchange Commission. Please refer to these filings for more information regarding the risks and uncertainties that the company faces.
UTi undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.
Now, I would like to turn the call over to Eric Kirchner. Eric?
Thank you, Jeff. Good morning, everyone. Weak macro economic forces weight on the industry throughout the second quarter. Many of the trends seen in the first quarter continued to effect industry performance in the second quarter and our results were no exception.
The uncertain environment and weak consumer demand have made companies increasingly careful in their production and in their freight and logistics spend. Currency translation also had a material impact on our second quarter results as the U.S. dollar strengthened against most other currencies and in particular the South African rand.
Our freight forwarding segment was negatively impacted by these macro economic forces, primarily because of the weak airfreight environment. Since the third quarter of last year airfreights been disproportionately affected as clients continue to ship in smaller quantities and increasingly favor ocean freight is the cheaper mode of transit.
Tonnage has declined significantly in the key east/west trade lanes, but less so in the intra-Asia lanes and those evolving the Middle East and Latin America. Our overall freight volumes in the fiscal 2013 second quarter declined at a slightly lesser rate than in the first quarter as comparisons to last year became easier.
In contrast, ocean freight volumes have grown modest all year. Our ocean freight TEUs increased in the second quarter at about the same rate of growth seen in the first quarter.
Net revenue per unit of freight forwarding was challenged by currency and higher ocean carrier rates. Ocean rates have risen significantly this year and had stayed at elevated levels, especially on trans-Pacific lanes. This had a detrimental effect on net revenue per TEU in the quarter.
We continue to have constructive dialogs with our carrier partners and clients to manage the impact of these higher rates, but the typical lag affect had a negative impact on the second quarter. Lawrence will review these details in a moment.
Operating expenses in freight forwarding declined less than net revenue as operating costs are more closely tied to shipments rather than tonnage or TEUs. As a result, productivity levels fell in the second quarter compared to the same period last year. While we don’t control external factors, we do remain vigilant in controlling costs and driving increased sales.
Contract Logistics and Distribution was again the more consistent segment with revenues and net revenues slightly higher on a year-over-year basis when adjusted for currency. However, revenue performance varied by region.
In the Americas and EMENA macro economic forces led to lower volumes and less new business. Our operations in Africa and Asia-Pacific on the other hand, continued to grow in local currencies with new business and higher client activity relative to the second quarter last year.
Our Contract Logistics and Distribution teams have continued to do a good job controlling costs, while improving marginal businesses and underperforming client contracts. As you can see, this led to an increase in operating income and margin for that segment in the second quarter, in spite of slowing economies and currency headwinds.
I’ll now ask Lawrence to walk through the financial results. Lawrence?
Thank you, Eric. Net income attributable to common shareholders in the fiscal 2013 second quarter was $0.18 per diluted share. Excluding severance costs, adjusted net income was $0.20 per diluted share in the fiscal 2013 second quarter, compared to $0.24 per diluted share recorded in the same period last year.
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