CEVA turned in second-quarter earnings of $80 million, doubling its result from the first quarter of the year.
Compared to the same period in 2012, earnings fell by $2 million.
Revenue increased from the first quarter to $2.15 billion, but fell from a mark of nearly $2.3 billion in the second quarter of 2012.
Rubin McDougal, CEVA’s chief financial officer, told American Shipper
he’s pleased with the results — he sees them in line with competitors such as DHL, Panalpina and UPS Supply Chain — especially since they were achieved in a down market and while the company was in the midst of a recapitalization campaign.
On April 2, company officials asked bond holders to trade in their holdings for equity in the company. By the end of the campaign, the company had reduced its debt by about half, cut its annual cash interest costs in half, and added nearly $300 million to its credit facilities.
“We looked at it as a tremendous transaction,” McDougal said of the deal, which was completed on May 2. “We felt that doing this transaction would put CEVA on a very solid footing for growth going forward.”
While CEVA is on solid footing, the markets around it are still, in some cases, limping along. McDougal pointed to contract logistics as the one industry that has seen steady growth so far this year and should continue to improve.
“It’s particularly growing in markets where outsourcing of contract logistics or warehouse management, those kinds of functions, have not happened prior,” he said. McDougal said Asia is a good example of this trend.
Freight management, on the other hand, is a different story. McDougal sees road transportation recovering in most markets, while ocean is progressing “at a steady clip, but not robustly.” Air cargo is soft. In the intra-Asian market, air and ocean are holding up well, and ocean is growing in the trans-Pacific market.
McDougal said air cargo will come back eventually, but because shippers are now used to using ships instead of planes to move their goods, and have adapted their supply chains, air transport activity will never return to what it once was.
“Anytime someone gets accustomed to a lower-cost mode, they hold onto it pretty tightly. That said, part of the migration to ocean, in my opinion, is being driven by the low cost of working capital right now, and secondly, the availability of manufacturing capacity,” he explained.
“We’re seeing people use ocean that in the past would never have,” he continued. “Today, they’ve got enough manufacturing capacity that they can put it on a boat for four weeks.”
Though the current state of the logistics market makes pressing forward in ocean somewhat easier than focusing on air cargo, CEVA is not abandoning the skies. Not by a long shot.
“We have been growing ocean much faster than the industry generally and are pleased with the progress we’ve been making there,” McDougal said. “We will continue to focus on ocean, but we will also be putting extra effort into growing our air business.” - Jon Ross