UTi Worldwide’s latest earnings report echoed a similar
theme – declining airfreight revenue and modal shift from air to ocean. However, its Distribution segment proved to
be a positive in an otherwise negative earnings report.
For the quarter ending January 31, 2013, total revenue
declined almost 5% to $1.1bn. Airfreight forwarding revenue declined almost
11%; Ocean freight revenue increased 1.5%; Contract logistics declined almost
10% and Distribution increased almost 6%.
For the fiscal year ending January 31, 2013, total revenue
declined 6.2% to $4.9bn. Airfreight forwarding revenue declined over 16%; Ocean
freight revenue increased 3%; Contract logistics revenue declined just slightly
and Distribution revenue increased over 7%.
Freight forwarding remains the company’s largest segment,
comprising 58% of total revenue. Like other freight forwarders, UTi also noted market
pricing negatively affected its revenue. For the fourth quarter, net revenue
per kilo in airfreight declined 15% while net revenue per TEU in ocean freight
declined 13%.
This is comparable to Expeditors International of Washington
which also noted revenue declines. For 2012, Expeditors reported net revenue
per kilo for air freight declined 7% and net revenue per container (FEU)
declined 4%.
Although many major freight forwarders noted declines in
airfreight tonnage for fourth quarter, UTi’s decline of almost 11% was a bit
alarming. This may be due to the time period of the company’s earnings which is
for November through January as compared to October through December for most
other providers.Airfreight Tonnage Comparison by YoY Percentage Change
UTi’s ocean freight tonnage increased 6.1% for fourth
quarter. This was a higher increase than that of other freight forwarders for
the quarter. This may indicate the company’s ability to react quicker to the
shift towards ocean freight and/or it could be due to its customer mix.
The outlook for first quarter 2013 does not appear to be
optimistic for UTi Worldwide. According to its CEO, Eric Kirchner, combined
January and February airfreight tonnage may be down around 11% while ocean
freight tonnage may be down about 5%. March may be a bit better give or take
2%-3%, up or down from March of 2012.
Overall, freight forwarders continue to face a tough market
– despite pockets of optimism, the overall global economy remains questionable,
tradelane shifts, capacity shifts/cuts and modal shifts are all affecting the
freight forwarding market. As shippers opt for cost over time to ship goods,
will a consolidation within the freight forwarding market occur or will we see
new solutions as freight forwarding companies strive to differentiate
themselves from the rest of the pack?