Ceva looks for cost savings to boost profitability

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[asset_ref id=”1778″] McDougal

Ceva plans to cut both direct and indirect costs and has identified substantial cost reduction opportunities in its freight network and some logistics contracts to boost profitability.

The company saw sales rise 5.5 per cent in the second quarter of 2012, but EBITDA was down 13.6 per cent to 70m euros. Improvements in Asia were offset by weakness in Southern Europe and Americas.

The cost reduction plan is over and above recent initiatives like Program UNO, where business processes have been standardised to achieve best-in-class customer service.

Rubin McDougal, Ceva’s chief finance officer, said the firm was assessing its logistics contracts individually for potential routes to saving costs and boosting performance, as well as taking advantage of expiring leases.

He said Ceva had made particular progress in merging new customers into existing operations, effectively creating shared used facilities.

Ceva reckons its freight management business saw a solid performance in the second quarter and maintained EBITDA at the same level as the prior year. However, this was offset by declines in contract logistics, which was affected by the economic downturn, most evidently in Southern Europe, as well as certain one-off items, mainly in the prior year quarter, which accounted for approximately one third of the decline. Ceva reported a strong performance in Asia Pacific contract logistics.

For its freight management activities, McDougal said the firm was using findings from the UNO project to inform and target its drive for productivity. To this aim Cava was taking measures such as reducing outside contract work, reducing its equipment, and in some cases, particularly in the Asia Pacific region, reducing staff numbers as volumes decrease.

McDougal said: “Overall for freight management we’re happy with the results for our ocean products, but disappointed with air… Air is performing less well for the same reasons that air is doing well, with less pressure on volumes suppliers can afford to ship by sea. Our ocean less than container load business is performing extremely well.”

Chief executive John Pattullo, said: “This was a difficult quarter, characterised by flat markets and customer caution, partially offset by our efficiency programs, global footprint and robust business model.

“Transpacific volume and weakness in southern Europe remain a concern. As a result, we have introduced an even more rigorous approach to cost management to support delivery of our strategic plan.”

Overall the first half of 2012 saw revenue up 3.5 per cent on the same period last year, while EBITDA was down 1.5 per cent.

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