Ceva Logistics has set out a three pronged plan to boost performance by €100 million after reporting a 13.4 per cent decline in EBITDA to €206 million for the first nine months of the year.
Third quarter EBITA fell to €70m. Chief executive Marvin O Schlanger said: “This was a disappointing quarter in terms of our profit performance. We are addressing the decline in profitability with a comprehensive plan to reduce overhead costs and improve contract performance. We are targeting a net benefit of approximately €100 million from these actions.”
The cost reduction plan is focused on selling, general and administrative (SG&A) costs, FM direct costs and fixing underperforming contracts.
Schlanger said that in freight management, Ceva had got ahead of the market in terms of developing its capabilities and needed to realign its operations to be cost competitive.
In contract logistics, he identified three areas where attention was needed. There were some contracts where work was needed to meet internal standards and this was being driven as quickly as possible.
There were some contracts where Ceva’s work was not being fully recognised – and there were commercial discussions going on to correct that.
The third category was where volumes were different from what was envisaged when the contract was originally signed – again discussions were going on to correct that.
Schlanger said he expects the profit improvement programme to fully operation by the second half of 2013 with a significant impact on the 2013 results.
In the first nine months, group sales rose 4.1 per cent to €5.36bn. Group sales were up 5.1 per cent in the third quarter to €1.8bn with the strongest growth in freight management. This was largely down to strong growth in ocean freight as customers in Asia Pacific and the Americas shifted goods from air to ocean. This contributed to an additional working capital requirement of €13m.
The third quarter decline in EBITDA of €70m was mainly the result of continuing weakness in the contract logistics performance, “particularly in Southern Europe, Middle East and Africa”. In the FM business, net revenue increases did not fully compensate for upward cost pressure.
John Pattullo retired as CEO on 12 October but continues to serve on Ceva’s board of directors.