CEVA’s preliminary results for 2018 point to future growth, reduced debt

Calling 2018 a year rocked by “structural changes” and activity to deleverage debt, CEVA Logistics AG released preliminary results on Monday for the year ended Dec. 31, 2018, suggesting that revenues grew during the year, albeit not quite as strongly as the revenues from the previous year.

CEVA’s full 2018 results are not expected to be released until the end of this month, but this interim report indicated that revenue growth for the year was at 5.2 percent, to US$7.36 billion, compared to the prior year, which grew at about 5.4 percent, in constant currency. Net revenue for 2018 is estimated at $3.63 billion.

Revenue from CEVA’s freight management operations are expected to grow by 7.2 percent, in constant currency, to roughly $3.5 billion, while contract logistics is estimated to increase by 3.9 percent, in constant currency, to about $3.85 billion.

CEVA’s “underlying business has continued to perform in line with expectations in both freight management and contract logistics,” the company added. CEVA also said its teams increased productivity, reduced costs and completed other “margin improvement initiatives” in 2018.

The company anticipates its earnings before interest, taxes, depreciation and amortization (EBITDA) for 2018 to be approximately $260 million, compared to $280 million reported in 2017. This number includes $62 million representing CEVA’s share of 50 percent from the Chinese JV Anji CEVA.

However, it’s estimated EBITDA has been negatively impacted by “various one-time adverse events,” especially in Q3 and Q4 of 2018, CEVA explained. Among these events included, “contract logistics issues in Italy in the third quarter, as well as some changes in accounting estimates in the fourth quarter, reflecting a more conservative approach from management.”

Minus these one-time events, CEVA said the adjusted EBITDA for the year would have been about $54 million higher, or $314 million, which would have been an increase over 2017’s figure.

The company also cited “negative foreign exchange impacts” from the Brazilian real, the euro and the Turkish lira, but added that these developments were “mitigated” by capital gains worth $14 million, stemming from the Chinese joint-venture, Anji CEVA Logistics Co. Ltd.

One of the principle structural changes at CEVA in 2018 was its successful initial public offering (IPO) on the Swiss Stock Exchange (SIX), which was followed by a refinancing effort that transformed its pre-IPO structure. Since then, the company “has made positive management and organizational adjustments and remains focused on its long-term strategy rather than on short-term performance,” the preliminary report stated.

Since the IPO, which took place in May 2018, “new business performance has remained promising, with a strong pipeline of new customers, as well as new opportunities with existing customers in both freight management and contract logistics,” the company said.

Among the other changes noted by the Swiss logistic firm was a sharp reduction in CEVA’s net debt to $1.19 billion – a 43 percent decrease compared to the $2.09 billion carried from 2017.

Finally, CEVA noted that its preliminary report on 2018 was released “in the context of a proposed offering of $825 million” made on Jan. 29, by French maritime shipping company CMA CGM SA, an offer which the CEVA board had rejected last week for being undervalued.

Last October, CEVA had rejected a takeover bid from Danish rival 3PL, DSV, for $28 per share. The offer from DSV was briefly raised to $30 per share, but was rescinded a few days later before CEVA was able to respond to the second offer.