CEVA begins new era under CMA CGM with Q1 drop in air volume

Following yesterday’s annual general meeting, CEVA reported its first-quarter results today, showing a 6.9% drop on air cargo volumes, compared to the previous first quarter, plus several corporate structure changes as French seafreight firm CMA CGM begins its governance over the Swiss 3PL.

For Q1 of 2019, CEVA said the dip in the air segment came “mainly from downtrading of some trade lanes and a selective approach to new business.” However, the net revenue per tonne, or yield, rose by 7.6% to US$806 per tonne. “Airfreight has experienced a relatively slow start to the year with weaker volumes than in the same period last year,” CEVA said.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the CEVA Group reached $134 million for the period ending March 31, which the company said, “continues to be negatively impacted by the performance in Contract Logistics in Italy.” Group revenues, meanwhile, rose by a modest 1.1%, y-o-y, in constant currencies to just under $1.7 billion.

The aforementioned Contract Logistics segment experienced a deep 8.7%, y-o-y, plunge in revenues to $901 million, as “significant currency impact has hit major geographies,” such as Turkey, Brazil and Australia, CEVA said, adding that the Q1 retention rate in the segment “has significantly improved” compared to the previous year. EBIDTA for Contract Logistics dropped $15 million to $23 million, despite productivity improvements “in the majority of geographies and structural margin improvement in several low margin contracts,” the company said.

Revenues from Freight Management also fell slightly, by 0.7%, y-o-y, to $797 million, while EBITDA for the sector dipped by $2 million to $13 million in Q1.

In terms of governance, Rodolphe Saadé, chairman and CEO of CMA CGM, was elected as chairman of the CEVA Board of Directors. Also, Nicolas Sartini, the current chief operating officer and deputy CEO of CEVA Group, will become full CEO of CEVA effective June 1. Sartini will replace current CEO Xavier Urbain, who will become an executive advisor to Saadé.

Along with the new leadership, CEVA will open a new operational center in Marseilles, France, to bring together CEVA’s management teams and support functions, which will total about 200 positions.

As part of the settlement of CMA CGM’s January public tender offer, the seafreight company said it now holds more than 98% of the share capital and voting rights of CEVA, and will proceed with the “squeeze out procedure” by filing a claim for cancellation of the remaining outstanding CEVA shares. CEVA’s net debt of $2.43 billion has been reduced by 43% compared to Q1 of 2018, which is “in line with the significant de-leveraging” following CEVA’s initial public offering.

CEVA also said its “new business wins” rose by 12% in Q1, including new automotive contracts in the Benelux countries, Asia and the Americas, as well as consumer and retail contracts in North America, IMEA and Asia.

“Despite a challenging global environment in the beginning of the year, CEVA has performed in line with its roadmap and targets and achieved a number of productivity improvements,” CEVA concluded.

For its medium-term targets for 2021, CEVA has set its revenue target to more than $9 billion, which reflects the expected 5% average annual organic growth and the contribution of CMA CGM Logistics of $630 million. The new parent also raised its adjusted EBITDA expectation for 2021 from $380 million to a range of $470 million to $490 million.