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TheStreet Open House

UTi Worldwide CEO Discusses F2Q12 Results - Earnings Call Transcript

Now I would like to turn the call over to Eric Kirchner. Eric?

Eric Kirchner

Thank you, Jeff, and good morning everyone. Second quarter results reflect solid performance in both our freight forwarding and contract logistics and distribution segments. Yield expansion and improved control over costs drove most of the freight forwarding improvement, while increased activity in contract logistics and margin improvement in our U.S. distribution business led to stronger performance in this segment.

Air freight volumes declined against challenging comparisons from a year ago, but the decrease was less than the contraction in the overall market. A general swiveling in the overall economy and freight environment also contributed to weaker volumes for the entire industry. This is unlikely to change much in the third quarter given the macroeconomic climate. So preliminary volumes for us in August were relatively consistent with the prior year.

Ocean freight TEUs were ahead of last year, performing a little better than expected and in line with the market. Preliminary volumes in August were up slightly compared to August of last year, which was our best volume month of fiscal year 2011.

So far we're seeing mixed signs of a peak season. Yields and net revenue per unit increased over the prior year due to process improvements that include better buying and our gateway initiatives as well as movement in carrier rates. The rate environment remained supporting of the yield development, but comparisons in the second half of the year become more challenging, particularly in the fourth quarter.

Our contract logistics and distribution segment continued to see volume gains from existing clients and new business wins, especially in our Africa and Asia-Pacific regions.

We were particularly pleased to see our U.S. distribution business improve in the second quarter, consistent with the market, but also reflective of our efforts to develop better margins. While these improvements are encouraging, we continue to review our operations as part of our ongoing plan to fix underperforming businesses and contracts.

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