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UTi Worldwide's CEO Discusses Q3 2012 Results - Earnings Call Transcript

Stocks in this article: UTIW

Overall, our Contract Logistics and Distribution segment turned in a solid third quarter. This segment continued to see volume gains from existing clients and new business wins, especially in our Africa and Asia Pacific regions. Our U.S. Distribution business was also strong again in the third quarter. We continued to work on improving the fundamentals in our Contract Logistics and Distribution business, which led to the better operating performance in the quarter.

While all of this is encouraging, the outlook for the fourth quarter is not as bright. Activity is clearly slowing for the industry and for us. Airfreight declines moderated in November, but tonnage will not reach levels that we would typically associate with the peak season. Recent retail sales results in the United States have been encouraging, but it's not yet clear that these results will carry through the entire holiday season. As a global company, we're also affected by economic conditions in other regions. In addition, the timing of Chinese New Year will significantly reduce activity levels out of China during the last 10 days of January. This will adversely impact our fourth quarter results due to the fact that our fiscal year ends January 31. The rate environment is still supportive of yield development in the near-term as capacity remains flat, which provides some cushion in our forwarding operations. But this won't last forever, particularly given the signs that carriers are reducing capacity.

In Contract Logistics and Distribution, several of our clients tell us they're forecasting volume declines in their operations in the fourth quarter, particularly in the retail, consumer, chemicals and automotive verticals in the Americas and EMENA regions. In addition, the impact from a weakening rand will impede dollar reported growth in the Africa region. At current exchange levels, this could reduce our fourth quarter dollar reported results by approximately $0.02 to $0.03. We expect that new business wins, especially in Africa and Asia Pacific, will help but will not fully offset the anticipated overall volume declines.

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