Call Start: 11:00
Call End: 12:05
UTi Worldwide (UTIW)
Q4 2012 Earnings Call
March 22, 2012 11:00 AM ET
Jeff Misakian - VP, IR
Eric Kirchner - CEO
Lawrence Samuels - CFO
Tom Wadewitz - JPMorgan
Bill Greene - Morgan Stanley
Ben Hartford - Robert W. Baird & Company
Scott Group - Wolfe Trahan
Peter Nesvold - Jefferies & Company
David Ross - Stifel, Nicolaus
Keith Shoemaker - Morningstar
Nate Brochmann - William Blair
David Campbell - Thomson, Davis & Company
Previous Statements by UTIW
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Good day, ladies and gentlemen, and thank you for standing by. Welcome to the UTi Fiscal 2012 Fourth Quarter Conference Call. (Operator Instructions) This conference is being recorded today, Thursday, December 1, 2011. I'd now like to turn the conference over to Mr. Jeff Misakian, Vice President, Investor Relations. Please go ahead, sir.
Thank you, Lilly and good morning, everyone. Welcome again to UTi Worldwide's Fiscal 2012 Fourth Quarter Results Conference Call. Joining us on the call today are Eric Kirchner, Chief Executive Officer; and Lawrence Samuels, Chief Financial Officer. Ed Feitzinger, Executive Vice President, Contract Logistics and Distribution, is also here and available to answer questions during the Q&A session.
Before we begin the presentation, I would like to point out that certain statements made in today's call are not historical facts. They may be deemed, therefore, to be forward-looking statements under the Private Litigation Reform Act of 1995. Many important factors may cause the company's actual results to differ materially from those discussed in any forward-looking statements.
These risks and uncertainties are described in further detail in the company's filings with the Securities and Exchange Commission. Please refer to these filings for more information regarding the risks and uncertainties that the company faces. UTi undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Now I would like to turn the call over to Eric Kirchner. Eric?
Thank you, Jeff and good morning everyone. In fiscal year 2012, we delivered improved results in a challenging environment. While there were some adjustments in the fourth quarter, operating results were solid with expansion in net revenue per unit in freight forwarding and increased activity in contract logistics and distribution. This more than compensated for a very weak South African Rand and slowing air and ocean volume.
On an adjusted basis, operating profit grew 24% and operating margin expanded by 150 basis points in the fiscal 2012 fourth quarter compared to the same period last year. And adjusted net income increased 39% from last year's fourth quarter. Lawrence will review the financial details in a few minutes.
Both business units delivered operating profit and margin improvement. Freight forwarding in particular had strong growth in the quarter principally due to expansion in that revenue per unit. Contract logistics and distribution was more significantly impacted by the weaker Rand, however the segment saw modest growth in the quarter on an organic basis.
In our freight forward segment, air freight volumes contracted as expected due to a soft market and a Chinese New Year holiday that occurred in January this year as opposed to February last year. As we told you on our last earning's call, we saw no peak season in air freight in the fourth quarter and this was confirmed in the final result of most in the industry. In fact our tonnage decline in the fourth quarter was similar to many of our competitors and the reductions reported by most key airports and airlines.
We saw a very modest expansion in ocean freight during the quarter. Having January in our figures, impacts our comparison to last year because of the earlier Chinese New Year. On a calendar quarter basis we were closely aligned with our peers and the market.
Net revenue per unit expanded in the fourth quarter particularly in air freight. The expansion was driven by a combination of lower carrier rate, and process improvements that include better buying and continued success with our gateway initiatives.
In contract logistics and distribution, net revenue declined in the fourth quarter primarily because of the weaker Rand. However, on an organic basis net revenue in the segment increased 5% in the fiscal 2012 fourth quarter compared to the same quarter a year ago. This was primarily due to new business win and increased client volume especially in Africa and Asia and continued improvement in our US distribution business.
We saw strength primarily in pharmaceuticals, automotive and consumer and retail sectors. We also managed our costs with self-improve the operating margins. The industry faces some headwinds in fiscal 2013 particularly the first half of the year which I will address in my closing remarks. I'll also provide you with an update on our transformation activities at that point.
I'll now ask Lawrence to walk you through the financial results.
Thank you Eric. Net income attributable to common shareholders in the fiscal 2012 fourth quarter was $0.12 per diluted share. We had some unusual items in the fourth quarter that reduced earnings which I will review in a moment. Excluding these items adjusted net income attributable to common shareholders in the fiscal 2012 fourth quarter was $0.20 per diluted share compared to $0.14 per diluted share recorded in the same period last year.
As a global company, its worth repeating that more than 65% of our revenues and operating cost are incurred in currencies other than the US dollar. While the translation of currencies for reporting purposes always has some effect, in the fiscal 2012 fourth quarter, the weaker South African Rand had a material negative impact on our revenues while generating a corresponding reduction in our expenses when translated in to US dollar reporting currency.