UTi Worldwide's CEO Discusses F1Q13 Results - Earnings Call Transcript

UTi Worldwide Inc. (UTIW)

F1Q13 Earnings Call

June 7, 2012 11:00 a.m. ET

Executives

Jeff Misakian - Global Vice President, Investor Relations

Eric Kirchner - Chief Executive Officer

Lawrence Samuels - Chief Financial Officer

Ed Feitzinger - Executive Vice President, Contract Logistics and Distribution

Analysts

Alex Brand - SunTrust Robinson Humphrey

Tom Wadewitz - JPMorgan

William Greene - Morgan Stanley

Ben Hartford - Robert W. Baird

Scott Group - Wolfe Trahan & Co.

Jack Atkins - Stephens

Todd Fowler - KeyBanc Capital Markets

Elliott Waller - Jefferies & Company

David Ross - Stifel Nicolaus

David Campbell - Thompson Davis

Kevin Sterling - BB&T Capital Markets

Keith Schoonmaker - Morningstar Research

Presentation

Operator

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the UTi Fiscal 2013 First Quarter Results Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, June 7, 2012.

I'd now like to turn the conference over to Jeff Misakian. Please go ahead.

Jeff Misakian

Thank you, Ian, and good morning everyone. Welcome to UTi Worldwide's fiscal 2013 first 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?

Eric Kirchner

Thank you, Jeff. Good morning, everyone. Results in our fiscal 2013 first quarter were negatively impacted by the weak airfreight environment which has shown little sign of improvement on key trade lines. We mentioned this on our last call when you told you the volumes were likely to remain soft for the first half of the year, and many of our competitors have reported similar results to date. Additionally, our results were impacted negatively by the weaker South African rand.

Higher net revenue per unit relative to the same period last year partially offset these negative factors. We also experienced ongoing improvements in our contract logistics and distribution business which continued to deliver revenue and operating profit growth in the first quarter. Taken together, our overall results were slightly ahead of last year. In our freight forwarding segment, the percentage of air freight volume contraction was in the mid-teens in the first quarter. Part of this was due to a tough comparison with some of our highest volumes of the year shipped in the first quarter of fiscal 2012. But clearly the environment also paid a key role of many companies fewer heavy weight goods through the air.

It’s important to note that shipments were down only 6% in the first quarter, much less then the tonnage decline, as client moved fewer kilos per shipment. This has a negative impact on productivity in freight forwarding in the short term as most operating expenses are tied to shipments rather than tonnage. This was an issue for the entire industry. We remain focused on keeping costs under control and improving our productivity.

Our ocean freight continued to show modest growth in the quarter and inline with the market. Our efforts to improve our ocean product are showing result as client currently favor this mode of transit. Net revenue per unit has begun to erode recently as carriers, particularly in ocean freight, have been driving up rates in a big to restore their profitability. This may pressures yields in the short-term but we believe that we can manage this environment successfully.

In contract logistics and distribution, net revenues increased slightly in the first quarter. Organic growth came from new business wins in Africa and Asia and continued strength in our U.S. distribution business. Underlying volume improvements were most notable in the United States, while new wins were across the broader set of clients. We continue to make progress improving margin of businesses and client contracts which helped increased operating profit and margins.

I will now ask Lawrence to walk through the financial results. Lawrence?

Lawrence Samuels

Thank you, Eric. Net income attributable to common share holders in the fiscal 2013 first quarter was $0.12 per diluted share. Excluding severance costs, adjusted net income was $0.14 per diluted share in the fiscal 2013 first quarter. This compares to $0.12 per diluted share recorded in the same period last year, which was adjusted to remove severance and other transformational related costs, as well as costs related to the closure of certain underutilized facilities.

The weaker South African rand continued to have a material negative impact on our reported revenues in the first quarter of fiscal 2013, and generated a similar reduction in our expenses when translated into our U.S. dollar reporting currency. This weakening began late in the third quarter of last year and it’s likely to be affecting our competitive results for at least two more quarters.

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