French liner giant CMA CGM asserted near-full control over Swiss third-party logistics provider Ceva Logistics today by installing Chairman and CEO Rodolph Saade as CEVA’s new chairman and naming Nicholas Sartini, Ceva’s chief operating officer and deputy CEO, as its new chief executive, effective June 1.
The reshuffling came as Ceva reported broad-based declines in its first quarter results in what will be one of its last quarters, if not its last quarter, as an independent company. CMA CGM, which said in February it would launch a $1.65 billion tender offer for the two-thirds of Ceva’s shares it didn’t already own, told Ceva last week that it now owns 98 percent of Ceva’s shares and voting rights. Ceva said today that CGM will proceed with a “squeeze-out” procedure under which the remaining shareholders tender their shares for what is deemed to be fair cash compensation.
Sartini will replace Xavier Urbain, who will become Saade’s executive advisor, Ceva said. Urbain has held the CEO position at Ceva since 2014. In addition, four board members, including former Chairman and CEO Marvin O. Schlanger, did not stand for re-election at the company’s annual general meeting held toady in Switzerland.
The tie-up between the two companies dates back to April 2018, when Ceva filed a $1.3 billion initial public offering on the Swiss stock exchange and announced that CMA CGM would take a roughly 25 percent stake in Ceva and enter into a strategic operational partnership. CMA CGM, in an effort to diversify away from commoditized ocean shipping services, wants to integrate third-party logistics services to add value to its customer relationships.
Ceva reported that first-quarter revenue rose, in constant currency, by 1.1 percent over year-earlier figures. Adjusting for currency fluctuations, revenue declined 5.1 percent year-over-year. Earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $134 million, a drop of 28 percent in constant currency and down 32 percent adjusted for currency fluctuations. Margins shrank year-over-year on both measures.
Ceva said it performed in line with its first-quarter targets despite a “challenging” global environment. It also affirmed its 2021 revenue target of above $9 billion, reflecting 5% annualized organic growth, and EBITDA to between $470 and $490 million from $380 million.
Ceva’s two divisions, contract logistics and freight management, reported year-over-year declines in revenue and, in the case of freight management, currency adjusted EBITDA. Freight management’s revenue rose 3.1 percent in constant currency, CEVA said.
Freight management’s results were hit hard by weakness in air freight volumes, which more than offset gains in ocean tonnage. Ocean yields were solid at $288 per twenty-foot equivalent unit (TEU), compared with $226 per TEU in the year-earlier quarter. Yields on air freight traffic, measured in net revenue per ton, rose 2.2 percent year-over-year, Ceva said. The drop in air tonnage and a corresponding rise in yield marks what Ceva called a “more selective approach to new business.”
Contract logistics was plagued by slight year-over-year revenue weakness and unfavorable currency impacts in markets like Australia, Brazil and Turkey. In particular, the unit continues to struggle in Italy due to contract disputes that have required the company to set aside tens of millions of dollars to resolve.
New business increased by 12 percent in the quarter, while the company reported an increase in retained business. Net debt, which had also been a problem for Ceva, declined by 43 percent from March 2018 due to significant de-leveraging efforts, Ceva said.
Ceva said it would open an operational center in Marseilles, France, to centralize the company’s management teams and support functions.