In its fiscal 2009 third quarter ended October 31, 2008, global logistics and freight forwarding services company UTi Worldwide reported revenues increased 3% to $1,210 million and net revenues increased 5% to $408.2 million.
Income from continuing operations reached $35.8 million, up from $34.7 million.
"We are pleased to report growth in both revenues and operating income, as well as operating margin expansion of 70 basis points, reflecting the benefits of our cost reduction plan and our ongoing efforts to improve our operating performance," said Roger I. MacFarlane, chief executive officer. "Freight forwarding volumes deteriorated throughout the quarter, particularly in airfreight, where growth turned negative for the first time in many years. While part of the airfreight weakness was market related, the majority resulted from steps we took to eliminate low yielding business, consistent with our more disciplined approach to net revenue growth. Yields expanded, offsetting the volume decline and demonstrating the flexibility of our forwarding model. We are also very pleased with the performance in our contract logistics and distribution segment, which produced improved operating margins in the quarter. We continued to win new logistics business and our surface distribution operations performed exceptionally well, though revenue gains in the quarter were offset by businesses that were shed through our previously announced cost reduction plan. We believe the solid performance delivered by our contract logistics and distribution segment reinforces the value of our CLIENTasONE strategy."
The increase in revenues was primarily due to organic growth in Europe, said UTi. Acquisitions contributed to growth in revenues, but this was more than offset by exiting businesses through the company's cost reduction plan and by the impact of the strengthening US dollar.
Operating expenses in the third quarter of fiscal 2009, excluding freight consolidation costs, totaled $354.3 million, an increase of 4% compared to the same period last year.
The company sold the remainder of its art packing business during the third quarter of fiscal 2009. The sale resulted in a gain of $2.1 million in the fiscal 2009 third quarter, which was reported as discontinued operations in the company's condensed consolidated statements of income. The majority of the art packing business was sold in the fiscal 2009 second quarter as part of the company's ongoing focus on its core businesses.
Freight Forwarding revenues (including customs brokerage) in the fiscal 2009 third quarter grew 4%.
Contract Logistics and Distribution net revenues declined 2% in the fiscal 2009 third quarter, compared to the same period last year. This was primarily due to shedding businesses under the cost reduction plan as well as the loss earlier in the year of the Baytown, TX facility with Wal Mart. The operating margin in Contract Logistics and Distribution improved in the fiscal 2009 third quarter to 7.5%, compared to 6.5% in the prior-year period.
"Looking forward, it is difficult to predict the extent to which weakening global economies will impact international trade. We believe our cost reduction plan and reorganization have put us on the right footing; we will continue to manage and build client relationships, keep a tight lid on costs and manage those areas we can control. We have been through difficult environments before and I am confident we will successfully manage through this downturn as well," said the UTi CEO.