Simultaneously with announcing earnings guidance for fiscal 2008, UTi Worldwide Inc. said it would exit retail distribution in Africa, the surface distribution operation of its Integrated Logistics business in the Americas and “other under-performing operations.”
UTi is also canceling various long-term initiatives in certain industry verticals, scaling back air freight charters, and “exiting loss-making contracts.” The latter includes exiting its contract logistics operation in the Americas.
“UTi has grown significantly in the past five years,” said Roger I. MacFarlane, CEO. “This rapid expansion has led to increases in expenses that have outpaced net revenue growth. Our past efforts have not been as successful as we expected in reversing this trend. In addition, pressure on yields, particularly in airfreight, and under-performing operations were worse than expected. On top of this, we are facing a slowdown in our clients' businesses.”
MacFarlane notes that the company has taken actions to address these issues and enable UTi to be more agile in the current economy. “The steps we are taking are designed to reduce costs and improve profitability, while at the same time, moving decision making closer to clients to increase accountability.”
UTi expects to reduce annualized operating expenses by $105 million to $110 million as a result. Net revenues are expected to drop by $75 million to $80 million. The net impact, says UTi, is an expected increase in operating profit of $30 million to $40 million.
