CEVA Logistics AG Investor Call Third Quarter/First 9 Months November CEVA Logistics AG Q3 2018

Transcription

1 CEVA Logistics AG Investor Call Third Quarter/First 9 Months November

2 Highlights Third Quarter of 2018 Revenue up 4.7% year on year in constant currency FM growth +6.8% in constant currency, with good Ocean volumes and flat in Air CL growth +2.8% in constant currency Adjusted EBITDA down US$30 million in Q3 / Q3 EBITDA negatively impacted by Italy CL (US$ -26 million) out of which US$20 million one-time provisions Progress on many strategic initiatives / Excellence & cost-saving programs intensified Strong new business momentum Broadening of CMA CGM partnership 2

3 Highlights First Nine Months of 2018 Revenue up 5% year on year in constant currency - FM growth +6.9% in constant currency, - CL growth +3.4% in constant currency, Adjusted EBITDA down US$8 million year on year, in constant currency EBITDA negatively impacted by Italy CL (US$ -42 million) Strong new business momentum Refinancing now complete 3

4 Strengthened Partnership with CMA-CGM CEVA Logistics broadens strategic partnership with CMA CGM CEVA Logistics and CMA CGM have agreed that CEVA Logistics will remain a listed company with an arm's length business relationship with CMA CGM Partnership with CMA CGM opening more opportunities than expected Synergies between CEVA and CMA CGM under review, new medium-term guidance to be disclosed CMA CGM will offer to CEVA Logistics' shareholders wishing to exit their investment in CEVA Logistics to purchase their shares for CHF per share 4 The photo is credited to CMA CGM

5 Agenda 1 Business Update and Strategic Progress 2 Q3/9M 2018 Financial Results 3 Outlook 5

6 Business Development Momentum Investments in Sales, e.g. headcount increase by 10%, to accelerate sustainable growth in strategic geographies and segments Continued strong momentum across all business lines New Business wins up nearly 8% YTD across all Freight Management products, with highest growth in Ocean, and in Contract Logistics Significant new contracts and extensions won in Q3: - Several >US$10 million new Air and Ocean freight contracts in Technology and Automotive and >US$10 million new contracts in Contract Logistics in Automotive, Healthcare, Consumer & Retail 6

7 Business line overview: Freight Management Q3 Highlights Air Overall flat volumes with strong performance on Intra Asia and Far East westbound trade lanes Further productivity improvements resulting in a 6.6% improvement in Files/Operator ratio during the first nine months Ocean Good volumes with significant growth out of India, Middle East and Southeast Asia Key Figures (in US$ m unless otherwise stated) Q YoY % Air tons ( 000) % Air NR/t (US$) % Ocean TEUs ( 000) % Ocean NR/TEU (US$) % Revenue %* EBITDA %* EBITDA Margin 2.5% -50bps* Productivity gains through increased focus and standardization: Files/Operator ratio improved by 5.4% in the first nine months Ground North America driver shortage resulting in approx. 25% rise YoY in cost per mile for independent contractors Cost increase not fully mitigated by price increases and creating a US$3 million impact on EBITDA Other FM Improved performance in US VAS (US$7 million improvement YTD in EBITDA) * At constant FX 7

8 Quarterly Air and Ocean Volume and Yield Development Air export volumes (t) quarterly growth (YoY, in %) Yield: Net Revenue/t (US$) 15,6 11,8 10, ,6 ~2% -1,3-0,2 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Market Volumes (thousand t) Q3 18* Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Ocean volumes (TEU) quarterly growth (YoY, in %) Yield: Net Revenue/TEU (US$) 3,5 2,8 6,9 8,5 8,3 6,3 2-3% Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Market Q3 18* Volumes (thousand TEU) Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 * Company s estimate 8

9 Update on Tariffs US-China trade for CEVA (combined east-and-westbound) represents 14% of Air & Ocean revenues The contemplated tariff increase on US$200 billion of goods should not affect more than 13% of our business in the US-China trade lane, driven in particular by Consumer & Retail Switching procurement from China to alternative countries in Southeast Asia (e.g. Vietnam, Cambodia, Myanmar, Thailand) will likely shift volumes over time from CEVA China to CEVA operations in those countries Internal consumption in China affected Base: H revenues 9

10 Business line overview: Contract Logistics Key Figures as reported (in US$ m) Q YoY % Revenue %* EBITDA %* EBITDA Margin 0.8% -360bps* Q3 Highlights Good volumes across existing contract portfolio and implemented new businesses, e.g., Consumer, Retail, e-commerce and Healthcare Productivity improvements across contracts and clusters, continued productivity gains at focus contracts: - 50% of low margin contracts (out of 110 contracts in total) already terminated, repriced or improved - Focus contracts EBITDA improved by 30 bps in Q3 YoY 104 customers live on WMS Express and Standard (Matrix OFS solution). Additional 20% customer rollout expected by end of 2018 Italy continued to be challenging (US$26 million impact, including US$20 million one-time provisions) More new contract start-up costs * At constant FX 10

11 Focus on Italy Two contracts with significant issues (incl. change of business scope, higher operating costs) A local partner company (cooperativa) went bankrupt. The negative impact of these items is as follows: EBITDA impacts (in US$ m) Q M 2018 Provision for onerous contracts (16) (26) Trading losses and additional labour costs (6) (12) Provision for risk/ bankrupt partner (4) (4) Total (26) (42) Plan to address these issues being implemented 11

12 Anji CEVA Business Performance Revenues up 17.6% in 9M 2018 in constant currency to US$1,069 million - Automotive Division: Revenue up 15.7% in constant currency - Non-Automotive Division gathering pace: significant new business activity and strong pipeline. Non-Automotive diversification underway YTD EBITDA reached US$99 million, including a gain from a fixed asset disposal of US$28 million in Q (CEVA s share US$14 million). In Q3 2017, there was a gain of US$12 million (CEVA s share US$6 million). 12

13 Agenda 1 Business Update and Strategic Progress 2 Q3/9M 2018 Financial Results 3 Outlook 13

14 Key figures Quarter Ending 30 September 2018 Q Delta at constant FX (%/US$ million) 9 Months Ending 30 September M 2018 Delta at constant FX (%/US$ million) Revenue 1, % EBITDA % EBITDA Margin 1.6% -220bps Revenue 5, % EBITDA % EBITDA Margin 2.7% -50bps Underlying EBITDA, excluding Italy CL issues was: - US$ 55 million in Q3 - US$190 million for the first nine months 1 Before specific items and Share-Based Compensation (SBC) 14

15 Group P&L All figures above EBITDA are before specific items and SBC 1 9 Months Ending 30 September M M 2017 Delta (%/US$ million) Delta at constant FX (%/US$ million) Revenue 5,448 5, % +5.0% Net Revenue 2,721 2, % +3.7% Operating Expenses (2,573) (2,398) EBITDA before specific items & SBC % -11.9% EBITDA Margin 2.7% 3.4% -70bps -50bps Specific items and SBC (51) (31) (20) (20) Depreciation & Amortization (96) (83) (13) (10) Net Finance Expense (199) (170) (29) (31) Net Result from joint venture Tax (25) (28) 3 Net Income (198) (124) (74) Share in Anji-CEVA EBITDA Adjusted EBITDA % -3.9% Comments Strong revenue growth in both FM and CL vs. the same period in 2017 Specific Items: higher due to IPO (+US$19 million) / SBC (+US$7 million) whilst restructuring cost much reduced (US$ -12 million) D&A : accelerated amortization of acquisition intangibles, higher capex Net Finance Expense still mostly reflects pre IPO capital structure before the refinancing in August 2018 also includes US$56 million IPO/ Refinancing one-time costs FX impact related to translation of BRL and TRY mainly in Q3, but < US$3 million in 9M SBC: Share-Based Compensation 2 Adjusted EBITDA includes the Group s share of EBITDA from the Anji-CEVA joint venture, and excludes specific items and SBC 15

16 Results Freight Management Quarter ending 30 September 2018 Q Q Delta ( %/US$ million) Delta at constant FX ( %/US$ million) Revenue % +6.8% Net Revenue % +3.2% Operating Expenses (203) (198) +2.5% +4.1% EBITDA EBITDA Margin 2.5% 3.1% -60bps -50bps 9 Months Ending 30 September M M 2017 Delta ( %/US$ million) Delta at constant FX ( %/US$ million) Revenue 2,537 2, % +6.9% Net Revenue % +4.0% Operating Expenses (615) (588) +4.6% +2.8% EBITDA EBITDA Margin 2.5% 2.4% +10bps +20bps 1 Before specific items and Share-Based Compensation (SBC) 16

17 Revenue of Air, Ocean and other FM Q3 and 9M 2018 Revenue of FM Products Quarter ending 30 September 2018 Q YoY Growth ( %) YoY Growth at constant FX ( %) Air % +9.5% Ocean % +5.0% Other FM % +4.3% Revenue of FM Products 9 Months Ending 30 September M 2018 YoY Growth ( %) YoY Growth at constant FX ( %) Air 1, % +9.8% Ocean % +5.6% Other FM % +4.2% 17

18 Results Contract Logistics Quarter ending 30 September 2018 Q Q Delta ( %/US$ million) Delta at constant FX ( %/US$ million) Revenue % +2.8% Net Revenue % +2.8% Operating Expenses (649) (614) +5.9% +8.5% EBITDA EBITDA Margin 0.8% 4.6% -380bps -360bps Comments Italy CL significantly impacting Q3 numbers. Underlying EBITDA, excluding Italy issues was US$33 million in Q and US$126 million for 9M Months Ending 30 September M M 2017 Delta ( %/US$ million) Delta at constant FX ( %/US$ million) Revenue 2,911 2, % +3.4% Net Revenue 2,042 1, % +3.5% Operating Expenses (1,958) (1,811) +8.1% +5.3% EBITDA EBITDA Margin 2.9% 4.2% -130bps -110bps 1 Before specific items and Share-Based Compensation (SBC) 18

19 Results Anji-CEVA not consolidated Quarter ending 30 September 2018 Q Q Delta at constant FX ( %/US$ million) Revenue % EBITDA EBITDA Margin 15.5% 10% +520bps Net Income CEVA s share of EBITDA Comments Strong revenue growth from existing contracts, new implementations and transfer of CEVA China CL business (July 2017) US$28 million gain from property sale in Q3 in total (for 100%) compared with US$12 million in 2017 (for 100%) 9 Months Ending 30 September M M 2017 Delta at constant FX ( %/US$ million) Revenue 1, % EBITDA EBITDA Margin 9.3% 8.4% +90bps Net Income CEVA s share of EBITDA

20 Specific Items affecting EBITDA 9 Months Ending 30 September M M 2017 Restructuring Litigation & legacy tax 6 (2) Other 2 4 Sub-Total excl. IPO/ Refinancing IPO and refinancing costs affecting EBITDA 19 - Share-based compensation 14 7 Comments Much lower restructuring cost compared to prior year Litigation in PY benefitted from a US$10 million cargo claim compensation and in 2018, this mainly includes a claim in South America Share-based compensation cost increase reflects one-time option grants issued in relation to IPO 20

21 Net Working Capital NWC development impacted particularly by - Increase of Receivables due to lower factoring primarily in Italy and Turkey - Payables lower than year end Continued focus on underlying structural improvements, e.g. since year end - Customer terms improved by 1 day - Supplier payment terms increased by 2 days NWC Evolution (end of period) US$ million (50) (100) (1.8)% (150) (2.4)% (200) (250) (300) Q1 Q2 Q3 Q4 0 (0.4)% (1.2)% as % of LTM Revenue (1.1)% (2.2)% (2.0)% (1.7)% (2.4)% as % of LTM Revenue as % of LTM Revenue (2.7)% (3.6)% 21

22 Cash Flow 9M M 2017 Delta EBITDA (45) Gain on disposal of PP&E 0 (1) 1 Retirement Benefit Obligations (5) (2) (3) Provisions 16 (1) 15 Change in working capital (135) (55) (80) Other (4) 3 (7) SBC Operating cash flow (17) 93 (110) Net finance expenses (160) (119) (41) Tax (21) (27) 6 Divestments Capital expenditure (80) (75) (5) Dividends received Free cash flow (278) (128) (150) Proceeds from sale of PP&E 2 3 (1) Net Fund movement (276) (125) (151) Comments Operating cash flow is impacted by US$7 million of paid costs relating to the IPO and Refinancing Working Capital change due to comparative, growth, lower non recourse factoring in Italy and Turkey and earlier payment terms, e.g., US payroll Finance expense increased due to higher debt in H1 and rates as well as a US$32 million impact from the IPO and Refinancing 22

23 $1.4bn Refinancing Completed We have repaid significant debt with proceeds from IPO Comprehensive refinancing completed including - US$475 million Term Loan million Notes, - US$585 million Revolver and ancillary facility 1 Key benefits from new facilities Higher flexibility to pursue strategy; public company style covenants Longer maturities 5-7 year tenor Enhanced liquidity Much lower interest cost US$100 million reduction in finance expenses confirmed, on a full-year basis 1 c.us$180 million for guarantees 23

24 Refinancing Q New Facilities Amount (US$ equivalent) Currency Maturity Rates Term Loan B 475 USD 2025 L+3.75% (leverage step down to L+3.50%) Notes 350 (EUR 300) EUR % Revolving Credit and Ancillary Facility 585 multi currency 2023 L+2.375% Refinancing of 9% PIK Notes (US$438 million), Term Loans (c.us$584 million) and Revolver (US$250 million) completed 3 August 2018 Ancillary Facilities within the Revolver primarily used for guarantees (c.us$180 million) Hedging In October 2018, CEVA entered into interest rate hedging contracts to fix the interest rate on the majority of its floating rate debt for a period of 5 years Entered into a 3-year cross-currency swap of US$150 million principal debt from USD to EUR 24

25 Agenda 1 Business Update and Strategic Progress 2 Q3/9M 2018 Financial Results 3 Outlook 25

26 CEVA Strategic Targets* EBITDA Margin 1 3.3% > 4.0% Margin Improvement Initiatives Freight Management US$280 M Narrow Air & Ocean productivity gap with peers ( process improvement and technology) Improve Net revenue : procurement, pricing Strengthen Ocean and grow through solutions Adj. EBITDA FY 17A FM Margin: 2.3% to c.3.5% CL Margin: 4.1% to 4.5% 5.0% 2 2 Growth FM Margin CL Margin Anji JV Adj. EBITDA Target Medium Contribution to EBITDA improvement illustrative Term 4 Address low margin/loss-making operations Contract Logistics Improve performance on focus contracts Address low margin contracts and sites Win new business more effectively/ standardized solutions Commercial acumen (discipline in pricing, capital employed) 26 * Set at IPO, excluding any additional benefits from the closer cooperation with CMA CGM 1 EBITDA margin excludes share of Anji-CEVA JV EBITDA and is before specific items and Share-Based Compensation (SBC) 2 Including SG&A

27 Outlook Confirming medium-term EBITDA margin target of 4% and growth above market resulting in US$100 million adjusted EBITDA improvement, excluding any additional benefits from the closer cooperation with CMA CGM CL operations in Italy expected to be fixed in the next few months Strong productivity momentum and process improvement have a high priority New sales organization delivering strong returns 27

28 Wrap-Up CEVA continues to deliver productivity and to execute on its medium-term plan Q3 excluding Italy CL was broadly in line with management expectations CEVA is on track to deliver its medium-term ambition CMA CGM partnership will provide more upside. 28

29 Appendix

30 Balance sheet All figures in actual currency US$ million Assets Property, plant and equipment Goodwill 1,325 1,333 Other intangibles Others Non-current assets 1,943 1,939 Trade receivables 1,163 1,061 Cash and cash equivalents Others Current assets 1,771 1,573 Total assets 3,714 3,512 US$ million Liabilities and equity Equity (parent company) 271 (625) Non-controlling interests 2 3 Total equity 273 (622) Non-current liabilities 1,883 2,475 Trade and other payables 1,394 1,391 Borrowings Others Current liabilities 1,558 1,659 Total liabilities and equity 3,714 3,512 30

31 Debt maturity profile All figures in US$ million at actual Fx rates Drawn Facilities Undrawn Facilities * ** * Includes only ABL facilities. Refinancing of ABL facilities underway, maturities of all ABL facilities will be extended after the refinancing ** Includes ancillary facilities of up to USD 250 million 31

32 Quarterly financial performance actual currency 2017 figures in actual currency Delta (%) Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD Freight Management Revenue , , Net Revenue EBITDA Contract Logistics Revenue , , Net Revenue , , EBITDA Group Revenue 1,790 1,848 1,810-5,448 1,596 1,721 1,782-5, Net Revenue , , EBITDA Adjusted EBITDA Excluding specific items and share-based compensation 2 Adjusted EBITDA includes the Group s share of Anji-CEVA but excludes specific items and share-based compensation 32

33 Quarterly financial performance Constant 2018 currency 2017 figures in constant currency Delta (%) Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD Freight Management Revenue , , Net Revenue EBITDA Contract Logistics Revenue , , Net Revenue , , EBITDA Group Revenue 1,790 1,848 1,810-5,448 1,699 1,759 1,729-5, Net Revenue , , EBITDA Adjusted EBITDA Excluding specific items and share-based compensation 2 Adjusted EBITDA includes the Group s share of Anji-CEVA but excludes specific items and share-based compensation 33

34 Safe harbor statement This news release contains specific forward-looking statements. These forward-looking statements include, but are not limited to, discussions regarding the proposed private offering of the Notes described above, its guidance for 2018 and beyond, discussions regarding industry outlook, CEVA's expectations regarding the performance of its business or joint ventures, its liquidity and capital resources, and other non-historical statements. These statements can be identified by the use of words such as "believes" "anticipates," "expects," "intends," "plans," "continues," "estimates," "predicts," "projects," "forecasts," and similar expressions. All forward-looking statements are based on management's current expectations and beliefs only as of the date of this news release and, in addition to the assumptions specifically mentioned in the above paragraphs, there are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including the effect of local and national economic, credit and capital market conditions, a downturn in the industries in which we operate (including the automotive industry and the air freight business), risks associated with CEVA's global operations, fluctuations and increases in fuel prices, CEVA's substantial indebtedness, restrictions contained in its debt agreements and risks that it will be unable to compete effectively. Further information concerning CEVA and its business, including factors that potentially could materially affect CEVA's financial results, is contained in the annual and quarterly reports of CEVA Logistics AG (and its predecessor CEVA Holdings LLC), available on the Company's website, which investors are strongly encouraged to review. Should one or more of these risks or uncertainties materialise or the consequences of such a development worsen, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. CEVA disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise. This presentation includes certain non-gaap financial information. Because not all companies calculate non-ifrs financial information identically (or at all), the presentations herein may not be comparable to other similarly titled measures used by other companies. Further, such non-gaap financial information of the Company should not be considered a substitute for the information contained in the historical financial information of the Company, if any, prepared in accordance with IFRS included herein. 34

35 Contact Investors: Pierre Bénaich SVP Investor Relations Media: Matthias Hochuli Group Head of Marketing and Communications

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