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UTi Worldwide posts quarterly loss, pooh-poohs raging talk of DSV takeover

LONG BEACH based forwarding giant UTi Worldwide has posted a third quarter net loss of US$34 million with revenues dropping 6.6 per cent to $1.08 billion.

Quarterly results announcement come as talk swirls over a possible takeover by Danish forwarding giant DSV, and now the heels of the UTi CEO's sudden replacement.

Refusing talk about the speculation, the new CEO stayed on message at the results briefing.

"Earlier this year, we were working through service issues and billing challenges associated with the rollout of our freight forwarding system in the United States," said the new CEO, Edward Feitzinger, who took over after the sudden departure of Eric Kirchner.

"Since then, our service has improved dramatically. These past issues adversely impacted freight forwarding growth and free cash flow for several quarters," said Mr Feitzinger.

UTi had already dismissed reports that it was close to being sold to DSV. saying that talks had not gone beyond preliminaries.

Mr Feitzinger, said the quarter was "marked a turning point in a number of areas. Air freight kilos improved and adjusted EBITDA improved each month during the quarter. Free cash flow also turned positive in a quarter where we have historically had negative cash flow."

The company posted a $19.6 million receivable impairment in the fiscal 2015 third quarter relating to a customer bankruptcy, with the total amount owed to the company is $24.9 million.

The company has filed a $16 million insurance claim for a portion of the amount, but the insurer has not yet accepted the claim.

DSV also confirmed that it had held discussions concerning the potential acquisition of UTi Worldwide, but said no "current" discussions were taking place.

The UK's Transport Intelligence said DSV's acquisition of UTi would have made sense as it would have combined DSV's strength in Europe with UTi's operations in Asia, Africa and North America.

Investment bank Stifel said it also saw DSV as a good match for UTi. It added that UTi made a good acquisition target in general.

"UTi is an attractive asset to anyone looking to establish a global presence in freight forwarding and/or contract logistics, as UTi is one of the few top 15 forwarders for sale, has a footprint in the US as well as links from the US to other major markets, and has significant margin expansion potential," it said in a research note.

Bloomberg reported that UTi had been in sale discussions since mid-2014 and could have potentially reached an agreement with DSV as soon as this month, until news of the discussions became known. UTi shares closed up 20 per cent yesterday at $13.88, after earlier soaring as much as 28 per cent.

Bloomberg reports that UTi had lost about one-quarter of its market value since disclosing on February 25 that it had breached some loan covenants.

The company issued new debt, as well as convertible preferred shares to P2 Capital to fix the liquidity crunch - making P2 UTi's biggest investor. Bloomberg reported that UTi hired Morgan Stanley a few months ago to explore options including a sale.