With more and more manufacturing businesses operating on a global scale, there is a growing market for logistics firms that oversee the increasing complex supply chains for these businesses.

That’s why analysts are bullish on UTi Worldwide Inc., a Rancho Dominguez-based logistics firm that went public in November 2000.

In spite of the dismal climate for IPOs, UTi’s shares have performed well so far. They closed at $18.50 on Jan. 3, up 12.1 percent from the closing price of $16.50 on Nov. 3, 2000, the first day of trading.

UTi provides supply chain management services for large multinationals, such as DaimlerChrysler AG & #184; General Electric Co., and Polo Ralph Lauren Corp., as well as many smaller local businesses. The company’s decision to go public was in part prompted by the need for cash, both to pay off debt incurred because of its expansion over the last several years and to finance future acquisitions.

“You have to be everywhere your customers want you to be,” said Roger MacFarlane, chief executive of UTi. “That requires a huge investment, and as a result our operation margins are not where they should be.”

For the fiscal 2001 third quarter ended Oct. 31, 2000, UTi reported net income of $4.8 million (24 cents per share), compared to $7.6 million (39 cents per share) for the like quarter a year ago.

The decrease in net income was a result of both a higher effective tax rate, as the company did more business in the U.S. this year, and a one-time $2.3 million distribution from a stock award plan.

Meanwhile, company revenue grew by 22 percent over that same period to $240.8 million, from $196.6 million a year earlier.

Because of UTi’s investments in building a global network and in information technology to handle the largest and most demanding customers, analysts expect the company’s net earnings growth will start to outpace its revenues growth in the coming years.

“Their operating margin is below the average for the industry, but it is improving consistently,” said Gregory Burns, an analyst with Lazard Fr & #269;res & Co. LLC in New York. “As they leverage their global network, their bottom line will grow faster than their top line.”

The international logistics industry is growing at an annual rate of 20 percent, according to Burns, and UTi can absorb more growth without significantly increasing expenses. As a result, the company should be able to grow its market share from about 1 percent to roughly 3 percent, according to Burns.

Last September, for example, the company acquired Honk Kong-based freight forwarder Continental Group for $16.6 million. Not only will the acquisition give the company a greater presence in Asian-Pacific trade, it will also benefit UTi’s operating margins, according to a recent research report from Bear, Stearns & Co. analyst Edward Wolfe.

Operating margins for logistics firms in general tend to be substantially higher in the Far East region because of lack of competition and the complexity of shipments and distances involved, Wolfe said.

The acquisition of Continental Group also underlines UTi’s growing involvement in Asia and the Americas at the expense of Africa, its traditional territory.

In 1998, the company did 48 percent of its business in Africa and 33 percent in Asia and the Americas. By the third quarter of fiscal 2001, only 30 percent of revenue came from Africa and 50 percent from Asia and the Americas.

The early focus on Africa came from the fact that the founders of UTi started the company’s predecessor in South Africa in 1976. The company’s chairman, Matthys Wessels, is still based on Johannesburg, while MacFarlane and Peter Thorrington, the president and chief operating officer, are based in Rancho Dominguez. UTi is registered in the British Virgin Islands.

At this point, the company has built up a network of 400 offices in 128 countries, from Angola to Turkmenistan. To finance the global network and the information technology needed to manage the supply chains of their largest customers, UTi raised $75 million in its IPO. A large chunk of that cash has gone to paying off debts that were incurred as a result of the expansion.

Although there is a growing concern that a U.S. economic slowdown may have a negative impact on world trade, MacFarlane believes that UTi is not particularly vulnerable to fallout from such a slowdown.

“We are a non-asset based company and as such we are more flexible than asset-based carriers who own their own airplanes, ships or trucks,” said MacFarlane. “In addition our focus is on international airfreight, which is not as vulnerable to steep cycles as domestic airfreight, and finally we expect that large companies will continue to outsource their supply chain management.”