Long Beach freight forwarder UTi Worldwide Inc. reported second-quarter earnings that fell well short of analyst estimates. But the real news from the company’s Sept. 4 earnings call was that a major technology overhaul is getting close to the finish line. And that delivered for the company’s investors.
UTi has spent much of the past year installing a new comprehensive IT system from 1View Solutions in Hertfordshire, England, and the company is finally ready to reap the benefits. The system, designed to provide an integrated platform linking the many countries UTi does business in, could save the company up to $95 million a year by the end of 2015, according to management. It should also dramatically improve customer billing – which could be a boon for a company that’s historically had a tough time collecting from clients.
Shares of UTi soared 25 percent to close at $11.30 for the week ended Sept. 10, making the company the biggest gainer on the LABJ Stock Index. (See page 32.)
On Sept. 4, the company released its earnings for the quarter ended July 31. The company reported a net loss of $16.9 million compared with a loss of $4.4 million for the same period a year earlier. Revenue fell 3 percent to $1.1 billion.
Despite the company’s poor financial performance, investors are starting to believe that UTi is on a positive trajectory. It has spent tens of millions of dollars building up and adding countries to the 1View system. And its share price has suffered, with the stock down 35 percent year to date, even after the recent surge.
Eric Kirchner, the company’s chief executive, said with the new system now substantially complete, UTi should begin to enjoy a major competitive advantage.
“Today, virtually all transactions are processed through the new systems which is a major achievement,” Kirchner said during the company’s earnings conference call. “Several of our peers are working on similar system deployments but they are years behind.”
The company did not respond to a request for comment.
Kevin Sterling, an analyst who covers the company for Winston-Salem, N.C., investment bank BB&T Corp., said investors are looking beyond this quarter and are now confident that UTi is getting close to completing what could be a transformative technology project.
“It will help them get better pricing and market share,” Sterling said.