Background information

RIGA GRADUATE SCHOOL OF LAW

Analysis of CEVA Logistics financial activity

Course Paper in Business

Author: Olga Baranova

Supervisor: Dace Kavasa

RIGA, 2011

Table of content

Summary……………………………………………………………...………………………..3

Introduction…………………………………………………………………………………….4

Background…………………………………………………………………...………………..5

Analysis……………………………………………………………………….………………..5

Revenue………………………………………………………………………………………...6

EBIT………………………………………………………………………………….………...6

Cash generated from operations………………………………………………………………………………….…...7

ROE………………………………………………………………………………….………...7

Godwill………………….………………………………………………………….…...……...7

Borowings……………………………………………………………………………..……….7

Liquidity…………………………………………………………………………………….…7

Equity ratios……………………………………………………………………………………8

Profitability ratios……………………………………………………………………………………………8

Activity ratio…………………………………………….……………………………………………....9

Altman Z-Score……………………………………………………………………………….10

Updates for the latest period (2009)…………………………………………….…………….10

Conclusion………………..…………………………………………………………………..12

Bibliography…………………………………………………………………………..…..…..14

Summary

Present work consists of introduction part anlysis, comparison with previous period and conclusion. In introduction part author describes actuality of financial analysis and rises a question (hypotesis) which will be answered in conclusion part of the work. Next chapter presents historical backgrounds of the company which will help to understand changes in financial data. Analysis part shows how with different financial leverages (ratios and balance sheet analysis) it is possible to describe company’s financial activity and give reasons for such changes. Comparison with previous period observes how situation answer to question about possible investments in company.is changed in 2009 various quarters. Conclusion part author summarize all previous research and analysis and gives his opinion about current situation and forecasts future activities, although he gives answer to the main research question – is It r reasonable to make an investment in “CEVA” Logistic company.
Introduction

Current work presents logistic firm “CEVA logistics “ and it’s financial activity in time period 2008 till 2009 when every area of buisness activity were affected by economic crisis , which hurt individuals, businesses, and financial institutions very hard. Logistic company was chosen because by it’s financial activity example it would be instructive to observe

all economic recession consequences and decline in companys activity , because logistic buisiness is tightly bind with worlds supply and demand and both of these factors were affected by decreas in worlds welfar durring crisis. Present work shows how economic recession influenced companys financial activity using as primary tools balance sheet indicators and financial ratios , which will show comparative and full review on companies situation. As summarize work represents conclusion , which answers a question about possible investment in “CEVA Logistics” company .Also work forcasts future comapnies activity and possible development using as primary tool “ CEVA Logistics ” Annual reports.

Background information

“CEVA Logistics is a global logistics company providing transport services in freight management, contract logistics, distribution and transportation management. The company runs a global network with facilities in over 100 countries and employs 50,000 people. It is divided between two main divisions:” [1]

· Contract Logistics

“The origin of the contract logistics business is with TNT, which was founded in Australia in 1946. In 1996 Australia-based TNT was acquired by postal and telecom company KPN in the Netherlands. Two years later the telecom and postal divisions of KPN were separated. The new company, called TNT NV, was then organized around three divisions: TNT Logistics, TNT Express and TNT Post. It includes warehousing and ground based distribution, offered separately or in combination.” [2]

· Freight management

“The origin of our freight management business is with EGL, which was founded in Houston, Texas in 1984 as Eagle USA Airfreight. After experiencing strong and rapid growth in the early 1990's, the Company initiated a public offering in 1995 and began trading on the NASDAQ Stock Market. EGL was removed from the NASDAQ in August 2007 when Apollo Management L.P. purchased the company and merged it with CEVA Logistics. EGL now operates under the CEVA brand name.” [3]

CEVA is now the fourth largest Logistics Company in the world proving its high competitiveness and the scale of global demand for it. There is no doubt that CEVA Logistics is a serious investment project which has to be considered very seriously.

Analysis

From the first view CEVA Logistic seems to have strong financial position. However, the company is largely debt funded. But less than 1.5% of the total debt is due for repurchasing each year until 2012. There is a significant amount of cash available in the firm- €164 million. In addition to this there is €26 million of unused invested funds. As a result, CEVA is in a position where there is no much need to worry during this difficult period of global recession.[4]

There was normal financial growth during the first 10 months of the year 2008, after which the current world economic recession affected badly the company’s financial performance. CEVA Logistics business was largely impacted by a number of other factors, such as a significant decrease in the automotive manufacturing sector. The actual loss is (125 million EURO). CEVA was not the only logistics company, which suffered from the global economic recession.

Overall, year 2008 was a very important one for CEVA as two diverse companies were joined into one- CEVA Logistics. It is a significant long-term investment, which opens new business perspectives and opportunities in the logistics sphere of business. However, there can also be suspicious views why this merger did take place exactly in 2007.

Analytical skills/techniques (1)

Revenue

CEVA Logistics revenue for the 2007 was €4.8 billion. In 2008 CEVA Logistics becomes the fourth largest supply chain company in the world with revenue of €6.3 billion. The reason for such a large growth is the purchase of TNT Logistics to the CEVA’s Freight Management division. However, the current global economy is very unstable and it is quite difficult to predict now the consequences of this purchase.

EBIT

EBIT (earnings before interest, tax, depreciation and amortisation)[5] has increased by 6.3% in 2008 to €320 million from €301 million in 2007. EBIT is a key management measurement for the company’s operational performance. The main point for growth of the revenue was purchase of the Freight Management business from TNT during 2007. EBIT was also largely affected by the decrease in the world economy in the latter part of 2008.

Date: 2015-12-24; view: 772