Forwarder and logistics provider UTi Worldwide announced a massive restructuring, shedding portions of its logistics businesses, cancelling loss-making contracts and shaking up senior management as it prepares to announce lower than expected fourth-quarter earnings.
The Long Beach, Calif.-based company plans to reduce by 1,400, or 7 percent, its worldwide workforce of approximately 19,000. An additional 1,000 workers will be let go when UTi's outsourcing contract with Wal-Mart ends on March 1.
The company also will restate its earnings for fiscal 2006, 2005 and 2004.
The most recent quarterly statement showed the company generated $1.18 billion in gross revenue for the third quarter of 2007, with net revenue of $391 million and net income of $34.8 million. UTi's last annual report, filed in January, 2007, showed $3.56 billion in gross revenue, $1.22 billion in net revenue and net income of $107.9 million.
Assembled from more than 40 acquisitions since 1999, UTi prided itself on having built a global organization from the ground up. Now, Chief Executive Roger I. MacFarlane said the company will exit its retail distribution business in Africa, surface distribution and integrated logistics in the Americas and loss-making contract logistics business in the Americas.
For his part, MacFarlane said he had no comment on a possible acquisition of UTi. "We've said that our intention is to run UTi for the long term as an independent company," he said.
As part of the restructuring, MacFarlane will become chief operating officer in addition to his CEO role. William T. Gates was appointed president of global contract logistics and distribution, while M.J. Wessels will become chairman of the board, effective in June.
MacFarlane said the new restructuring will cut up to $110 million from operating expenses, 70 percent of that related to labor.
In a conference call with investment analysts Nov. 8, MacFarlane said, "I do think we are trying to get back to what we were doing." He said UTi would extend its moratorium on acquisitions for another 12 months.
MacFarlane said UTi still plans to offer end-to-end supply chain services, "though we haven't done well on executing all the pieces."
Looking forward, MacFarlane said, "This will be a very challenging year?particularly as we are facing uncertain economic conditions." But he said some of the company's problems also stemmed from accepting contracts whose implementation later resulted in losses.
He characterized the restructuring announcement as a move to anticipate as much as react to changing economic conditions. "We have slimmed down the operation in anticipation of a tighter economic environment," he said.
-- William Hoffman, Traffic World