UTi Worldwide says it is raising prices for shippers after the global freight forwarder saw its profit margins squeezed amid rapid growth in demand in the company’s fiscal first quarter.
UTi said stronger air and ocean freight volume pushed revenue up 37 percent in the three months ending April 30, but the forwarding and logistics operator’s net profit grew only slightly to $10.1 million because of tight capacity and higher shipping rates.
Shipping volume returned close to the level of two years ago, UTi CEO Eric W. Kirchner said, with rising demand driving a 54 percent gain in air freight gross revenue and a 42 percent in ocean forwarding total revenue, pushing overall gross revenue to $1.06 billion. But net revenue grew only 18 percent, and was up only 7 percent when adjusted for currency fluctuations.
That left UTi’s net profit up only 2.3 percent over the same three-month period a year ago.
Kirchner said UTi now is pressing to pass along the higher rates to its shipping customers.
“Our freight forwarding results were constrained by yield pressure caused by very tight capacity and higher transportation rates,” he said. “We are adjusting our pricing to reflect these higher rates, yet rates continue to be volatile on many trade lanes.
“It is difficult to predict when yields will stabilize, as it will depend on the future rate and capacity environment and our continued ability to adjust pricing. We are intent on achieving our targeted margins, which may adversely impact volume growth in future months. However, we maintain our goal of growing faster than the market,” said Kirchner.