The global freight transport and logistics Group, Panalpina, increased its net forwarding revenue in the first six months 2008 compared to the first half year 2007 by 7.8%, currency adjusted even by 17.5%. In relation to the transport volume, Panalpina managed again to gain additional market share both in the air freight as well as the ocean freight sector. Gross profit was -3.9 % below, but currency adjusted 1.9 % above last year’s figure. Net earnings (CHF 76.7 million) were once again impacted by the situation in Nigeria. Panalpina intends to withdraw its domestic service portfolio from Nigeria, which is planned to be taken over by local investors.
CEO Monika Ribar is content with the results achieved in the first six months of 2008, particularly in view of the slowing down of the worldwide economy towards the end of the 2nd quarter. “Factors such as the global finance crisis and the rising prices of raw materials have affected investment- and consumer behaviour in many countries and therefore growth in air- and ocean freight has also slowed. Despite this we increased transport volumes and net forwarding revenue compared to the extraordinarily strong first half of 2007. This is a strong indication that our company is very customer-focused and close to the market,” explained Monika Ribar.
“With the new management structure implemented three months ago, the clear strategic focus on the core activities and group wide implemented compliance- and cost-cutting-programmes, we are perfectly prepared for the challenges ahead”, she further elaborated.
The Panalpina Group increased its net forwarding revenue in the first six months of 2008 by 7.8%, currency adjusted even by 17.5%, compared to the same period of 2007. All regions have contributed to the pure organic growth, mainly Asia/Pacific and Central- and South America with increases of 14.7% and 19.3% respectively. In North America the improvement was 4.1% and in Europe/Africa/Middle East/CIS 5.7%. With an increase of 10%, Central- and South America also improved its gross profit (contribution margin) significantly, thanks to a great extent to newly acquired business in the Supply Chain Management segment. Asia/Pacific improved its gross profit by 2.3%, whilst Europe/Africa/Middle East/CIS and North America suffered gross profit declines by -5.6% and -9.1% respectively compared to last year’s period. Both regions suffered more than others due to Nigeria-related issues and negative currency effects. An additional negative factor in North America was the slowing-down of the economy.
Compared to the market, Panalpina outperformed both in air- and ocean freight. The air freight tonnage grew by 6.1% (market growth at about 2-3%), and ocean freight volumes (in TEUs) grew by 9.4% (market growth at 5% to 6%). In both core activities, a slow-down of the economy became apparent for the first time in June. Based on net forwarding revenue, air freight grew by 13.1% and ocean freight by 6.7%. On gross profit level, ocean freight improved compared to last year’s figure by 6.3% while air freight declined by 8.8%, mainly due to rising fuel costs and decreasing demand. Furthermore, air freight was more strongly affected by the terminated Nigerian services and fuel surcharges which were passed on to the customers, in many cases with a certain time lag. The margins were under heavy pressure particularly from global customers. However, although ocean freight also suffered from the slowing down of the economy, on certain trade routes the margins were improved.
|(in million CHF)||HY1 2008||HY1 2007||+/-|
|Net forwarding revenue||4,347.4||4,034.6||7.80%|
|Contribution margin (gross profit)||855.7||890.9||-3.90%|
|Consolidated net earnings||76.7||108.4||-29.20%|
The operating results were negatively impacted by expenses in relation to Nigeria as well as the legal proceedings in connection with alleged violations of the anti-trust regulations in the forwarding industry by an amount totalling CHF 39.5 million. Legal and consulting fees of CHF 16.3 million are included in the aforementioned amount. As a consequence, Ebitda decreased by 24.6% compared to the same period in the previous year.
The Board of Directors and the Executive Board of Panalpina have decided to withdraw from the domestic business in Nigeria by the end of 2008. The company will continue to offer transportation services up to arrival port / airport Nigeria, including flight operations and coastal shipping services but will terminate all local and domestic services. In the meantime, Nigerian investors have shown interest in taking over Panalpina’s local service portfolio. They intend to acquire some of Panalpina’s assets and resources for their own company and they also plan to recruit employees from the current Panalpina Nigeria staff. This company will operate completely independently from Panalpina and the Panalpina Group will not have any equity stake in this new company.
Monika Ribar explains, “In view of the Group’s future development, the withdrawal from Nigeria is in the company’s best interest”. She emphasizes that it has not been an easy decision to make. “Admittedly foreign companies operate in an ongoing uncertain and hard to assess legal environment in Nigeria. This makes it difficult for Panalpina to offer both a comprehensive service portfolio and at the same time meet the high ethical standards as outlined in Panalpina’s Code of Business Conduct”, she continues to explain. With the emerging solution customer demands can be fulfilled even after Panalpina’s withdrawal from the domestic and local business.
Even in a more challenging business environment, Panalpina intends to continuously outgrow the market both in air- and in ocean freight. In addition, the recently introduced cost saving program as well as the further standardization and optimization of all processes will have a decelerating effect on the cost development. Based on volume development towards the end of the second quarter as well as industry forecasts, Panalpina expects a slow-down of the growth dynamics in key markets in the second half of the year. This will have an effect on transport volumes. Due to these anticipations and taking into account that the situation in Nigeria will impact the results three months longer than originally planned, Panalpina redefines its financial targets. For 2008, the company adheres to a gross profit increase of 4% but adjusts the Ebitda/Gross Profit margin downwards to 16%. However, adjusted by extraordinary costs, this margin is still on the same level as in the previous year.