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Panalpina reports solid growth in revenues

Oct 30, 2008

Successfully manages impact by economic decline, currency fluctuations, and Nigeria

Panalpina, the global freight transport and logistics group, increased its net forwarding revenue in the first nine months of 2008 by 6.9% compared to the first nine months of 2007, currency adjusted even by 13.3%. In relation to the transport volume, Panalpina continued to gain additional market share both in the air freight as well as the ocean freight sector. Gross profit decreased by 3.4%, but currency adjusted increased by 2.3%. Net earnings of CHF 105.0 million (-33.9%) were impacted by the termination of the domestic service portfolio in Nigeria as well as the global economic decline and currency fluctuations.

«Panalpina has managed to generate respectable growth in a very adverse global business climate», says CEO Monika Ribar. «Taking one-time effects and currency fluctuations out of the equation, it becomes evident that the underlying business is very healthy. All regions are showing growth and we are continuing to gain market shares in air as well as in ocean freight. With our asset-light strategy and global network, our focus on global supply chain management and a strict cost-controlling program that has been in place since February 2008 and will be continued, we are well positioned for the challenges to come».

Growth in all regions

The Panalpina Group increased its net forwarding revenue in the first nine months of 2008 by 6.9%, currency adjusted even by 13.3%, compared to the same period of 2007. All regions have contributed to the growth, mainly Asia/Pacific and Central and South America with increases of 14.8% and 15.7% respectively. In North America the improvement was 5.1% and in Europe/Africa/Middle East/CIS 4.3%. With an increase of 8.1 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 3.5%, whereas Europe/Africa/Middle East/CIS and North America suffered gross profit declines by -5.1% and -8.5%, respectively, compared to last year’s period. Both regions suffered more than others due to Nigeria-related issues, currency fluctuations and the global economic decline.

Market share gains in both air and ocean freight

Growth slowed down in both air and ocean freight. The air freight tonnage grew by 1.4% and ocean freight volumes (in TEUs) grew by 7.1%. In both core activities, the effects of the global economic decline have become more visible. Based on net forwarding revenue, air freight grew by 13.3% and ocean freight by 2.9%. On gross profit level, ocean freight improved compared to last year’s figure by 3.1% while air freight declined by 5.4%, mainly due to rising fuel costs and decreasing demand.

Panalpina Group: Results for the first nine months of 2008

(in million CHF)Q1-Q3 2008Q1-Q3 2007+ / -
Forwarding services8,026.97,712.84.10%
Net forwarding revenue6,719.36,287.46.90%
Contribution margin (gross profit)1,307.11,352.7-3.40%
Ebitda202.5272.5-25.70%
Ebit167.5224.4-25.40%
Consolidated net earnings105158.8-33.90%

Result impact due to Nigeria but strong balance sheet and net cash position

The operating results were negatively impacted by CHF 77 million including one-time expenses due to the withdrawal from Nigeria as well as costs associated to ongoing investigations; legal and consulting fees of CHF 26 million are included in the afore-mentioned amount. As a consequence, Ebitda decreased by 25.7% compared to the same period in the previous year. At the same time Panalpina’s balance sheet and net cash position continue to be very strong.

Outlook

Due to the global economic decline Panalpina expects slowed growth in key markets for the last three months of the year which will impact transport volumes. As a result, Panalpina updates its financial targets: for 2008 the company expects a neutral or slightly positive gross profit growth (currency adjusted) and readjusts the Ebitda/gross profit margin to 13-14%. In the light of the global economic development and the uncertain outlook Panalpina gives no guidance on 2009 gross profit improvement but guides for margin improvement.

«The current market situation is challenging us to make ourselves even more adaptable and efficient. Despite the economic decline, there are still vast growth opportunities in our heavily fragmented market. Panalpina is well balanced across all the regions, all global trade-lanes and key industries. Additional to that Panalpina is debt-free and can rely on a strong management team. Moreover Panalpina is among the top tiers of the industry and in a favorable position to gain further market shares in the mid and long term», says CEO Monika Ribar.

About Panalpina

The Panalpina Group is one of the world's leading providers of supply chain solutions. The company combines its core products of Air Freight, Ocean Freight, and Logistics to deliver globally integrated, tailor-made end-to-end solutions. Drawing on in-depth industry know-how and customized IT systems, Panalpina manages the needs of its customers' supply chains, no matter how demanding they might be. Energy Solutions is a specialized service for the energy and capital projects sector. The Panalpina Group operates a global network with some 500 offices in more than 75 countries, and it works with partner companies in a further 90 countries. Panalpina employs 15,000 people worldwide who deliver a comprehensive service to the highest quality standards – wherever and whenever.