Panalpina reports a 39% increase in free cash flow despite lower volumes and gross profits

Nov 5, 2009

The Panalpina Group significantly increased its transport volumes in the third quarter of 2009 compared to the second quarter of 2009. Air freight volumes grew by 10% and ocean freight volumes by 13%. Compared to the first nine months of 2008, free cash flow increased by 39% to CHF 161 million despite 18.5% lower gross profits. In terms of operating costs, Panalpina is well on track to achieve the previously announced full year CHF 130 million reduction.

"Between the second and third quarter of 2009, Panalpina recorded higher volumes in both air and ocean freight“, comments CEO Monika Ribar. “But as the numbers in the 9-month comparison clearly show, the market environment remains extremely difficult. This is why we continue to intensify our sales efforts by optimizing our customer mix and by expanding our offerings in global supply chain management. While there is no short-term solution for the current challenges, I am confident that these measures will pay off in due course”.

Volumes recovering at low levels

Air freight volumes grew by 10% and ocean freight volumes by 13% between the second and the third quarter of 2009. On a year-to-year basis, air freight volumes were down by 25% and ocean freight volumes by 18%. While these numbers reflect weak development on many trade lanes, Panalpina has gained air freight market share on the transpacific trade lane and ocean freight market share on Asia-Europe, the company’s most important ocean freight trade lane. Gross profit declined by 18.5% to CHF 1,065 million and has been impacted during the third quarter by significantly higher freight rates that could not be fully passed on to customers. EBITDA decreased to CHF 73 million having been negatively impacted by year to date legal fees of CHF 44 million which are related to ongoing investigations.

Anti-trust investigation in Canada closed

The Canadian Competition Bureau has closed its investigation with respect to alleged anti-competitive activity in the international freight forwarding industry citing a lack of evidence that would substantiate an undue lessening of competition. Other investigations of several competition authorities against various major freight forwarding companies are ongoing. However, so far no formal allegations have been made against Panalpina.

Ongoing refocus of sales efforts

In order to better align the company in this difficult market environment, Panalpina has stepped up its sales efforts. Measures include an increased focus on the SME segment in order to optimize the customer mix and on extending its offerings in the field of global supply chain management. In addition, the design and implementation of a trade lane management concept, the appointment of a Global Head of Sales reporting directly to the Executive Board, intensified sales training as well as improved visibility and transparency are anticipated to spur growth in the coming quarters.

Cost reduction well on track

The cost-savings program announced in March this year continues to yield positive results. Operating costs are developing on track to achieve the targeted CHF 130 million (currency-adjusted) reduction.

Panalpina Group: Results for the first nine months of 2009

(in CHF millions)Q1-Q3 2009Q1-Q3 2008Q3 2009Q3 2008
Forwarding services5,4718,0271,7652,833
Net forwarding revenue4,3896,7191,4152,372
Gross profit1,0651,307338451
Consolidated net earnings21105528

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.