Panalpina gains market share and significantly improves profitability

Aug 4, 2010

In the second quarter of 2010, the Panalpina Group posted substantial growth in forwarding volumes in both air freight (+36%) and ocean freight (+19%), gaining market share in both segments. At the same time, the company increased profitability per freight unit quarter-on-quarter and was able to keep costs tightly under control. The settlement negotiations with the U.S. authorities should be concluded in the second half of the year. In the second quarter, Panalpina set aside a CHF 128 million compliance provision to cover expected fines and future compliance consultancy costs.

"The global markets continued to recover in the second quarter of 2010 and we achieved above-average growth in our forwarding volumes. We even had the best June ever in terms of air freight volumes," comments CEO Monika Ribar. "The measures we took to improve profitability are also bearing fruit. In addition to continued strict cost discipline, we have made substantial progress in procurement and sales. Our clear focus on customers is proving successful and we were able to adjust our prices in line with freight rate development. This enabled us in the second quarter to achieve higher gross profit per ton in air freight and per TEU in ocean freight, compared to the first quarter," Ms. Ribar emphasized.

Volume growth and higher gross profit in second quarter

In the second quarter of 2010, Panalpina increased forwarding volumes by 36% in air freight and 19% in ocean freight. As the air freight market grew by 28-30% and the ocean freight market by 10-13%, Panalpina gained market share in both segments. Compared to the second quarter of 2009, gross profit rose by 8% to CHF 380 million.

Clear recovery in several industry verticals

A number of industry verticals that are important for Panalpina, such as the automotive, hi-tech, and telecommunications industries, were hit particularly hard by the economic crisis in 2009; this adversely impacted Panalpina's business activities. The recovery in these sectors is therefore all the more gratifying, as it has enabled Panalpina to record a significant increase in revenues in the second quarter 2010. Other important industry segments for Panalpina which have posted above-average growth include Chemicals, Consumer and Retail as well as Fashion.

Costs remain under tight control

Personnel costs have been kept under control despite new hires in a number of regions. The increase in personnel took place primarily in Asia and North America, where employees were hired to accommodate higher volumes and business wins. EBITDA decreased to negative CHF 64 million in the second quarter due to the CHF 128 million provision to include potential fines and compliance consultancy costs related to alleged violations of the U.S. Foreign Corrupt Practices Act (FCPA) and U.S. antitrust laws. Excluding this provision, EBITDA amounted to positive CHF 64 million in the second quarter.

Negotiations with U.S. authorities close to finalization

The U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) have completed their FCPA-related investigations and the settlement negotiations with both authorities should be concluded soon. Panalpina expects the signing of the settlement documents sometime in the second half of the year, which explains why a provision of CHF 128 million is included in the figures for the second quarter. This amount also includes anticipated fines related to the U.S. antitrust investigation but does not cover other ongoing anti-trust investigations against the international forwarding industry, in particular the European antitrust investigation, as Panalpina is unable to predict the outcome of such proceeding and related potential fine. The EU Commission is not expected to reach a decision before 2011.

Panalpina Group: Key figures for the second quarter of 2010

(In CHF millions)Q2 2010Q2 2009
Forwarding services2,2881,710
Net revenue from forwarding services1,8941,363
Gross profit380352
Compliance Provision128-
EBITDA (adjusted)6437
Compliance Provision128-
EBIT (adjusted)5024
Consolidated profit-9315
Compliance Provision128-
Consolidated profit (adjusted)3515


Looking to the rest of the year, CEO Monika Ribar is cautiously optimistic: "I am convinced that the measures we have put in place are taking effect and look forward to our future business development with confidence. In the coming months profitability will remain our chief priority," she explains. "We are continuing to build in a structured manner on the initiatives that we have successfully implemented in procurement and sales. Clear product segmentation and our strong customer focus have had an extremely positive impact. Although higher volumes are likely to put pressure on our cost base, we shall continue to operate on the principle of sustainable profitable growth."

With regard to the economic environment, Ms. Ribar still sees some uncertainty in a number of countries, in particular those in which state-initiated economic stimulus packages are being allowed to expire. Concerning developments in forwarding volumes, Panalpina forecasts market growth of 15% in air freight and 10% in ocean freight in 2010.

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.