“These results confirm that we are on the right path with our focus on a product-driven organization led by our industry verticals. We are continuing to outgrow the market with above average volume growth in both Air and Ocean Freight”, stated CEO Monika Ribar. “With a gross profit increase of 13% compared to the third quarter 2009, our customer-oriented growth strategy is showing results”, she said.
Panalpina increased its forwarding volumes by 27% in Air and 16% in Ocean Freight in the first nine months of 2010. These results clearly surpassed the average market growth of 24-25% in air and 12-13% in ocean freight. However the market began to slow in the third quarter and this was largely due to less restocking activity, a higher comparison base and a shorter-than-usual peak season in ocean freight. Compared to the third quarter of 2009, gross profit rose by 13% (19% in local currencies) to CHF 382 million. The overall increase in gross profit was supported by double digit growth across all regions in local currencies. The company recorded strong development in free cash flow generation amounting to CHF 79 million in the third quarter 2010 (vs. CHF 46 million in the third quarter 2009); supported by a record low net working capital intensity of 1.7%. Cash and cash equivalents as per September 30, 2010 amounted to CHF 526 million.
Increased shipping volume resulted in a moderate growth in the company’s overall operating costs in the third quarter. In order to accommodate the increase in shipping volumes and business wins, the number of personnel increased primarily in Asia and North America. This strategy has proven effective as productivity has remained at high levels and EBITDA rose to CHF 59 million in the third quarter 2010 (vs. CHF 22 million in the third quarter 2009).
In the third quarter Panalpina successfully launched its additional new own controlled regular air freight services connecting Luxembourg with the new Dubai World Central-Al Maktoum International Airport and as a result was the first ever scheduled freighter service to call at the new state-of-the-art airport. Dubai is now being regularly served as part of Panalpina’s new round the world rotation connecting Luxembourg, Dubai, South Africa, Hong Kong, North America and Latin America. The service enables the company to offer its customers a unique and highly flexible solution for time sensitive airfreight, including fast turnaround times from cargo arrival to delivery. At the same time, Panalpina introduced a new express service to Brazil with an airport-to-airport transit time of 30 hours from Hong Kong via Huntsville, Alabama to São Paulo in order to meet the high demand for fast and reliable connections from Asia to Brazil.
The U.S. antitrust case was settled in the third quarter and Panalpina will pay a related fine of USD 12 million to U.S. authorities. The U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) FCPA-related investigations have been completed and finalization of the settlement formalities is expected by the end of the year. Both cases in the U.S. are covered by the CHF 128 million provision which was charged to the 2010 second quarter financial statements. This amount does not include any provisions for ongoing anti-trust investigations in Switzerland, the EU, New Zealand and Brazil as Panalpina is unable to predict the amount of any potential fine. A statement of objections was received from EU competition authorities in February 2010 and Panalpina submitted a written response at the end of April. An oral hearing before the Commission’s case team took place in July and no decision is expected before mid-2011.
|(CHF million)||Q3 2010||Q3 2009||YTD 2010||YTD 2009|
|Net revenue from forwarding services||1,874||1,415||5,355||4,389|
|Consolidated profit (adjusted)||34||5||69||22|
Entering the final quarter of 2010, CEO Monika Ribar comments that “our targets for 2010 are well on track for full achievement in 2010. We have further strengthened the organization with the appointment of 3 new product heads (Air Freight, Ocean Freight, Logistics) who will join the company in early 2011. Fulfilling these key positions with recognised industry leaders marks the completion of the adaptations to our organization which we announced earlier this year. I believe that our focus on customers, products and industry verticals will support our goal to continuously expand our market share. I am very pleased with our increase in profitability which will remain a priority going forward.”
In the fourth quarter 2010, Ms. Ribar is expecting a deceleration of volume growth rates and does not see a peak season shaping up as it has in the past. The peak season for air freight will only be moderate and in ocean freight, the peak season is already over with restocking having taken place early as businesses attempted to avoid shortages and anticipated peak season rates.
Based on the strong year-to-date volume development, Panalpina reiterates its forecasted market growth of at least 15% in air freight and 10% in ocean freight in 2010.