Panalpina achieves a solid result in a difficult market environment

Thanks to strict cost management and a consistently implemented cost-cutting program, the Panalpina Group succeeded in significantly reducing its cost base year-on-year and as a result was able to compensate for the fall in volume. Compared to the prior-year period, free cash flow increased by 175%, and compared to the first quarter of 2009, air freight volume rose in the second quarter of 2009 by 3%, ocean freight by 8%. A large number of new business deals in the SME customer segment failed to compensate for the falloff in volume from large customers. Currency fluctuations had a negative impact on results. Gross profit fell by 15% compared with the same period in 2008 (-11.5% in local currency terms). Net earnings for the first six months amounted to CHF 16.9 million.

"Panalpina suffered a sharp fall in ocean and air freight volumes in nearly all trade lanes. Newly acquired businesses also failed to make up for the losses, which had a negative impact on the first-half results,“ comments CEO Monika Ribar. By contrast, freight volumes increased in the second quarter compared with the first three months. "In addition, thanks to our consistently implemented cost management program, coupled with an excellent cash flow position and a forward-looking sales strategy, we are well-positioned to master the challenges of the global business environment, which is expected to remain difficult in the second half-year.“

Sharp fall in air and ocean freight
In line with the first-quarter forecast, global freight in nearly all trade lanes also fell in the second quarter compared with the previous year. Positive trends were reported in niche lanes such as Asia-Oceania and intra-Asia, but this was insufficient to compensate for the drop in traffic between Asia and Europe and on the trans-Atlantic and trans-Pacific shipping routes. On the other hand, between April and June, Panalpina posted a 3% increase in air freight compared with the first quarter and an 8% increase in ocean freight. Compared with the first half of 2008, air freight fell by 28% in the first half of 2009 and ocean freight by 21%. This was attributable to several factors. Massive cuts in production in key industries – notably automotive, hi-tech and telecommunications – had a major impact on Panalpina, which has a strong presence in these sectors. The market was also affected by a cut-throat price war, with transport prices well below cost. While Panalpina remains committed to its goal of faster-than-market growth over the long term, the Group intends to refrain from short-term acquisition of market shares at the expense of profitability.

Strict cost management
The additional cost-cutting program announced in March has already yielded positive results. Around 11% of the global workforce had been cut by the end of June. At the end of the first half-year Panalpina had 1,700 fewer full-time positions than at the end of 2008. The resulting savings will be reflected fully in the second half-year results. Strict cost control has had a positive impact on operating costs, which were already 11% lower in the second quarter of 2009 compared with the fourth quarter of 2008. The company is therefore convinced that it can reduce its 2009 operating costs compared with 2008.


(In CHF millions)	1st half 2009	1st half 2008	Q2 2009	Q2 2008

Forwarding services	3,706.4	5,193.6	1,710.3	2,636.3
Net forwarding revenue	2,973.4	4,347.4	1,363.3	2,213.4
Gross profit	727.4	855.7	352.3	432.1
EBITDA	51.5	131.6	37.1	72.9
EBIT	26.6	108.1	23.7	61.2
Consolidated net earnings	16.9	76.7	15.0	44.5





2009 Half Year Results - Datasheet	169 Kb





2009 Half Year Review - Presentation	249 Kb

Outlook
"We do not anticipate a significant improvement in the global market environment or even a recovery in the global economy in the second half-year. Thanks to strict cost management, the pursuit of a long-term, profitable growth strategy, and the fact that we are debt-free and intent on maintaining high liquidity, we are confident about the Group's development over the mid to long term," explains CEO Monika Ribar.

The Panalpina Group
The Panalpina Group is one of the world's leading suppliers of forwarding and logistics services, specializing in end-to-end supply chain management solutions and intercontinental air freight and ocean freight shipments. Thanks to in-depth industry know-how and state-of-the-art IT systems, Panalpina provides globally integrated door-to-door forwarding services tailored to its customers' individual needs. The Panalpina Group operates a close-knit network with some 500 branches in over 80 countries. In a further 80 countries, it cooperates closely with partner companies. The company employs around 14,000 people worldwide.