Panalpina with strong volume growth in first quarter 2010

Apr 29, 2010

The Panalpina Group reports strong volume growth in both air (+24%) and ocean freight (+22%) in the first quarter of 2010. Gross profit declined by 13% year-on-year but increased by 5% quarter-on-quarter. Costs were kept at low levels. Profitability per unit of cargo was still under pressure but has been improving sequentially. Settlement discussions with U.S. authorities are nearing finalization with expected fines, other penalties and legal expenses amounting to CHF 120 million.

“We are glad to see the gradual recovery of the global markets continuing and our freight volumes picking up”, says CEO Monika Ribar. “We are well on track with the implementation of our procurement and sales initiatives, managed to keep our costs at low levels and significantly increased productivity. Our volumes have been starting to outpace the market again and I am confident that we will also see our profitability improving further in the coming months”, she adds.

Growth in volumes, decline in gross profit

In the first quarter of 2010, air freight volumes grew in line with market levels (23-25%) by 24% on a year-on-year basis. Ocean freight volumes grew by 22% on a year-on-year basis outpacing the market (15-20%). Despite these very encouraging growth rates, volumes remained below pre-crisis levels. Gross profit declined by 13% year-on-year, but increased by 5% quarter-on-quarter. While profitability per ton of air freight is showing clear signs of improvement, profitability per TEU of ocean freight is still under pressure. In terms of tradelanes, Intra-Asian and Latin American related traffic recorded exceptionally strong growth in both air and ocean freight.

Costs remain at low levels

Personnel and other operating expenses were well under control and tracking significantly below the first quarter of 2009. Productivity measured in shipments handled per FTE was kept at very high levels. EBITDA decreased to CHF 10 million which includes legal fees of CHF 8 million related to ongoing investigations. Net working capital intensity remained low at 2,2%. Net cash and cash equivalents as per March 31, 2010 amounted to CHF 511 million.

Settlement with U.S. authorities at advanced stage

In view of the advanced stage of the settlement negotiations with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC), Panalpina has decided to reserve CHF 120 million, an amount anticipated to cover fines, other penalties and legal expenses relating to the settlement of both the U.S. Foreign Corrupt Practices Act (FCPA) and the U.S. antitrust investigations. This amount will be reflected accordingly in the company's 2010 half year financial statements. The finalization of the settlement with the U.S. authorities is expected in the near future. The above reserve does not cover other ongoing, non-U.S. antitrust investigations against the international freight forwarding industry in particular the proceeding launched by the European Commission as Panalpina is unable to predict the amount of any potential fine with certainty.

No major impact from temporary closure of European air space

Panalpina expects only a minor impact on its business from the recent temporary closure of the European air space. On a positive note, Panalpina through its own-controlled air freight network was able to secure the very first flight of a freighter plane into Europe after the closure of air space. The company’s «Dixie Jet» took off from Huntsville, Alabama on Sunday 18 April at midnight and landed safely in Zaragoza, Spain, on Monday 19 April in the afternoon.

Panalpina Group: Results for the first quarter of 2010

(in CHF millions)Q1 2010Q1 2009
Forwarding services1,9651,996
Net forwarding revenue1,5881,610
Gross profit327375
Consolidated profit0,041,90

“While we are glad to see volumes on the rise in the first quarter, the remainder of 2010 is hard to predict”, says CEO Monika Ribar. “We expect Asia to be the major growth driver in the coming months as consumption in Europe will most likely take more time to recover. Our focus will thus remain on gross profit generation, cost and cash control”, she adds.

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.