Thursday, November 4, 2010

Swiss Freight Group Sound Confident Despite Huge Anti Trust Fines

Panalpina Say New Services and General Upturn Have Helped Profits
Shipping News Feature

SWITZERLAND – Freight forwarding group Panalpina have released third quarter figures which they claim out pace the general freight market trend. The company recorded strong volume growth with a 27% increase in Airfreight and a 16% increase in Ocean Freight year-on-year compared to industry averages they put at 24-25% in air and 12-13% in ocean freight respectively.

The company also believes that an end to some of the difficulties, both fiscal and image related, engendered by the ongoing anti trust cases endemic throughout the industry recently, means they can look forward to a brighter future whilst warning that a slow down of activity in Q3 had an effect due to less restocking activity, a higher comparison base and a shorter-than-usual peak season in ocean freight.

The two US anti trust cases involving the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) Foreign Corrupt Practices Act (FCPA)-related investigations have been completed and finalization of the settlement formalities is expected by the end of the year. For those Panalpina collected a bill of $12 million, covered by the set aside CHF 128 million provision which was charged to the 2010 second quarter financial statements.

However more trouble lies ahead as this amount does not include any provisions for ongoing anti-trust investigations in Switzerland, the EU, New Zealand and Brazil and 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.

From a service point of view additional new own controlled regular air freight services were successfully launched recently and as covered in previous articles. Increased cargo shipping volumes 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).

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.

Photo:- Courtesy of Panalpina