Geneva, 22 nd September 2009 Panalpina a leading global Supply Chain Management company
22 nd September 2009 2 Panalpina at a glance Comprehensive global network Worldwide no. 3 in Air freight, no. 4 in Ocean freight Among top 15 in Supply Chain Management 500 own offices in over 80 countries > 13 000 employees Financial highlights (2008) Net forwarding revenue: CHF 8.9 billion ( 5.6 billion) Gross profit: CHF 1.7 billion ( 1.1 billion) EBITDA: CHF 241 million ( 152 million) Net earnings: CHF 114 million ( 72 million) Air Freight Three business segments Ocean Freight Supply Chain Management Automotive Healthcare & Chemicals Six industry verticals Retail & Fashion Hi-Tech Telecom Oil & Gas
22 nd September 2009 3 Many years with above-market growth Air freight Ocean freight Non-containerized* 901 000 tons (2008) 1 278 000 TEU (2008) 1.35 million tons (2008) 791 000 874 000 947 000 901 000 923 000 1 084 000 1 278 000 1 233 000 0.95 1.20 1.35 0.70 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 *non-containerized break bulk cargo from Oil & Gas and Special Project forwarding
22 nd September 2009 4 and industry-leading returns Return on Capital Employed (ROCE)* in 2008 ROCE (1999-2008)* 45% 45% 40% 40% 35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% Expeditors Kühne + Nagel Panalpina UTI Agility DSV Toll Holdings CEVA Logistics 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 *ROCE defined as EBIT before special items less taxes in % of average equity plus net debt Source: Annual reports *2007/08 on the basis of EBIT before special items Source: Panalpina Long history of delivering attractive returns, in line with industry top performers Value creation through consistently exceeding the cost of capital
22 nd September 2009 5 Gross profit distribution per region and business segment Regions Business segments Gross profit 2008: CHF 1 742 million Europe / Africa / Middle East / CIS (56%) North America (18%) Asia / Pacific (16%) Air Freight (43%) Ocean Freight (32%) Supply Chain Management (25%) Central and South America (10%)
22 nd September 2009 6 Panalpina stands for global presence and complex supply chain solutions with ambitions to grow further PWTN 2015 Complexity of service offering TOLL CHRW KWE DSV UTIW EXPD AGLT CEVA DB Schenker PWTN 2008 KNIN DHL GF Bubble size refers to turnover (in $bn) in 2008. Global network
22 nd September 2009 7 Currently, trade is being hit much harder than production YoY change in % 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% World trade and GDP growth forecasts (%) Total U.S. business inventories/sales ratio Forecast 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E Global real GDP growth World trade growth Precedent years High GDP growth, driven by emerging markets Trade growing at a 1.5 multiple of GDP Sales growing faster than inventories Present Trade forecasted to shrink much more than GDP in 2009 Investments into emerging markets decreasing Inventories falling, but due to collapse of demand 50% of U.S. shippers do not expect restocking to occur before 2010.* Future Is a major short-term boost from restocking activity on the horizon? Will we get back to the growth figures seen in recent years? Will trade still outpace GDP growth as a rule? Source: IMF, World Bank, U.S. Census Bureau *Source: Wolfe Research Shipper Survey, August 2009
22 nd September 2009 8 as a result, 2009 volumes are tracking far below 2008 Panalpina air freight volumes (absolute and % y/y) Panalpina ocean freight volumes (absolute and % y/y) Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Tons 2009 y/y change in % TEUs 2009 % chg 2009 Continuous improvement both year-on-year and month-to-month over the last 4-5 months Volumes still double-digit below prior year in Air and single-digit in Ocean
22 nd September 2009 9 partially compensated by GP margins at record levels 45% Gross profit margins business segments 40% 35% 30% 25% 20% 15% 10% Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Air Ocean SCM GP margins have reached historically high levels as a result of: Declining freight rates to record low levels Falling oil prices, resulting in lower fuel surcharges Focus on profitable business, resulting in high GP per cargo unit
22 nd September 2009 10 and productivity improvements through FTE reduction Development of FTE s and FTE productivity (shipments handled per FTE) Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 FTE SHI/FTE Productivity declined sharply as a result of strongly falling volumes towards year-end 2008 FTE reduction initiated in March 2009 helped to improve productivity Positive recent trend reinforced through customers tendency to opt for smaller shipment sizes
The fundamental growth drivers are intact Roadshow with Bank Vontobel 22 nd September 2009 11 Shippers will continue to expand their reliance on leading logistics partners as SCM complexity and cost pressure continue to challenge int l freight movements. Further consolidation of the market is likely, given the high fragmentation, financial constraints of smaller competitors and the importance of economies of scale. Forwarding and logistics companies continue to grow their share of the market pie as asset owners concentrate on their core competences. Economic growth will come back at some point and coupled with the ongoing globalization process will spur international trade.
22 nd September 2009 12 however a U-shaped scenario is assessed by Panalpina to be the most probable one Optimistic scenario Economy close to hit bottom Fiscal stimulus leading to rebound already before 2010 Quick recovery, similar speed as decline Base scenario: long U-shape Bottom to be reached towards year end Recession lasting well into 2010 Gradual recovery of markets and turnaround during 2 nd half of 2010 with reviving trade flows and globalization Air volumes back at 07 levels in 2013 and ocean in 2012 2010 Worst case: L-shaped, similar to lost decade in Japan Still long way until bottom is reached Depression to last 3-5 years or longer Downward spiral resulting from mass layoffs, collapse of consumer spending, protectionism and reversed globalization today
22 nd September 2009 13 Forwarding proved to be resilient to margin pressure during past down cycles 40% Sales and earnings growth peer group 30% Profit margins (conversion ratio) peer group 35% 25% Y o Y c h a n g e 30% 25% 20% 15% 10% 5%? C o n v e rs io n ra tio in % 20% 15% 10% 5%? 0% -5% -10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E Net forwarding revenue Gross profit EBITDA 0% -5% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E EBITDA/GP margin EBIT/GP margin Median for Panalpina, Kühne & Nagel, Expeditors, UTi Worldwide, CH Robinson, DSV Median for Panalpina, Kühne & Nagel, Expeditors, UTi Worldwide, CH Robinson, DSV
22 nd September 2009 14 The company is well positioned to weather the storm Key success factors in freight forwarding: Be globally present Be responsive to customer needs Deliver constantly high quality Be able to provide complex logistics solutions beyond transportation Manage subcontractors Continued focus on expense control Be able to work in a network and exploit synergies Have an impeccable image and compliant underlying procedures Be innovative Have sufficient financial strength Have an integrated IT Panalpina is well positioned: People business: motivated staff, can do attitude Global network Diversified across industries and trade lanes Asset-light (most asset-light of any publicly listed logistics companies) Strong balance sheet
22 nd September 2009 15 and is on track to achieve its short- and mid-term targets 2009 financial targets Downsize global FTEs by ~1 500 (10% of workforce) Reduce operating expenses by CHF 130 million (see below for details) Adapt cost structure in line with volume development Preserve cash (tight NWC management, low capex, travel ban, no share buybacks) Status quo Number of FTE s reduced by >1 700 as per 30 June Full financial benefits ( run rate ) from personnel cost savings will be visible in second half of 2009 Contingency plans in place in case that volume development in second half-year deviates materially from internal assumptions Other targets Continue to gain market share Implementation of various long-term efficiency improvement initiatives Resolve pending investigations Status quo Large number of new business wins in recent weeks Automation and consolidation of various administrative processes in progress FCPA: completion of investigations in Q4 remains target; Anti-trust: likely to stretch into 2010 Recap of 2009 cost reduction target (vs. 2008, figures in CHF million): 40 Net organic savings 50 Organic savings (resulting from FTE reduction and other implemented cost measures) -10 Severance provisions (booked in 1Q09 due to FTE reduction) 48 One-time costs incurred in 2008 (risk provisions, liquidation Nigerian subsidiary) 37 Reduced cost base as a result of discontinued business as of 1 Oct 2008 5 Reduction in anticipated legal fees in 2009 vs. 2008 130 Cost reduction target in 2009
22 nd September 2009 16 Panalpina s way to sustainably maintain global leadership Growth Refocus sales activities on strategic products and customer segments while maintaining leadership with Global Accounts Build on existing expertise to provide global Supply Chain Management solutions in key industries Focus on growth opportunities in ocean freight Leverage air freight competence Cost control People & systems Reach cost competitiveness Drive process discipline and quality Continually invest in our people Commit to our global network Continually invest in integrated and standardized IT systems
22 nd September 2009 17 Recap of investment highlights Leading global network and leverage through size and scale of operations Market leadership in freight forwarding and supply chain solutions Limited cyclicality and high returns on capital due to assetlight business model Strong net cash position and potential to improve profitability Differentiation through customerfocused approach and specialist industry expertise Long-term industry growth prospects with goal to gain market share
22 nd September 2009 18 Appendix
22 nd September 2009 19 First half 2009 Executive summary Gross profit for the Group declined 9% on a like-for-like basis Targeted CHF 130m savings on track underlying operating expenses declined 4% Number of FTEs reduced by 11% during first half-year, ahead of target Group performance impacted by legal fees, FX, discontinued business: Net forwarding revenue Gross profit Operating expenses EBITDA Net earnings Result 1H09 (CHF million) 2 973.4 727.4 675.9 51.5 16.9 Growth y/y 1H09 (actual) -31.6% -15.0% -6.7% -60.9% -77.9% Growth y/y 1H09 (local currencies) -28.1% -11.5% Strong cash flow generation (free cash flow of CHF 155m, up 175%), resulting in net cash position of CHF 433m (>20% of market cap) -3.5% -56.9% -79.5% Growth y/y 1H09 (like-for-like) -8.8% -4.3% -34.4% Year-on-year volumes and gross profit impacted by continued weak market environment; quarter-on-quarter volume improvement: 1H09: development of volumes vs. gross profit Growth (y/y) Volumes GP GP (excl. FX) Air (tons) -28% -18% -15% Ocean (TEU) -21% -8% -7% Volume growth by quarter: 2Q09 vs. 2Q08: 2Q09 vs. 1Q09: -28% -20% +3% +8%
Gross profit declined 9% on a like-for-like basis (Figures in CHF million) Roadshow with Bank Vontobel 22 nd September 2009 20 1H08 1H09-25 Like-for-like growth: -9% Reported growth: -15% 831 856 30 757 727 1H08 restated discontinued business* 1H08 actual 1H09 actual FX effect 1Q09 adjusted * Adjustment for discontinued business for which GP was still recorded during 2008 (refer to Appendix for details)
22 nd September 2009 21 Total expense overview reveals cost base on track to achieve targeted CHF 130m savings in 2009* 420 Opex reported Opex adjusted 400 396 (CHF million) 380 360 340 365 346 359 342 381 351 338 361 333 320 300 315 301 280 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 FTE 30 Jun 09 13 530 31 Dec 08 15 270-1 740 % -11% Reduction of more than 1 700 FTEs over the last six months, ahead of target Resulting cost savings started at the end of Q1 major effect expected in second half-year Strict cost control to continue cost structure / FTEs adapted in line with volume declines * based on originally guided CHF 40m legal fees
22 nd September 2009 22 Outlook for current business year review of Guidance Guidance 2009 Reduction of 1 400 1 600 FTEs Reduce operating expenses by CHF 130m* Market share gains CHF 40m legal fees related to pending investigations Tax rate 26 27% Status Assessment Ahead of target continue to adapt cost structure in line with volume development. Full financial benefits ( run rate ) from personnel cost savings will be visible in second half of 2009 Substantially lower volumes with larger customers, especially in Automotive / Hi-Tech. Recent business wins should have positive impact in 2 nd half-year. Likely to exceed guided amount fees can be influenced by the Group only to a limited extent On track YoY volume declines should lessen in H2, however no substantial short-term recovery expected: Strict cost control and tight cash management continue and remain a high priority Focus on growth opportunities and continually invest in people & systems * based on originally guided CHF 40m legal fees