Panalpina –a leading asset-light forwarding and logistics ... · PDF filePanalpina –a leading asset-light forwarding and logistics provider. 2 ... Schenker Panalpina Kühne & Nagel

Bad Ragaz, January 2009 Helvea Swiss Equities Conference

Panalpina – a leading asset-light forwarding and logistics provider

2

Investing in the shares of Panalpina World Transport Holding Ltd involves risks. Prospective investors are strongly requested

to consult their investment advisors and tax advisors prior to investing in shares of Panalpina World Transport Holding Ltd.

This document contains forward-looking statements which involve risks and uncertainties. These statements may be identified by

such words as “may”, “plans”, “expects”, “believes” and similar expressions, or by their context. These statements are made on the

basis of current knowledge and assumptions. Various factors could cause actual future results, performance or events to differ

materially from those described in these statements. No obligation is assumed to update any forward-looking statements. Potential

risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and

pricing pressures and regulatory developments.

The information contained in this document has not been independently verified and no representation or warranty, express or

implied, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or

opinions contained herein. The information in this presentation is subject to change without notice, it may be incomplete or

condensed, and it may not contain all material information concerning the Panalpina Group. None of Panalpina World Transport

Holding Ltd or their respective affiliates shall have any liability whatsoever for any loss whatsoever arising from any use of this

document, or its content, or otherwise arising in connection with this document.

This document does not constitute, or form part of, an offer to sell or a solicitation of an offer to purchase any shares and neither it nor

any part of it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. This information

does neither constitute an offer to buy shares of Panalpina World Transport Holding Ltd nor a prospectus within the meaning of the

applicable Swiss law.

Disclaimer

Disclaimer

3

Business and market overview – still a highly fragmented market with potential for FLC to increase their share

9.5

5.34.1

3.1

DHL DB

Schenker

Panalpina Kühne &

Nagel

Air freight turnover (CHF bn)

6.95.9 5.7

3.3

Kühne &

Nagel

DHL DB

Schenker

Panalpina

Ocean freight turnover (CHF bn)

Air Freight Ocean Freight Supply Chain Management

~ CHF 111 bn

21.5

5.7 4.51.3

DHL CEVA Win-

canton

… Pan-

alpina

SCM turnover (CHF bn)

Market size (2007)

FLC penetration rate

~ CHF 286 bn ~ CHF 1’494 bn

~ 85% ~ 34% ~ 15%

Market share Top 10 FLC* ~ 43% ~ 37% ~ 25%

FLC = forwarding/logistics companies

* base: services provided by forwarding/logistics companies only

Market and competition

Market position

among

top 15

Global

#4

Global

#3

4

The long-term industry trends are favourable…

Economic growth

and globalization

Outsourcing

Increasing market

entry barriers

Consolidation

• Ongoing globalization with trade flows growing at a multiple of world GDP

• Long-term historical growth rates air freight ~5%, ocean freight ~9%, SCM ~8%

• Exporters strive to reduce costs by streamlining their supply chains

• Forwarding and logistics companies continue to grow their share of the market pie as asset owners concentrate on their core competencies

• Continued demand for complex supply chain management solutions

• Requirement of a strong balance sheet, global network & an integrated IT platform

• Driven by economies of scale and customer requirements for global coverage

• Integrators and conglomerates are moving into the forwarding segment

� Long-term market perspectives remain intact

� Defensive nature of the freight forwarder model during times of economic downturn

� Panalpina has historically outgrown the market by 4-5% and aims to continue outpacing the market

� Long-term market perspectives remain intact

� Defensive nature of the freight forwarder model during times of economic downturn

� Panalpina has historically outgrown the market by 4-5% and aims to continue outpacing the market


5

…however with a recent change in the pattern of world trade

Shift from air to

ocean freight

Overcapacities in

carrier market

Oil price volatility

Uncertain outlook

• Air freight approx. 8-10 times more expensive than ocean freight

• High-value goods, emergency shipments will continue to go by air

• Supply side exceeding demand side, resulting in pressure on freight rates

• Shifting purchasing power from carriers to freight forwarders

• Fuel surcharge mostly a pass-through item for freight forwarders

• Indirect effect through effect on consumption and inflation

• Macroeconomic forecasts subject to constant revision

• No consensus on how long economic downturn will last

� Large freight forwarders and logistics companies with diversified service offering and low asset intensity are well positioned to weather stormy markets

� Flexibility of business model is a key success factor!

� Large freight forwarders and logistics companies with diversified service offering and low asset intensity are well positioned to weather stormy markets

� Flexibility of business model is a key success factor!


6

Forwarding proved a resilient business model during past down cycles

Sales and earnings growth peer group Profit margins (conversion ratio) peer group


Median for Panalpina, Kühne & Nagel, Expeditors, UTi Worldwide, CH Robinson, DSV

Median for Panalpina, Kühne & Nagel, Expeditors, UTi Worldwide, CH Robinson, DSV

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2000 2001 2002 2003 2004 2005 2006 2007

Yo

Y c

ha

ng

e

Net forwarding revenue Gross profit EBITDA

Improving Improving Peak WorseningTroughTroughWorseningPeak

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1999 2000 2001 2002 2003 2004 2005 2006 2007

Co

nv

ers

ion

ra

tio

in

%

EBITDA/GP margin EBIT/GP margin

Improving Improving Peak WorseningTroughTroughWorseningPeak Peak


Company overview and strategy

8

Panalpina is present around the globe

Asia / Pacific3’000 employees

Europe / Africa / Middle East / CIS8’000 employees

North America2’400 employees

Central andSouth America2’000 employees

Panalpina office

Partner company / Agent


Note: no Panalpina office in Nigeria from October 2008

9

Our business is diversified across several key industries…

Automotive

• 10-15%

• BMW, Bosch, VW, Continental, Volvo

• Increasing cost pressures drive outsourcing and global sourcing evaluation

• Economic conditions forcing OEM and Tier 1 downsizing and production cuts in several major markets

• Provide solutions with end-to-end products to reduce cost and create value to customers

• SCM focus with internal training and external marketing

Healthcare Retail & Fashion Hi-Tech Telecom Oil & Gas

• 5-10%

• BASF, Roche, Syngenta, Novartis

• Technological advances further enhance transparency requirements, i.e. lot traceability

• Need for direct-to-customer distribution channels, i.e. DtP

• Regulatory compliance

• Offer end-to-end cold chain competence

• Service predictability

• ~10%

• Adidas, H&M, Zara, Swatch, P&G, Nestlé

• Export distribution centers; order phasing, product velocity and SKU level supply chains

• IT collaboration and product visibility

• Security and green logistics

• Operational excellence

• Value creation, end-to-end solutions and customer intimacy

• Supply chain management as an order winner

• 15-20%

• HP, Lenovo, IBM, Philips

• Shift from air to ocean to save costs

• Increased focus on green logistics drives development of new products

• Enhance supply chain mgmt solutions

• Introduction of new services (e.g. rail-air)

• Gain high-volume profitable new business to feed own-controlled network

• 10-15%

• Alcatel-Lucent, Nokia Markets, Huawei

• Network Infrastructure Equipment producers focus on emerging markets (e.g. Africa, India, Latin America)

• OEM’s exposed to falling profits

• Development of Telecom concept for last-mile delivery in Africa

• Reverse logistics

• 10-15%

• Chevron, Schlumberger

• High energy demand

• Dynamic of NOC’s

• Deepwater business

• Increased emphasis on logistics visibility

• Win back more customers in the wake of FCPA investigation

• Effectiveness of IV end-to-end solutions

Exposure in % of

group NFR

Key market trends

Key initiatives to

drive growth

We grow together with our customers and maintain a diversified exposure across various industries.

Our goal is to continue to gain market share!

Examples of key

customers


10

…and well-balanced across all global trade lanes

Asia-Europe Transatlantic Transpacific

~30-35%

• Slowdown from previously double-digit growth to declining

• Supply/demand ratio expected to remain stable due to capacity cuts already implemented by carriers

• Sharp slowdown from 2007 to 2008

• Market demand lagging behind supply, resulting in continuing pressure on freight rates

• Abolition of FEFC liner conference in October 2008 led carriers to implement their own pricing systems

~15%

• Moderate growth rates of last few years dropping to negative

• Some carriers reducing flights and freighter capacities

• Weak growth in 2008, driven by US exports; US-inbound contracting

• New surcharge system implemented by carriers in June 2008 after TACA’s closure

• Declining load factors result in spot rate reductions

~10-15%

• Traditionally strong China-US growth rates dropping to below zero towards the end of this year

• No peak season in late 2008

• Flat growth in 2008; strong US exports but contracting US imports

• Ocean carriers announced capacity reduction of 15-20%

• Very soft peak season

Key market trends

Air freight

(Combined

air/ocean)

We have a global network reaching beyond the major traffic routes. Our goal is to continue to

gain market share!

Exposure in % of

total vols

Intra-regional /

niche lane traffic

~40%

• Intra-Asia still expected to hold up relatively well in 2009

• Niche lanes such as Asia-Africa or Asia-Latam to show above average growth

• Emerging economies also slowing down, affecting intra-regional and Middle East trades

Key market trends

Ocean freight


11

Panalpina has achieved industry-leading returns

0%

5%

10%

15%

20%

25%

30%

35%

40%

Exp

ed

ito

rs

Pan

alp

ina

Kü

hn

e +

Na

gel

Ag

ilit

y

DS

V

UT

I

Ge

od

is

Lo

gw

in

Return on Capital Employed (ROCE)* in 2007

Source: Annual reports

0%

2%

4%

6%

8%

10%

12%

14%

Ex

ped

ito

rs

Ag

ilit

y

Pan

alp

ina

Kü

hn

e +

Nag

el

DS

V

UT

I

Geo

dis

Lo

gw

in

Return on Assets (ROA)** in 2007

Source: Annual reports

*ROCE defined as Ebit less taxes in % of average equity plus net debt **ROA defined as net profit in % of average total assets


12

Panalpina stands for global presence and complex supply chain solutions – with ambitions to grow further

PWTN

2007

KNIN

DB

Schenker

DHL

AGLT

CEVA

EXPD

UTIW

DSV

CHRW

KWE

TOLL

PWTN

2012

Global network

Co

mp

lex

ity o

f se

rvic

e o

ffe

rin

g

Bubble size refers to

turnover (in $bn) in 2007.*

*Pro-forma figures for CEVA and DSV after the acquisition of EGL and ABX, respectively.

PWTN2007


13

Panalpina’s asset-light model helps to balance economic cycles

10%

20%

30%

40%

50%

60%

70%

80%

Freight Forwarding average

Universe average

Integrator average

10%

20%

30%

40%

50%

60%

70%

80%

Freight Forwarding average

Universe average

Integrator average

Demand (volumes)

Boom Slowdown Recovery

Supply (capacity)

OvercapacityDemand overhang

Economic cycles and their effect on freight rates Asset intensity (2007 non-current assets/total assets)

•During periods of overcapacity (often initiated

by an economic slowdown), rates tend to fall

•Falling rates benefit freight forwarders’ gross

yields temporarily as they purchase capacity

•During periods of overcapacity (often initiated

by an economic slowdown), rates tend to fall

•Falling rates benefit freight forwarders’ gross

yields temporarily as they purchase capacity

•Profitability of asset-light freight forwarders is

partially hedged against economic cycles

•Panalpina has the lowest asset intensity of

publicly listed forwarders in the sector

•Profitability of asset-light freight forwarders is

partially hedged against economic cycles

•Panalpina has the lowest asset intensity of

publicly listed forwarders in the sector


14

Several efficiency improvement programs under way

Gross profit

Organizational

set-up

Core processes

Indirect sourcing /

spending

High

Low

Impact on

bottom line Lever

• Direct procurement costs down

• Profitable volume up

• Optimize mix

Defined actions

• Define top 5 vendors by area and type of service and define savings potential

• Renegotiate rates and realize savings

• Benchmark consolidation benefits internally and define actions

Planned / ongoing initiatives

• Gross profit, GPI

KPI‘s

Review global corporate set-up:

• Number of areas, business units etc.

• Number of layers

• Functions at each layer

• Reduction of number of areas

• Reduction of layers, support and management functions based on internal benchmarking

• Personnel expenses, PGP

• Optimize ‘purchase-to-pay’

• Optimize ‘order fulfillment’

• Optimize ‘deliver-to-collect’

• see separate slide • Personnel expenses, PGP

• Optimize indirect procurement (expenses for offices & vehicles, maintenance & repair, travel, communications)

• Review and optimize claims handling and insurance costs

• Define and implement quick win opportunities

• Set up pilots

• Realize full potential based on learned lessons from pilots

• Other operating expenses, OGP

Finance and tax• Reduction of financial expenses

• Reduction of tax rate

• see separate slide • Financial exp. in % of EBIT

• Tax rate

Operating exp

ense m

anagement

Net working capital• Reduction of NWC intensity • Reduction of overdue receivables and

WIP, increase of DPO through best practice exchange and tight control

• DSO, overdues in % of A/R

• DPO, accrued cost of services

• Delay in invoicing / WIP


15

Optimization of core processes

‘Purchase-to-Pay’

Core process

• Automatic posting of intercompany invoices to the file – pilot Germany

• Scanning and automatic posting to the file of 3rd party invoices – pilot Northern Europe

• IDS: ‘paperless’ intercompany invoicing – pilot China

• Vendor netting – worldwide implementation ongoing


H2 2009

2010

H2 2009

Ongoing

Anticipated start of impact

‘Order Fulfillment’• Implementation of SAP TM

• E-filing and e-documentation system (=electronic document database)

2010 / 2011

2011 / 2012

‘Deliver-to-Collect’• Automatic posting of bank statements – worldwide implementation ongoing

Ongoing


16

Reduction of non-operating expenses and NWC intensity

Financial expenses

Lever

• Adjust the ‘FX exposure hedging’ approach: bundle exposures and hedge based on consolidated exposure by currency

• Define and implement measures to reduce local financing costs

• Renegotiate bank charges and charges for bank guarantees

• Expand cash-pooling to leverage volume and optimize return on invested cash


2009

Tax rate

• Review subsidiary structures and analyze different tax treatments

• Optimize spreads on intercompany loans and parent guarantees

• Review and optimize ‘debt-to-equity structures’ at subsidiaries and interest rates on intercompany loans

• Optimize dividend distribution/intercompany charge approach in order to reduce withholding taxation

2009

Net working capital

• Consistently reduce payment terms and collect faster (current DSO: 46.4 days) => potential cash generation of CHF 28m per day reduced

• Consistently invoice on time and accurately (current delay in invoicing: 7.1 days) => potential cash generation of CHF 28m per day reduced

• Consistently pay later (current DPO: 25.9 days) => potential cash generation of CHF 23m per day extended

2009

Anticipated start of impact


17

Leverage air freight competence, exploit growth opportunities in ocean freight, and build

on existing expertise to provide complex logistics solutions beyond air and ocean freight

Further enhance expertise in industry verticals

Drive profitable SME sales in strategic trade lanes

Deliver high returns on capital by focusing on process discipline & quality and

maintaining “asset-light” approach

Continue to outpace market growth organically, complemented by selective acquisitions

Panalpina’s strategy cornerstones



Recap of investment highlights

19

Freight forwarding is an attractive sector

Investment highlights

76% 85%

1997 2007 (est)

Forwarders Carriers

28% 34%

1997 2007 (est)

Forwarders Carriers

Global trade grows at a multiple of world GDPMarket penetration of forwarders is still low,

especially in ocean freight

Global forwarders outpace the market,

grabbing market share from smaller players

• Strong correlation between trade growth

vs. GDP growth – long-term multiple of 1.6

• Combined air & ocean freight growth in line

with trade growth

• Strong correlation between trade growth

vs. GDP growth – long-term multiple of 1.6

• Combined air & ocean freight growth in line

with trade growth

• Forwarders’ market share has been steadily

increasing and is expected to grow further

• A lot of potential for forwarders still to be

exploited especially in ocean freight

• Forwarders’ market share has been steadily

increasing and is expected to grow further

• A lot of potential for forwarders still to be

exploited especially in ocean freight

• Market still highly fragmented – Top 10

forwarders’ cumulative market share ~40%

• Panalpina has been steadily gaining market

share by growing faster than the market

• Market still highly fragmented – Top 10

forwarders’ cumulative market share ~40%

• Panalpina has been steadily gaining market

share by growing faster than the market

Trade growth vs. GDP growth, 1980 – 2007

(Correlation: 0.76)

CAGR 1980 – 2007

Source: IMF, Morgan Stanley

Source: IMF, IATA, Drewry, own estimates

3.8%

5.2%6.1%

9.1%

0%

2%

4%

6%

8%

10%

Global real

GDP growth

Air freight World trade

growth

Ocean freight

Ocean freight (FCL)

Air freight

Source: MergeGlobal

Source: MergeGlobal

Source: Panalpina

Source: Panalpina

Air freight growth – Panalpina vs. market

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

2000 2001 2002 2003 2004 2005 2006 2007

0

10

20

30

40

50

60

70

80

90

100

PWTN (LHS) Market (RHS)

mil

lio

n t

on

s 10% CAGR (Panalpina)

4% CAGR (Market)

Ocean freight growth – Panalpina vs. market

mil

lio

n T

EU

s

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2000 2001 2002 2003 2004 2005 2006 2007

0

50

100

150

200

250

300

PWTN (LHS) Market (RHS)

14% CAGR (Panalpina)

11% CAGR (Market)

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Yo

Y c

han

ge in

%

Global real GDP growth World trade growth

20

Freight forwarding with highest Returns on Capital Employed

ROCE by industry segment: 2000 - 2006

0%

5%

23%

53%

12%

19%

26%

57%

22%

29%31%

64%

0%

10%

20%

30%

40%

50%

60%

70%

Scheduled Air

Freight Carriers

Container Shipping

Lines

Contract Logistics Freight Forwarding

Trough Average Peak

Note: ROCE defined as EBITA divided by NWC plus net property, plant & equipmentSource: MergeGlobal/American Shipper March 2008


21

Market leadership in

freight forwarding and

supply chain solutions

Limited cyclicality and

high returns on capital

due to asset-light

business model

Long-term growth

prospects and track

record of outpacing

the marketDifferentiation through

customer-focused

approach and specialist

industry expertise

Strong net cash

position and potential

to improve profitability

Leading global

network and leverage

through size and scale

of operations

Panalpina represents a rare opportunity to gain exposure to a leading global freight

logistics solutions player with strong strategic and financial fundamentals.

Panalpina represents a rare opportunity to gain exposure to a leading global freight

logistics solutions player with strong strategic and financial fundamentals.

Why investing in Panalpina: company-specific highlights



Thank you!

Documents

Panalpina –a leading asset-light forwarding and logistics ... · PDF filePanalpina –a leading asset-light forwarding and logistics provider. 2 ... Schenker Panalpina Kühne & Nagel