panalpina –a leading asset-light forwarding and logistics provider · 2019-11-30 · 3 business...
TRANSCRIPT
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
Market and competition
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!
Market and competition
6
Forwarding proved a resilient business model during past down cycles
Sales and earnings growth peer group Profit margins (conversion ratio) peer group
Market and competition
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
Bad Ragaz, January 2009 Helvea Swiss Equities Conference
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
Company overview and strategy
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
Company overview and strategy
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
Company overview and strategy
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
Company overview and strategy
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
Company overview and strategy
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
Company overview and strategy
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
Company overview and strategy
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
Planned / ongoing initiatives
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
Company overview and strategy
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
Planned / ongoing initiatives
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
Company overview and strategy
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
Company overview and strategy
Bad Ragaz, January 2009 Helvea Swiss Equities Conference
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
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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
Investment highlights
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
Investment highlights
Bad Ragaz, January 2009 Helvea Swiss Equities Conference
Thank you!