Zurich 13 March 2008 Business Review 2007
13 March 2008 2 Convincing annual results Net forwarding revenue +12.3% CHF 8,684 million by pure organic above-market growth Gross profit Ebitda Net earnings +13.4% CHF 1,803 million +15.4% CHF 361 million +14.8% CHF 211 million Further increased volumes Air freight + 8.4% 947 000 tons Ocean freight +13.7% 1.233 million TEU Supply Chain Mgmt + 6.6% net forwarding revenue 1000 new jobs created worldwide
13 March 2008 3 Market trends Strong global economy, particularly in the first half of the year. Air freight market growing between 4 5%, characterized by a short peak season in Q4 during which capacity was tight. Air freight rates increased during peak season but came down again afterwards. Ocean freight market growing between 9 10%, developing very dynamically throughout 2007 with demand exceeding supply. Ocean freight rates rose further in Q4 although less than the steep increases seen during the first nine months. Supply chain management: continued trend for global outsourcing
13 March 2008 4 Consolidated income statement summary in CHFm Jan Dec 2006 Jan Dec 2007 Change Net forwarding revenue 7,735.2 8,684.2 +12.3% Gross profit 1,590.8 1,803.4 +13.4% GP margin on NFR 20.6% 20.8% +20 basis points Personnel expenses (reported) 886.9 1,002.4 +13.0% Personnel expenses on GP 55.7% 55.6% -10 basis points Other operating exp. (reported) 391.2 441.2 +12.8% Other operating expenses on GP 24.6% 24.5% -10 basis points Ebitda (reported) 312.7 360.8 +15.4% Ebitda margin on GP 19.7% 20.0% +30 basis points Ebit (reported) 261.0 299.4 +14.7% Ebit margin on GP 16.4% 16.6% +20 basis points Net earnings 183.5 210.6 +14.8%
13 March 2008 5 Balance sheet & cash flow summary in CHFm 12 months ended 31.12. 2006 12 months ended 31.12. 2007 Cash and cash equivalents 1 373.9 352.4 Borrowings (27.5) (33.5) Net cash (debt) 346.4 318.9 Total cash flow from operating activities (YTD) 338.3 315.9 Net working capital 2 % of gross revenue Total shareholder s equity Total assets Asset intensity 3 414.4 4.5% 977.7 2,108.3 7.7% 484.9 4.6% 1 016.5 2,265.6 7.4% Net capital expenditures 54.1 48.6 1 Including financial assets held for trading 2 Net working capital defined as current assets net of cash and cash equivalents minus current liabilities net of interest bearing debt 3 Calculated as tangible fixed assets / total assets
13 March 2008 6 Performance vs. financial guidance Actual 2006 Actual 2007 Guidance 2007 Gross profit growth +13.0% +13.4% 9% Ebitda / GP margin 19.7% * 20.0% ** 20 22% NWC intensity 4.5% 4.6% 4 5% Tax rate 23.6% 23.9% ~ 25% * 18.8% excluding non-recurring items ** 20.0% excluding non-recurring items All guidances achieved. Ebitda / GP margin came in at low end of guidance: Guidance was increased after Q1 2007 Impact from reduced service portfolio: GP CHF -18.2m, Ebitda CHF -23.8m
13 March 2008 7 Group profitability Profitability development Margin development (normalized) 400 EBITDA CAGR: +30% 22% in CHFm 350 300 250 200 150 214.2 165.6 312.7 261.0 360.8 299.4 20% 18% 16% 14% 12% 14.8% 11.4% 18.8% 15.6% 10.9% 20.0% 17.2% 12.1% 100 50 120.3 183.5 210.6 10% 8% 8.3% 0 12M 2005 12M 2006 12M 2007 6% 12M 2005 12M 2006 12M 2007 EBITDA EBIT Net income EBITDA margin* EBIT margin* Net income margin* * normalized margins (excluding non-recurring items)
13 March 2008 8 Operating cost development (in CHFm) 12M 2007 12M 2006 12M 2005 Operating costs 1 492.7m (82.8% of GP) 1'002 441 50 55.6% of GP 24.5% of GP 1 329.2m (83.6% of GP) 887 391 51 55.7% of GP 24.6% of GP 1 253.8m (89.1% of GP) 844 362 48 59.9% of GP 25.7% of GP 0 300 600 900 1'200 1'500 2007 opex (excl. gains on sales of non-current assets and goodwill impairment) in % of GP decreased by 80 bps to 82.8%. Personnel expenses grew by 13.0%, while headcount increased by 7.0%. The difference is attributable to wage inflation, non-recurring items and FX impacts. Other opex grew by 12.8% (+9.1% on a normalized basis), resulting in a slight reduction of the other opex cost ratio by 10 bps. YTD 2005 2007 CAGR for operating costs: 9.0% for personnel expenses 10.4% for other operating expenses 1.9% for D&A Personnel Other operating costs D & A* *excluding goodwill impairment of 11.3m in 2007
13 March 2008 9 Free cash flow development 250 (5) 200 60.0-82.4 in CHF million 150 38-9.0-16.5 104 100 186.0 138.1 50 - FCF YE 2006 Operating activities Working capital Finance and tax Investing activities FCF YE 2007
13 March 2008 10 Working capital overview Development of net working capital 6.0 % CHFm 600 5.0 400 4.0 3.0 4.5% 4.3% 4.6% 3.8% 4.0% 12/06 03/07 06/07 09/07 12/07 200 0 NWC intensity NWC High business activity led to an increase in NWC towards year-end. NWC intensity is within the given guidance of 4-5%. Higher DSO were partly compensated by higher DPO.
13 March 2008 11 Dividend increase proposed to the AGM Dividend payment of CHF 3.20 per share Equivalent to an amount of CHF 80 million Representing payout ratio of 38% Dividend yield (based on 2007 year-end share price) is 1.63% In addition, the share buyback program is used to return cash to shareholders 0.80 1.20 1.20 2.40 * 2.00 3.00 3.20 2002 2003 2004 2005 2006 2007 2008 * 2005 included a special one-time jubilee dividend of CHF 20 million.
13 March 2008 12 10-years review 10,000 CHFm 8,000 CHFm 400 300 6,000 200 4,000 2,000 100 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 0 Headcount 9,915 11,015 11,586 12,042 12,463 12,344 13,224 13,583 14,304 15,301 Gross forwarding revenue Net forwarding revenue Gross profit Ebitda Net income
13 March 2008 13 Regional business development 2007 growth (year-over-year) Emea Noram Latam Apac Group Net forw. revenue +14.6% -0.9% +22.1% +18.0% +12.3% Gross profit +14.4% +10.1% +8.8% +16.0% +13.4% Ebit +8.6% +100.0% +0.0% +22.1% +14.7% Solid EU economy Imports, in particular from Asia Oil & Gas industry US dollar and slowing imports Strong EBIT recovery in line with our objective Strong demand for SCM solutions Steep volume increases especially to/from Brazil and Mexico Appreciation of local currencies hurt EBIT Introduction of new rail-air product China-Africa of increased importance
13 March 2008 14 Profitability by region Gross profit growth by region (in % of gross profit) EBIT margin by region 32.7% 31.0% 29.4% 3.2% 14.4% 14.4% 11.9% 12.5% 10.1% 8.1% 14.2% 8.8% 9.2% 7.9% 16.0% 10.2% 17.8% 16.9% 6.5% 3.6% 1.1% 13.9% 12.8% 9.2% Europe / Africa / ME / CIS North America Central & South America Asia / Pacific Europe / Africa / ME / CIS North America Central & South America Asia / Pacific 12M 2005 12M 2006 12M 2007 12M 2005 12M 2006 12M 2007 On gross profit level, all regions contributed with high growth rates, led by the Asia-Europe trade lane which profited from extremely buoyant market conditions. EBIT margin developed well in APAC and Noram. EMEA suffered from goodwill impairment in the third quarter. Latam profitability was impacted by strong local currencies.
13 March 2008 15 Development of core activities Air freight Ocean freight Supply chain management Market growth was 4-5% Our air freight volumes were up 8.4% to 947 000 tons. Good traffic flows from large accounts gained during 2006 Strong development on Asia-Emea, Latam-Noram, and Emea-Latam Market growth was 9-10% Our sea freight volumes were up 13.7% to 1 233 000 TEU. Strong development on Asia-Europe, Intra-Asia, and Latam-Noram Significant new business wins in Telecom Thriving project business Trend for customers to outsource non-core activities likely to continue Net forwarding revenue 2007 4,129 m CHF (47%) Net forwarding revenue 2007 3,280 m CHF (38%) Net forwarding revenue 2007 1,275 m CHF (15%)
13 March 2008 16 Performance by core activities Gross profit growth by business segment Solid volume growth resulted in high turnover growth in both air (+11%) and ocean (+16%). 22.1% Strong gross profit growth in airfreight due to 15.4% 11.7% 17.0% 13.0% 13.4% favorable supply-demand balance and more efficient procurement. 8.0% 7.3% Air Ocean SCM Group Slowdown in gross profit growth in ocean freight due to steep rate increases and tough comparison with prior year when rates were falling in the second half. 12M 2006 12M 2007 Nice margin expansion in SCM due to crossselling and customer profitability focus.
13 March 2008 17 Key industries overview Telecom Healthcare Automotive Hi-Tech All industry verticals developed dynamically in 2007. Very strong and new business generated especially in our telecom and automotive verticals as well as good project business have all contributed to a further margin expansion. Retail & Fashion Oil and Gas
13 March 2008 18 Number 3 in air freight In billion CHF net turnover and market share 2007 of CHF 76.5 billion estimated total market Number 4 in ocean freight In million TEUs transported and market share 2007 of 35.3 million TEUs estimated total market (forwarders only) 6.7 DPWN 8.8% 5.0 DB Schenker 6.5% 4.1 Panalpina 5.4% 3.1 Kühne+Nagel 4.0% 2.8 DPWN 7.9% 2.6 Kühne+Nagel 7.4% 1.5 DB Schenker 4.2% 1.2 Panalpina 3.4% Sources: Annual reports, market studies and Panalpina estimates Sources: Annual reports, market studies and Panalpina estimates
13 March 2008 19 Development of transported tonnages and volumes 947 000 tons 1 233 000 TEUs 1 200 000 tons 750 000 791 000 874 000 947 000 8.4% 824 000 923 000 1 233 000 1 084 000 13.7% + Non-containerized break bulk cargo from Oil and Gas and Special Project forwarding 2004 2005 2006 2007 2004 2005 2006 2007 Air freight Ocean freight Non-containerized
13 March 2008 20 The way forward Assessment Business model and strategy No fundamental changes Organization and processes Require review Culture Generation change Improved professionalism Ethical business conduct
13 March 2008 21 The way forward Measures 1 Compliance Review of entire range of services Reinforced code of conduct (FCPA compliant) Department of Justice (DOJ) Result Suspension of services (Nigeria) Organization Customer support Scenarios Continued commitment to market leadership in Oil & Gas See Slide Notes
13 March 2008 22 The way forward Measures 2 Short-term: cost optimization Housekeeping Long-term: business development initiative Streamline organization Increase effectiveness Internal & external growth
13 March 2008 23 The way forward Conclusions Continue to grow organically and above the market Revisit our organization to better serve our customers Discontinue services that do not meet Panalpina s strict compliance standards and systematically review strategic growth options and reinforce our long term growth and profitability targets and become industry leader in truly compliant freight forwarding practices
13 March 2008 24 The way forward Outlook Long-term business development initiative Short-term cost optimization program Financial Guidance: GP increase 4% Ebitda / GP 17.5 18.5% NWC intensity 4 5% Tax rate 26 27% Financial Guidance: Ebitda / GP 21% 2008 2009 2010