Panalpina Annual Report 2006

Report of the Executive Board
14 Panalpina Annual Report 2006
Ocean freight forwarding
The Group itself provides ocean freight forwarding
services in 90 countries and, through its partner
companies, in an additional 60 countries. Ocean
freight forwarding services accounted for 36.5%
of the Group’s net revenue in 2006. The Group has
tailored its services to the transportation needs
of its customers. For customers who transport full
container loads, it offers FCL (full container load)
services. In contrast, for customers who ship
smaller consignments, the Group offers a competitively
priced consolidation product with its LCL
(less than container load) service. As customers
can combine these products with standardized
service options, such as door­to­door, door­to­port,
port­to­door and port­to­port deliveries, the services
the Group offers in the ocean­freight area can
easily be tailored to each customer’s needs.
Supply chain management
In 2006, supply chain management services
accounted for 15.5% of the Group’s net revenue.
The Group offers a whole range of services and
logistics solutions designed to improve its customers’
supply chain management. For customers
who run supply chain management in­house, the
Group offers consulting services related to both
the planning of logistics processes and the selection
and management of logistics service suppliers.
For clients who outsource supply chain management,
the Group also provides warehousing and
distribution services, including order­fulfillment,
invoicing and reporting. In this way, the Group combines
its traditional forwarding services with logistics
services tailored to customers’ needs, offering
customers complete supply chain solutions.
Results of the year 2006
Significant impacts of currency fluctuation, rates,
taxes, customs and duties
Management believes that the operating results
of the Group are effectively currency neutral.
The currency mix of revenues and cost items is
fairly balanced due to the diversified nature of
the business, industry practices and the worldwide
nature of the Group’s activities.
Forwarding revenue
The net forwarding revenue of the Group increased
by 11.3% (or 10.2% currency adjusted) over the
year 2005, from CHF 6,949 million to 7,735 million.
A reclassification of 2005 figures in the amount
of CHF 13.5 million has been made: suppliers’ discounts
have been reclassified from forwarding
services revenue to reduce the forwarding services
expenses from third parties.
Revenue growth was merely organic, the acquisitions
realized during the course of 2005 accounted
for 1.0% of the growth.
Historically, the Group’s results have been subject
to seasonal trends. The Group’s first fiscal quarter
is traditionally weaker than other fiscal quarters,
and the third and fourth fiscal quarters have generally
been the strongest. This seasonality is based
on many factors, including holiday seasons, consumer
demand, climate and economic conditions.
In particular, a substantial portion of the Group’s
revenues are derived from customers in industries
whose shipping patterns are tied closely to consumer
demand or are based on just­in­time production
schedules. Management estimates that due
to seasonal trends approx. 46 – 48% of the annual
net forwarding revenue is generated in H1 each
year and approximately 52 – 54% in H2 each year.
In the year under review, for the first time ever,
the first quarter showed an accelerated start due
to high volumes, resulting in an impressive quarter
end in March. The higher number of working days
compared to the previous year contributed as well
to the higher revenues.
In the opinion of Management, this strong start was
also the result of a slight shift in the world economy
from the second quarter into this first quarter;
the volumes shipped across the globe and the
high levels of the different surcharges (fuel and
security) contributed to these results.
The second quarter ended only slightly higher than
the first, with the month of June showing its traditional
quarter end surge. Additionally, the amount
of working days mainly in Emea, accounting for
57% of the Group’s net forwarding revenue, had
a negative effect on the second quarter.
Volumes pushed by the growth of existing customers,
the oil and gas environment still very active
thanks to the energy prices, the acquisition of new
accounts, large and small, the commodity prices
encouraging the mining industries to increase their
developments, all these factors contributed to the
double digit growth of the net forwarding revenues
in 2006.
Illustrated below are the historical trends of seasonality
including 2006 as observed in the development
of net forwarding revenue in 2006 compared
to the previous two years: