Panalpina Annual Report 2011

8
Report of the Executive Board
On a product level, all three product divisions (Air Freight,
Ocean Freight, Logistics) were strengthened by a number
of key divisional management hires during the reporting
year. Moreover, Panalpina also continued its strict focus on
restoring unit profitability, particularly gross profit per ton
of air freight, which rose 9 % year-on-year (+ 21 % in local
currencies). As a consequence, a number of larger, yet unprofitable
customer contracts were not renewed, leading
to an adverse effect on the Group’s transported air freight
volumes, because, in a declining market, the volumes
represented by these contracts could not be immediately
replaced with new business. In terms of product innovation,
Panalpina signed a new ACMI (aircraft, crew, maintenance
and insurance) contract for two Boeing 747-8Fs with
one of its long-term business partners. The aircraft will enter
service in the first half of 2012 and operate in Panalpina’s
unique own-controlled air freight network, replacing two
Boeing 747-400Fs. Compared to the 747-400F, the industry’s
newest freighter has 16 % additional cargo volume,
but is expected to have the lowest carbon dioxide emissions
in its class. With the new aircraft, Panalpina is optimally set
up to meet industry specific requirements and the increasing
demand for large-freighter capacity, especially in the
Healthcare, Hi-tech, Automotive and Oil and Gas verticals.
In Ocean Freight, in line with the corporate strategy to
aggressively expand its Less than Container Load (LCL)
business and to focus on emerging markets, Panalpina
launched more than 50 new LCL point-to-point services
in 2011. Most of the new regular services run out of Asia
and meet increased customer demand for reliable LCL
solutions on the Intra Asia and Asia-Europe trades.
In the third product division, Logistics, the Group extended
its product line with a range of new services which all support
the strategic focus of offering value-added services to
customers. In addition to launching regional centers of
expertise on three continents, Panalpina also opened several
new logistics centers, including a facility in Huntsville
(USA). The 3,700 square-meter Huntsville Logistics Center
is situated in close proximity to the Panalpina Huntsville
hub and provides complete kitting and parts assembly as
well as temperature-controlled storage areas.
Out of its nine existing industry verticals where Panalpina
has a dedicated setup in place to effectively serve its customers
with industry-specific solutions, four focus industry
verticals were defined, which are particularly well aligned
with the product strategies: Consumer and Retail, Healthcare,
Hi-tech, and Oil and Gas. In terms of gross profit
growth, the largest advances during the reporting year
came from Automotive, Healthcare, Hi-tech, Telecom and
Panalpina Annual Report 2011
Fashion. In Oil and Gas, the signing of a strategic services
master agreement with one of the world’s largest oil and
gas companies marked a major milestone in the execution
of the Group’s growth strategy. The scope of the multi-year
agreement comprises transportation services for air, ocean,
road and rail, industrial projects, freight management and
other logistics services connected with the exploration and
production of oil and gas.
While Panalpina aims for predominantly organic growth, it
also looks selectively into acquisition opportunities to support
and accelerate the execution of the corporate strategy.
One company which the Group identified as an optimal
strategic fit and acquired in 2011 is Grieg Logistics, a leading
logistics provider to the Norwegian oil and gas industry
with approximately 100 staff and an annual turnover of
roughly NOK 400 million (CHF 67 million). Through this acquisition,
Panalpina added seven new locations in Norway
and thus significantly expanded its presence in the country.
Through the set of initiatives embarked on during the year,
complemented by a new volume record in Ocean Freight,
Panalpina achieved a solid organic (ie, expressed in local
currencies) gross profit growth of 12 % and thus managed
to further solidify its position within the industry. Furthermore,
through effective cost management, profitability was
significantly increased and profit margins further expanded
in 2011.
Outlook
The economic situation in many of the developed nations –
a majority of which are struggling with critical levels of debt
and continuously high levels of unemployment – is set to
remain challenging in the years ahead, while the stability of
the financial sector yet needs to be restored. On the other
hand, growth prospects for many of the emerging economies
remain promising. Regardless of the short-term economic
environment and in line with its sustainable, profitable
growth strategy, Panalpina remains committed to further
improving productivity while continuing to invest selectively
and specifically in Marketing and Sales, IT and Value-Added
Logistics Services competence and maintaining a strong
focus on cost control – all with the aim of delivering reliable
solutions to our customers and ensuring above-market
growth. To facilitate implementation of the corporate strategy,
to drive growth and increase profitability, the Panalpina
Group will put in place (effective July 1, 2012) three regional
CEOs (with respective respon sibility for Asia Pacific, Europe
and Middle East, and the Americas), each supported by a
small team of dedicated regional resources. With this lean
regional setup, the decision-making power will shift from