Panalpina Annual Report 2011

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104 Consolidated Financial Statements 2011 Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily in regard to the US dollar and the euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities as well as net investments in foreign operations. Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure with the Group Treasury, if possible. To manage foreign exchange risks arising from future commercial transactions or recognized assets and liabilities, entities in the Group use forward contracts. Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the Group entity’s functional currency. The Group Treasury is responsible for managing the net position using external derivative contracts. For segment reporting purposes, each subsidiary designates contracts with the Group Treasury as fair value hedges. External foreign exchange contracts are designated at the Group level as hedges of foreign exchange risk on specific assets and liabilities on a gross basis. At December 31, 2011, the Group’s net foreign currency risk exposure amounted to CHF 9.4 million (2010: CHF 31.6 million). The following table demonstrates the sensitivity to a reasonable possible change of 10 % in the USD, EUR and HKD exchange rate, with all other variables held constant, of the Group’s profit before income tax (due to changes in the fair value of monetary assets and liabilities). Panalpina Annual Report 2011 Profit before income tax Effect in thousand CHF 2011 2010 Euro (1,648) 371 US dollar (105) (2,286) Hong Kong dollar (947) (896) Total effect (2,700) (2,811) The movement in the pre-tax effect results from the change in the fair value of derivative financial instruments not designated in a hedging relationship and monetary assets and liabilities denominated in USD, EUR and HKD, in which the functional currency of the entity is a currency other than USD, EUR or HKD. Although the derivatives have not been designated in a hedge relationship, they act as a commercial hedge and will offset the underlying transactions should they occur. If the exchange rates of all currencies changed by 10 %, the total maximum net effect would amount to CHF 0.9 million (2010: CHF 3.2 million). Interest rate risk The Group has a clear funding policy that prohibits affiliates from borrowing in foreign currency and has a clear preference for intragroup financing. Affiliates are also required to repatriate their excess cash. Liquidity is mainly managed at the corporate level by using money market products. Derivative instruments are used to manage the duration of financial instruments in a prudent manner. As the Group generally has no significant interest-bearing liabilities, and given their short-term nature, the Group has a limited exposure to interest rate risk. Consequently the Group’s expense and operating cash flows are substantially independent of changes in market interest rates. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a finan cial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and other financial institutions, foreign exchange transactions and other financial instruments. Credit risk related to trade receivables Customer credit is managed by each business unit and subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit limits are established for all customers based on external ratings or, if not available, according to internal rating criteria. The customer’s credit quality is assessed based on an extensive credit rating scorecard. Outstanding customer receivables are regularly monitored. The objective of the management of trade receivables is to sustain the growth and profitability of the Group by optimizing asset utilization while maintaining risks at an acceptable level. There is no significant concentration of counterparty credit risk due to the Group’s large number of customers and their wide geographical spread. Risk limits and exposures are continuously monitored by country and by the nature of counterparties. Additionally, the Group obtains credit insurance and similar enhancements when appropriate to protect the collection of trade receivables. Credit risk related to financial instruments and cash deposit Credit risk from balances with banks and financial institutions is managed by the Group Treasury in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and with credit limits assigned to each counterparty with a minimum rating of A. Counterparty credit limits are reviewed by senior management on a regular basis. The limits are set to minimize the concentra tion of risks and therefore mitigate financial loss through potential counterparty failure.
The table below shows the Group’s maximum exposure to credit risk: Consolidated Financial Statements 2011 in thousand CHF 2011 2010 Cash and cash equivalents (without cash in hand) 571,886 527,513 Derivative financial instruments 5,504 20,454 Trade receivables and other receivables 1,106,317 1,057,090 Loans and other financial assets 49,123 18,547 Total financial assets shown in statement of financial position subject to credit risk 1,732,830 1,623,604 Guarantees 242,045 134,169 Total credit risk 1,974,875 1,757,773 Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group’s approach to managing liquidity is to ensure, to the extent possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, bank loans, de bentures, finance leases and hire purchase contracts. The Group’s liquidity is reported to the Management on a monthly basis. To secure liquidity, the Group holds a net cash position of CHF 586.1 million (2010: CHF 525.3 million) and credit lines with various finan cial institutions totaling CHF 515.9 million (2010: CHF 520.9 million). Of this total, CHF 179.8 million (2010: CHF 190.9 million) is allocated to bank guarantees and foreign exchange lines. The table below summarizes the maturity profile of the Group’s financial liabilities on December 31, 2011/2010 based on contractual un discounted payments. 2011 (in thousand CHF) between 1 and 3 months between 3 months and 1 year between 1 and 5 years Total remaining contractual payments Borrowings (note 25) 2,838 4,457 232 7,527 Trade and other payables 633,436 29,545 0 662,981 Accruals 223,462 29,086 0 252,548 Other liabilities Foreign exchange contracts 21,193 8,051 0 29,244 Cash inflow (800,997) (15,204) (6,115) (822,316) Cash outflow 765,705 15,558 5,723 786,986 Total 845,637 71,493 (160) 916,970 2010 (in thousand CHF) between 1 and 3 months between 3 months and 1 year between 1 and 5 years Total remaining contractual payments Borrowings (note 25) 2,884 6,451 403 9,738 Trade and other payables 557,671 24,372 9,971 592,014 Accruals 217,396 14,821 6,080 238,297 Provisions and other liabilities Foreign exchange contracts 80,311 40,142 0 120,453 Cash inflow (750,894) (65,039) (7,025) (822,958) Cash outflow 737,807 63,495 7,541 808,843 Total 845,175 84,242 16,970 946,387 Panalpina Annual Report 2011 105
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Annual Report 2011 A passion for so
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Five-year development in million CH
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Key figures 2011 Net forwarding rev
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Letter to Shareholders Panalpina An
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Executive Board (clockwise): Monika
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Panalpina’s headquarters closer t
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Non-current assets Panalpina’s no
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Group Management Structure As at De
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Report of the Executive Board North
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Logistics Key figures Generated 14
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Tim Bauer Lane Manager for Air Frei
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Samia Guerroumi Procurement and Cap
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Jasmine Medhora of Panalpina’s Pa
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Marco Parnitzke Booking Agent for L
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Panalpina Annual Report 2011
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Success factors as growth drivers 2
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Highest compliance standard Our cor
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Europe, Middle East, Africa and CIS
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Automotive Continued growth of volu
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Discovering and developing leadersh
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are specifically designed for emplo
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Procurement Strong subcontractor re
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Poland award in the 9th Logistics P
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Previous goals included 5 % reducti
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Social Commitment Responsibility to
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2 Capital structure 2.1 Capital On
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Page 65 and 66: Contents Consolidated Financial Sta
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Page 71 and 72: Consolidated Statement of Cash Flow
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Page 137 and 138: Balance Sheet as of December 31 (be
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Panalpina Annual Report 2011

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