Panalpina World Transport Holding Ltd. (PLWTF.PK)
Q2 2010 Earnings Call
August 05, 2010 15:00 pm ET
Monika Ribar - CEO
Marco Gadola - CFO
Karl Weyeneth - COO
Menno Sanderse - Morgan Stanley
James Solomon - DnB NOR
Michael Foeth - Bank Vontobel AG
Andy Chu - Deutsche Bank
Beat Kesier - Cheuvreux Switzerland
Roger Elliott - Citi UK
Marco Strittmatter - ZKB Switzerland
Axel Funhoff - ING Belgium
Good morning, good afternoon. I am Kristina, the conference call operator for this conference. Welcome to the Panalpina half year results 2010 conference call. This call must not be recorded for publication or broadcast.
At this time I would like to turn the conference over to Mrs. Monika Ribar, CEO. Please go ahead, madam.
Thank you very much and good afternoon ladies and gentlemen and thank you for joining our second quarter results conference call. Here today with me in the Board room of Panalpina Head Office in Basel is our CFO, Marco Gadola, who will as always give you an overview of our financial results and also here with me from the management team is Karl Weyeneth, our Chief Operating Officer. He will inform you about the developments and the performance of our core business segments. After our presentation, you will again have the opportunity to ask questions which we will be more than happy to answer.
A link to the podcast of this call will be available for one month on our website as of tonight. I would now like to hand over the word to Marco for a review of our first half financial.
Thank you, Monika and good afternoon to everyone. As usual we have put the presentation on our website which provides you with supplemental information and analysis on our quarter two and half year results. Let me now start to lead you through this presentation slide by slide.
The executive summary on slide 2 lists the key takeaways of the second quarter. The strong volume growth which already started last quarter continued and even accelerated in air leading to a 76% year-on-year raise for quarter two.
In ocean freight, volumes also grew again solidly, it is 90%. So we were again able to outpace the market in both segments. Furthermore we improved our gross profit per unit of cargo sequentially in both segments which led to a gross profit increase of 16% quarter-on-quarter and an increase of 8% then comparing quarter two 2010 to quarter two 2009. At the same time, we were able to keep operating expenses at low levels to further increase productivity.
All of this progress resulted in a significant improvement of the second quarter underlying EBITDA to CHF69 million compared to CHF51 million a year ago and CHF80 million in quarter one. Net revenue in capital intensity was also kept at the low level and the implementation of all our key initiatives is well on track.
With regards to the legal cases, we have booked the provision of CHF128 million in the second quarter to cover expected fines for both, the FCPA and US antitrust case and for expected expenses for compliance consulting in connection with the FCPA settlement agreement. The final settlement itself has been delayed to the second semester.
On slide three, we provide you with a snapshot of our profit and loss statement for both quarter two and year-to-date. Reported operating expenses are obviously distorted particularly by CHF128 million provision. So in order to make it easier for you, we scraped out the special items and calculated the underlining EBITDA and EBIT circled in red at the bottom of the slide. The incurred CHF5 million of legal fees in the second quarter dropping to the lowest level since the first quarter 2007.
Looking at operating profitability, the underlying EBITDA in quarter two came in at CHF69.4 million, which in percentage of gross profit is equivalent to a margin of 18.2%. Underlying EBIT in quarter two amounted to CHF55.4 million with an EBIT to gross profit margin of 14.6%.
Overall, foreign currencies had the negligible impact on the Group results also within the regions we saw substantial fluctuations. In Europe, this was mainly driven by the weakness of the euro, which in quarter two lost almost 7% of its value towards the Swiss Franc compared to the respective prior year period. This was compensated however by other regions. The number of currency exhibited a significant appreciation towards the Swiss Franc such as the Canadian and Australian dollar or the Brazil real, all of which gained between 13% and 16%.
Before we dig into the details on operating expenses and margins, Karl now lead you through the performance of our core segments and regions.
Thank you Marco and good afternoon ladies and gentlemen. On slide 4, the rapid recovery of transported freight volumes becomes evident, particularly in air, where we grew above market and increased our volumes in the second quarter by 36% year-over-year, exceeding Q2 2007 volumes by 2% and getting close to the previous second quarter record volumes that we achieved in 2008. We even had the best June ever in terms of air freight volumes.
In Ocean Freight, the development was also very positive with growth of 19% which was also above market. The slight deceleration first quarter was also align with what we observed for the market as a whole. When looking at the growth rates of their first two quarters here, keep in mind that as we move into the second half year, prior year comparisons become tougher so a continuation of growth on these levels is most likely not sustainable.