The resignation of Monika Ribar can hardly come as a shock as she has been in the job for almost seven years. The company is presenting her departure from the role of CEO and President of Panalpina “as part of the company’s on-going succession process”. However, in comments to the news agency Reuters, Monika Ribar herself mentioned that shareholders “are never happy with a poor share price performance,” whilst continuing to say that “her departure was unrelated to recent earnings misses from Panalpina”.
So what did investors have to complain about? Admittedly, the share price is less than CHF100, whilst in 2008 it was hitting highs above CHF130. However, this performance is not wildly different from that of fellow Swiss forwarder Kuehne + Nagel.
A more direct comparison between the two companies is that of profit margin. Here, there is more cause for concern at Panalpina. As an example, we see that between 2004 and 2012, the EBITDA/Gross Revenue margin for Panalpina has been on average 2.2%. In contrast, over the same period, Kuehne + Nagel’s profit margin has been significantly higher at an average of 4.6%; although Panalpina’s result has been hit by some eventful years featuring fines and write-offs.
Yet, this is still an imperfect comparison as Panalpina’s business differs from that of Kuehne + Nagel as it has less asset-based businesses in areas such as contract logistics and road freight. Nonetheless, this only highlights that Panalpina’s core air and sea freight forwarding business has under-performed its Swiss neighbour and rival. In addition, Kuehne + Nagel has also grown in terms of revenue, whereas Panalpina has not increased its revenue significantly from where it was in 2004.
To solve these issues, the new CEO Peter Ulber is going to have to understand what the root causes of Panalpina’s problems are. Certainly, it appears that Panalpina is struggling to attract key customers and receives smaller revenue when it does. This may be due to management structure, the quality of business systems or possibly Panalpina’s tactical market positioning. The latter is a very dynamic area, with the most dynamic forwarders able to grab business through their added value and information services offerings.
As the former head of Kuehne and Nagel’s air and sea freight forwarding business, Peter Ulber should be familiar with operational problems. However, he will also have to deal with larger scale issues such as what type of logistics service provider Panalpina wants to be. Salient to this is the issue of contract logistics. Panalpina’s attempts to expand into contract logistics have had very limited success.
One option is for Panalpina to expand into contract logistics through acquisition. If Ulber is attracted to this tactic he will have a choice of some quite good quality companies. However, developing growth through acquisition will not be easy and he needs a robust and realistic vision to underpin it.
Yet, even if he rejects this often hazardous path of acquisition, Panalpina fundamentally needs a new business model. Dealing with operational ineffectiveness will not be enough.