LOGISTICS

Marius Swanepoel  Gerhard Riemann 
Marius Swanepoel,
Chief executive officer of Imperial Logistics in southern Africa. 		 Gerhard Riemann,
Chief executive officer of Imperial Logistics International. 
The sustainable growth expected in this division, which now accounts for over 40% of operating profit, is a cornerstone of Imperial’s long-term strategy, reinforced by prudent organic expansion, an extended service offering and the ongoing global trend towards outsourcing logistics.

DIVISIONAL CONTRIBUTION

 

34%

 
Revenue  

42%

 
Operating profit 

46%

 
Profit before tax and exceptionals 
           
LOGISTICS          
        % 
   2009 2008  change 
Revenue  17 877 17 986  (1)
Operating profit  1 058 1 103  (4)
Net financing cost  (188) (130) 45 
Profit before tax and exceptional items  916 1 000  (8)
Operating assets  9 199 10 456  (12)
Non-interest-bearing liabilities  3 539 4 394  (19)
Capital expenditure  997 1 371  (27)
Operating margin (%) 5,9 6,1    
Employees  18 192 18 863  (4)

Imperial Logistics is the leading logistics and supply chain provider in southern Africa, offering integrated solutions to a diverse range of blue-chip customers across all major industries. Offshore, our logistics operations are housed in Imperial Logistics International, which provides inland waterway shipping, inland port operations, contract logistics solutions including warehousing and parts distribution, road transport, container handling, ocean ship broking and related value-added services.

The group’s logistics operations are a major contributor to results, a geographically diversified income stream and intra-group synergies.

The division has two distinct businesses – southern Africa and international – with different markets and different drivers. Common to both is a business approach that extends well beyond transport and warehousing into strategic supply chain partnerships. By adding value, improving service, reducing cost, understanding customers’ operations and exceeding their individual supply chain requirements, these Imperial companies are entrenching their role as strategic partners to their customers.

Equally, their respective specialisation in specific supply chains is underpinning growth into new markets. In Europe, for example, Imperial occupies key positions in inland ports which, combined with its leadership in inland waterway shipping, is ensuring long-term strength in the hub of the continental freight industry.

At industry level, Imperial’s southern African logistics operation is developing key partnerships with institutions focused on developing intelligent solutions to logistics and supply chain challenges. In April 2009, the fifth annual logistics survey was presented by the Council for Scientific and Industrial Research (CSIR) and Imperial Logistics. Since the inaugural publication in 2004, this research document has become a premier reference for logistics and supply chain management in South Africa, providing valuable support to decision-makers in developing important policies, and in making strategic infrastructure investment and maintenance decisions that will support sustainable industry and small business development.

During the review period, the logistics division contributed 34% of group revenue and 42% of operating profit, up from 31% and 38% in 2008 respectively. The sustainable growth expected in this division is the cornerstone of Imperial’s long-term strategy, reinforced by prudent organic expansion, an extended service offering – particularly at strategic level – and the ongoing global trend towards outsourcing logistics.

Despite extremely challenging trading conditions, strategic acquisitions during the year have again deepened the capabilities and skills within this core division.

Southern African logistics

                    
   2009  2008  Change  H2  H1  Change 
   Rm  Rm  %  Rm  Rm  % 
Revenue  9 831  9 733  1,0  4 523  5 308  (14,8)
Operating profit  738  700  5,4  327  411  (20,4)
Operating margin (%) 7,5  7,2     7,2  7,7    

Imperial Logistics Southern Africa comprises four core divisions after the recent establishment of the integration services division:

  • Transport and warehousing – focuses mainly on the automotive, construction, lubricants, mining, packaging, paper and glass industries. It delivers complete logistics and supply chain services throughout southern Africa with offices in various African countries.
  • Specialised freight – operates the largest fleet of bulk tankers in southern Africa under well-known brand names such as Tanker Services, focused on the food, chemicals, fuels and gas, construction and mining industries.
  • Consumer logistics – focuses on the fast-moving consumer goods (FMCG) and retail industry. It offers integrated supply chain solutions to a wide range of FMCG companies, as well as the agriculture and furniture markets.

  • Integrated services – houses fee-earning asset-light businesses that provide innovative logistics solutions to complement and enhance existing divisional service offerings with professional services by leveraging skills, processes and information technology.

    During the review period, the division made several acquisitions to broaden its footprint and expand its services:

    • 60% of Tip Trans Holdings
    • 60% of Express Hauliers
    • 70% of Logistical Transportation Services
    • 55% of Rustgold
    • 50,1% of Volition Consulting Services
    • the minority shareholder in Liebentrans

The division also strengthened its business in Zimbabwe by modernising its fleet of 150 vehicles as business conditions improve in that country.

Results

For the review period, the southern African logistics division did well to increase its operating profit by over 5% and improve margins. Trading conditions deteriorated from October 2008 with a general slowdown in manufacturing, mining, fuel, commodities, construction, as well as imports and exports. By contrast, the distribution of fast-moving consumer goods was more resilient, although volumes declined in the second half. The division has a well-balanced portfolio of businesses that can benefit from changing over-spending patterns towards more affordable products.

In addition, the national transportation strike which persisted for nine days in April 2009 proved costly.

A number of valuable new contracts were won during the year. These are absorbing some of the capacity created by lower demand.

The fleet size grew marginally to just over 5 500 vehicles. The average age of the truck tractor fleet is approximately 3,5 years.

Net working capital decreased by R366 million, and gross capital expenditure was R201 million lower at R608 million.

International logistics

                    
   2009  2008  Change  H2  H1  Change 
   Rm  Rm  %  Rm  Rm  % 
Revenue  8 046  8 253  (2,5) 3 360  4 686  (28,3)
Operating profit  320  403  (20,6) 118  202  (41,6)
Operating margin (%) 4,0  4,9     3,5  4,3    

Imperial Logistics International’s operations include logistics services, warehousing, clearing and forwarding, container operations and multi-modal transportation. Global services range from complex warehousing and distribution projects to made-to-measure water, air and land transport.

Importantly, the business is known for its customer focus in developing market and future-oriented solutions for national and international logistics challenges that satisfy high standards of quality, reliability and transparency. Imperial International manages four logistics services providers and their subsidiaries and affiliates:

  • Imperial Reederei – Europe’s leading inland shipping company with a transport volume of over 45 million tonnes per annum, focused on bulk cargo and container shipping in European river and canal systems, and dovetailing effectively with its inter-modal operations.
  • Panopa Logistik – customised contract logistics services provider specialising in highly complex services focused on automobile, steel and spare parts logistics with a blue-chip customer base.
  • Neska – market leader for transshipment and warehousing along the Rhine River and European market leader in ferroalloy handling, with extensive storage and warehousing facilities in Germany and Belgium. The company uses a multimodal system combining truck, rail and ship for national and international customers.
  • Brouwer Shipping and Chartering – backed by a global network of established relationships, Brouwer focuses on ship chartering and transportation of bulk and other cargo such as steel, scrap, tubes and pipes, coke, coal, fertiliser, grain and fodder.

During the year, Imperial Logistics International acquired Hansmann, a logistics provider to the automotive industry in Wolfsburg, Germany, and Garex which provides similar services in Poland.

Results

After a good start, the global economic crisis caused a dramatic reversal in the second half of the period, although the business remained profitable and managed to contain the pressure on margins.

The downturn in international demand for steel, industrial chemicals and automotive products affected business volumes. Important customers in the steel industry curtailed production by shutting furnaces as scheduled maintenance programmes were brought forward.

The business responded by cutting costs aggressively. The inland waterway shipping business, Imperial Reederei, was hardest hit by the European recession. Fortunately, some of this decline was absorbed by cancelling short-term charters with shipping suppliers. The port-handling activities in Neska were also affected but cost structures were adjusted to limit the impact. The contract logistics and steel distribution businesses in Panopa equally challenging showed reasonable resilience under circumstances.

Due to weak trading in the road transport businesses of Gillhuber and Laabs, goodwill on those acquisitions was impaired.

We expect difficult trading conditions to persist for much of the new financial year before a slow recovery starts.

Imperial Logistics International is known for its customer focus in developing lasting solutions for international logistics challenges. This will position the company well for the difficult trading conditions expected for much of the new financial year before a slow recovery takes hold.


Highlights

  • Contribution increased to 34% of group revenue and 42% of operating profit despite challenging trading conditions
  • Strategic acquisitions deepen divisional capabilities and skills, locally and offshore
  • Focus on complementary services that provide annuity income formalised in new southern African division