Davy Global Transportation & Logistics

Conference

John Manners-Bell FCILT

CEO, Transport Intelligence

27th June 2012, London

• Established in 2002 to fill a gap in the market for high quality, cost

effective market research

• Ti has now become the leading provider of market research solutions to

the global logistics industry

• Advisors to World Economic Forum, World Bank, UN and European

Commission

• Global research centre based in UK; research offices in Atlanta, USA and

Hong Kong

• Key Pillars: Research reports, Consulting, Knowledge Portal, M&A,

Conferences/Training

• Ti’s Global Associate Network provides a multi-country, multi-

disciplinary and multi-lingual extension to Ti’s capabilities

1. About Ti

1. Trends in global freight – container volumes

0

500000

1000000

1500000

2000000

2500000

3000000

Jan

-09

Sep

-09

Ma

y-1

0

Jan

-11

Sep

-11

Hong Kong

[TEUs]

Singapore

[TEUs]

0

200000

400000

600000

800000

1000000

Jan

-09

Oct

-09

Jul-

10

Ap

r-1

1

Jan

-12

Los Angeles

[TEUs]

Long Beach

[TEUs]

020406080

100120

Q1

20

09

Q3

20

09

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1

20

12

Antwerp

[mts]

Rotterdam

[mts]

• Despite the economic slowdown, there

has been sustained growth in sea

freight volumes since 2009 in Asia,

North America and Europe.

• Forecast growth in H2 is 7.5% (H1

4.5%).

• Emerging trades forecast at 8%.

However the past years have seen an

inability by shipping lines to manage their

businesses rationally in terms of capacity.

Source: Ti Dashboard

Trends in global freight – sea freight

• After a period of decline

following the rebound from the

2008/9 recession, rates

increased sharply in January

2012.

• Shipping lines endured $5 billion

losses in 2011.

• To address this carriers have

introduced slow-steaming;

organised alliances and

increased scrappage levels.

• Reduction of capacity

important, but more so level of

‘co-ordination’ of rate moves.

• Impact on supply chains

unquantified but severe.Source: Ti Dashboard

Trends in global freight – air freight

0

50000

100000

150000

200000

250000

300000

Jan

-09

Ma

y-0

9

Sep

-09

Jan

-10

Ma

y-1

0

Sep

-10

Jan

-11

Ma

y-1

1

Sep

-11

Jan

-12

Hong Kong-HACTL

[Metric Tonnes]

Frankfurt- Fraport

[Metric Tonnes]

Poly. (Hong Kong-

HACTL [Metric

Tonnes])

Poly. (Frankfurt-

Fraport [Metric

Tonnes])

• Following the rebound in

volumes in 2010, the

recovery petered out.

• Situation in Asia

particularly severe.

Transpacific volumes

weaker. Jade Cargo (JV

LH, Shenzhen Airlines)

liquidated.

• Highlight, German

exports benefiting

Lufthansa Cargo.

• There are signs that the

market is once again

strengthening, at least in

Asia.

Source: Ti Dashboard

Freight Logistics Profitability Trends

EBITDA and operating profit margins fell only slightly during the recession possibly

indicating that the industry responded to reduced revenues by reducing costs. Return

on assets fell during the recession indicating that as revenues fell assets became

underutilised.

Source: Global Transport & Logistics Financial Ratio Analysis Report 2012, Transport Intelligence

Impact on freight forwarding sector

• Average operating profit

margins have not fallen

below 4.4% throughout the

period. Even when there

were sharp falls in revenue

in 2009 operating profit

margins held up for three

quarters – sign of

countercyclicality.

• Despite the flat revenues

encountered in 2011,

average operating margins

have moved above 5%.

Source: Global Transport & Logistics Financial Ratio Analysis Report 2012, Transport Intelligence

Impact on contract logistics sector

• Average operating profit margins

have remained below 5% for the

whole of the past 5 years. The

smaller companies have fared

better in this respect.

• In 2010 margins strengthened.

This improvement appears to

have slowed or stalled in 2011

albeit at a higher level than any

time in the past five years.

Source: Global Transport & Logistics Financial Ratio Analysis Report 2012, Transport Intelligence

Impact on Express sector

• Revenues of the four integrators

grew steadily to just under

€80bn up to the final quarter of

2008. They then fell sharply

throughout 2009. Revenues

started to recover in the first

quarter of 2010 and by the last

quarter of 2011 had reached

€80bn again.

• Profits and volumes/revenues

directly linked. Utilisation of

assets critical to Express

companies success.

Source: Global Transport & Logistics Financial Ratio Analysis Report 2012, Transport Intelligence

Survey: Modal shift in downturn 1

0%

5%

10%

15%

20%

25%

30%

Asi

a t

o E

uro

pe

Asi

a t

o U

S

Asi

a t

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ati

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Am

eri

ca

Intr

a-A

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rop

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o A

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rop

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US

to

Asi

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US

to

Eu

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e

Eu

rop

e t

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US

to

La

tin

Am

eri

ca

% o

f re

spo

nd

en

ts

72%

28%

Yes

No

Are you witnessing a shift from air to sea?

• Almost three quarters of respondents (72%)

stated that they are experiencing a shift from

air to sea on one or more trade lanes.

• The ‘Asia to Europe’ trade lane

was cited as the route seeing

the greatest shift from air to

sea transport, with 24% of

respondents experiencing a

shift in this lane. The ‘Asia to

US’ route was a close second,

with 23% of respondents

witnessing a shift from air to

sea on the route.

Source: Ti/Davy market study

Survey: Modal shift in downturn 2

47%

9%

44%

Air to Road Road to Air No change

• A high proportion of shippers

(47%) are also seeing a shift from

air to road.

• This trend is driven by the rise in

oil costs and the fuel surcharges

being passed on to customers,

resulting in cheaper alternatives

being sought.

• This is particularly prevalent in

Europe, where traffic sent by

road can often be delivered in

the same time-frame as air

express items.

Source: Ti/Davy market study

Survey: Parcels product re-balancing

• Survey respondents expected growth across all service levels and products

• However, highest net growth expectations in cheaper, slower products

0%

5%

10%

15%

20%

25%

30%

35%

Time Definite Day Definite Deferred

Net growth prospects

Source: Ti/Davy market study

Survey: Vertical sector demand

0%

5%

10%

15%

20%

25%

30%

35%

Ph

arm

ace

uti

cal

Hig

h-t

ech

Fash

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/ t

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tom

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FMC

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Ch

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ica

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% o

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esp

on

de

nts

• The survey found that express carriers were receiving highest level of

increase in demand from the pharmaceutical industry.

• High-tech companies also significantly increasing their demands.

Source: Ti/Davy market study

Fastest growing trade lanes

0% 5% 10% 15% 20% 25% 30% 35%

Intra-Asia

Asia to US

Asia to Latin America

Asia to Europe

US to Latin America

Europe to Asia

US to Asia

Europe to US

Europe to Latin America

US to Europe

% of respondents

Source: Ti/Davy market study

• Intra-Asia market growth expected to be the strongest, as region moves to Sino-

centric model of manufacturing and consumption.

Prospects for market consolidation

Do you believe that there will be more

mergers and acquisitions in the next year?

• There is the over-whelming belief

amongst the respondents that there

will be consolidation in the industry in

the coming year (90%) due to:

• Certain companies struggling in

the harsher economic climate

(e.g. TNT)

• Cash-rich ‘predators’ with strong

balance sheets

• Aggressive Asian players seeking

to expand globally

• High levels of fragmentation in

the market

• Vertical sector opportunities

where companies seek to buy

exposure and expertise (e.g.

pharmaceutical).

90%

10%

Yes

No

Source: Ti/Davy market study

Most attractive emerging logistics markets

0 1 2 3 4 5 6 7 8 9 10

ChinaIndia

BrazilSaudi Arabia

UAEIndonesia

RussiaMalaysia

ChileMexicoTurkeyOmanQatar

ThailandSouth Africa

KuwaitBahrain

EgyptUruguayTunisia

MoroccoArgentina

PeruUkraine

KazakhstanJordan

VietnamPhilippines

ColombiaPakistan

BangladeshLibya

NigeriaAlgeria

EcuadorEthiopia

VenezuelaParaguayTanzania

KenyaBolivia

• China remains the most

attractive market for

investment in the 2012 index.

• India retained 2nd place,

seeing improvements in all of

the sub-indices.

• Brazil (3rd)scores above

average, although its

infrastructure remains weak.

• Russia (7th) scores below

average in terms of security

threats and ease of access to

the market.

Source: Ti/Agility Emerging Market Logistics Index

Best Connected Emerging Markets

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00

UAEChinaOman

MalaysiaChile

SaudiQatar

BahrainLibyaSouth

ThailandEcuadorUruguayMorocco

JordanEgypt

TunisiaRussiaBrazil

ColombiaTurkey

PeruMexico

IndiaKuwait

UkraineKazakhstan

ArgentinaIndonesiaVietnam

AlgeriaPakistan

VenezuelaParaguay

KenyaPhilippines

BoliviaEthiopiaNigeria

TanzaniaBangladesh

• United Arab Emirates, China

and Oman rank top in terms

of ‘connectedness’,

benefitting from strong

infrastructure, liner shipping

connections, airport density

and efficient customs

procedures.

• At the other end of the scale

Nigeria, Tanzania and

Bangladesh score poorly in

these criteria.

Source: Ti/Agility Emerging Market Logistics Index

Emerging Markets Quadrant

Source: Ti/Agility Emerging Market Logistics Index

Source List

Global Transport & Logistics Financial Ratio Analysis Report 2012,

Transport Intelligence, UK

Ti/Agility Emerging Markets Logistics Index 2012, Transport Intelligence,

UK. Free whitepaper http://www.transportintelligence.com/articles_papers/

Ti Dashboard, online industry data portal, Transport Intelligence

http://www.transportintelligence.com/graphs/

Global Contract Logistics Report 2012, Transport Intelligence, UK

International Express Parcels Report 2012, Transport Intelligence, UK

For more information about the contents of this presentation or any

of Transport Intelligence’s services and products visit:

www.transportintelligence.com

Or email John Manners-Bell

jmannersbell@transportintelligence.com

More information