IFCO Maintains Strong Growth Path in Q2 2010

IFCO’s  group revenues grew by 5.6% to US  $195.2 million in Q2 2010 compared to
Q2  2009 and in H1 2010 by 8.1% to US $383.6 million (currency adjusted by 8.5%
in  Q2 2010 and by 8.4% in H1 2010). Operational profitability (EBITDA) improved
significantly by 22.5% to US $36.1 million in Q2 2010 compared to Q2 2009 and in
H1  2010 by 25.6% to US $67.9 million (currency adjusted by 27.4% in Q2 2010 and
by  26.5% in H1  2010). As a  consequence LTM  Q2 2010 EBITDA  reached US $142.8
million.

RPC  Management Services showed again  robust and sustainable growth, delivering
significant  gains in  both revenues  in Q2  2010, which grew by 12.1% (currency
adjusted  by 18.3%) to US  $106.0 million, and  in EBITDA, which  grew by 17.1%
(currency   adjusted   by  23.2%) to  US  $30.6  million,  respectively.  Pallet
Management Services revenues were close to last year’s level with revenues at US
$89.2 million, although EBITDA increased by 42.3% to US $8.0 million in Q2 2010.

The sources of RPC Management Services’ revenue gains have held steady in recent
quarters,  resulting from a combination of organic volume growth in our European
RPC  business as well as  strong and sustainable growth  in our RPC US business.
Our  European business benefited from higher  usage and increased penetration of
our  current customer base as well as  winning new retailers in certain markets.
Also our efforts to develop the business in East Europe showed good progress and
supported  the overall positive volume development  in Europe. Growth in our RPC
US  business has accelerated  even further due  to increasing RPC penetration in
our  existing customer base and a steady  flow of new retailers adopting the RPC
model. RPC South America’s growth momentum continued to develop.

Revenues in Pallet Management Services came in close to previous year levels for
Q2  and H1  2010. Although the  market pricing  environment remained below 2009
levels,  the  negative  sequential  trends  flattened  out, with Q2 2010 average
pallet pricing at the same average levels as Q1 2010. Volumes in certain regions
of  the  US  have  experienced  a  rebound from 2009 levels, while other regions
remain  in  a  depressed  state.  Service  related revenues showed a good growth
momentum and continued to increase as a percentage of total revenues.

Gross  profit margin  on a  group level  increased in  Q2 2010 by 2.8 percentage
points  to 22.8% (H1 2010, grew 2.5 percentage  points to 21.8%). RPC Management
Services’  gross profit margin grew from  27.1% in Q2 2009 to 28.7% in Q2 2010.
Gross  profit margin in our European RPC business benefited from slightly higher
per  trip revenues,  constant per  unit cost  of goods  sold and  relative lower
depreciation. Gross profit margin in the RPC US business decreased slightly as a
result  of slightly lower prices, as well as higher freight costs resulting from
higher fuel prices and a higher rate of expedited RPC pool movements in order to
meet  the increasing customer  demand. All regions  continue to benefit from the
scale effects of the growing business on fixed costs. Gross profit margin in the
Pallet  Management Services business  grew to 15.8% from  12.5% in Q2 2009, with
the  effects of lower year-over-year customer  prices and higher fuel prices now
more  than offset  by significantly  lower raw  materials costs,  improved labor
productivity,  a more efficient transportation cost  structure, and a higher mix
of profitable service revenues.

Currency adjusted group EBITDA increased in Q2 2010 by 27.4% to US $36.1 million
(H1  2010, by 26.5% to US  $67.9 million). LTM  Q2 2010 currency adjusted EBITDA
reached a record level of US $135.8 million. EBITDA on a currency adjusted basis
in  RPC Management  Services increased  significantly in  Q2 2010 by 23.2% to US
$30.6  million (H1 2010, by 27.1% to US  $58.0 million). RPC Management Services
EBITDA  margin improved in Q2 2010 by  1.2 percentage points to 28.8%. EBITDA in
Pallet  Management Services increased by 42.3% to US $8.0 million in Q2 2010 (H1
2010, by  22.9% to US $14.9 million).  EBITDA margin in this  segment grew in Q2
2010 to 8.9% from 6.2% in Q2 2009.

Currency  adjusted  EBIT  increased  by  US  $7.4 million, or 39.8%, to US $26.1
million in Q2 2010 (H1 2010, by 38.1% to US $47.2 million). LTM Q2 2010 currency
adjusted EBIT reached a record level of US $95.7 million.

Net  result improved  from a  net loss  of US  $5.4 million  in Q2 2009 to a net
profit of US $6.1 million in Q2 2010 (H1 2010 from a net loss of US $2.7 million
to   a  net  profit  of  US  $7.0  million).  The  significant  net  operational
improvements  discussed  above  were  partially  offset  by  higher  ICE related
expenses  and a  higher deferred  tax provision.  Net finance costs decreased in
both  Q2 2010 and  H1 2010 as  a result  of the  one-time costs recognized in Q2
2009 in connection with the Company’s 2009 refinancing.

IFCO’s  cash flow from continuing operations,  excluding the cash flow effect of
income  tax payments  and ICE  related payments,  more than  doubled to US $64.6
million in H1 2010 from US $31.2 million in H1 2009 as a result of higher profit
levels and improved working capital development.

Capital expenditure levels increased by  US $14.6 million, or 109.4%, to US
$28.0  million  during  Q2  2010 (H1  2010, by  113.0% to US $52.9 million). The
realization  of the  planned growth  in Europe  and the  US has led to continued
investments in our RPC pools in 2010.

Outlook:  As the financial crisis that  unfolded in 2008 spread to the worldwide
economy  up to today, IFCO experienced  challenging economic climates in many of
its  markets. While  the economy  in the  United States  remained in  a weak but
slightly  improved condition  during Q2  2010, it is  expected that the European
economy will recover during 2010.

Accordingly,  the  European  RPC  Management  Services business will continue to
leverage  IFCO’s leadership  position and  market experience  to meet  or exceed
overall  market development. The Company plans to increase its sales initiatives
and  to continue  to expand  its geographic  presence in Western Europe, Central
Eastern  Europe (CEE)  and South  America. In  the United  States, IFCO realized
increases  in the overall RPC penetration among grocery food retailers and plans
to  grow in excess of this market  development. Based on the Company’s solid RPC
business  model, IFCO expects  that the RPC  Management Services businesses will
continue  to grow  in 2010. IFCO’s  investments to  support this  growth will be
carefully  aligned with its business development and are targeted to continually
increase the return on its invested capital.

IFCO’s  Pallet Management  Services business  has significantly  been negatively
affected by the overall economic decline in the United States in 2009, primarily
as  a result of pressure on prices  from lower market demand. Nevertheless, IFCO
remains  confident that the key competitive  advantages of the Pallet Management
Services  business – the breadth of  service offerings, the national network and
the  value proposition  at a  national and  local level  – have  not changed and
should  allow its Pallet  Management Services segment  to stabilize revenues and
increase   profitability   in   2010. Q2  2010 has  shown  nearly  flat  revenue
development as a first slight sign of recovery.

The Company believes that its current assessment of the markets and its business
development  as described  above should  result in  overall significant gains in
both revenues and operational profitability in 2010 as compared to 2009.

Financially,  IFCO expects to be able to  fund its capital, operational and debt
service requirements through its own operating cash flows.

For  further explanations,  please see  IFCO’s quarterly  report, which  will be
filed  with  the  Deutsche  Borse  AG  on  or about August 12, 2010, and will be
www.ifcosystems.com. The  Company will  hold a  conference call  on August  19, 2010. The details are available on the Company’s website.

Source: IFCO Systems

Speak Your Mind

*