Amsterdam, Netherlands, March 3, 2011
Despite an economic environment that continued to create challenges in most of IFCO’s markets, IFCO is proud that the Company remained on a sustainable and profitable growth path in 2010. Key performance indicators such as revenues, operational profit and operating cash flows all reached record levels in 2010.
IFCO’s currency adjusted group revenues and operational profitability (EBITDA) both continued to grow in 2010 as compared to 2009. IFCO’s currency adjusted group revenues grew by 9.1% to US $785.4 million and currency adjusted EBITDA increased by 20.1% to US $149.7 million in 2010 compared to 2009.
Retailers worldwide are strengthening their emphasis in reusable plastic packaging solutions to lower the environmental impact and improve their supply chain efficiency. As a result, our RPC business has enjoyed strong demand for our reusable packaging solutions.
As a result, RPC Management Services delivered significant gains in currency adjusted revenues (by 18.3%), gross profit (by 28.5%) and EBITDA (by 20.4%) in 2010 as compared to 2009. 2010 revenues in the Pallet Management Services business segment declined slightly (by 1.3%) while gross profit (by 4.2%) and EBITDA (by 10.3%) grew compared to 2009.
RPC Management Services’ delivered consistent currency adjusted revenue growth during 2010 (Q1 2010 17.3%, Q2 2010 18.3%, Q3 2010 20.5% and Q4 2010 17.0%), 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 new retailer wins in certain markets, such as Spar in Austria during 2010 and Carrefour in France and Greece, which commenced in late 2010, but will roll out during 2011. Also, our efforts to develop our East European business showed good progress, evidenced by our Q4 2010 agreement signed with MERCATOR in Slovenia, and supported the overall positive volume development in Europe. Growth in our RPC US business continued due to increasing RPC penetration in our existing customer base and a steady flow of new North American retailers adopting the RPC model. RPC South America’s growth momentum continued to develop.
IFCO today is the most complete worldwide provider of reusable packaging solutions with a global pool of more than 116 million reusable containers, generating more than 550 million trips and a worldwide infrastructure of 210 depots and sanitation centers. These physical assets, together with our employees’ intangible pool management expertise, effectively serve the increasing demand for reusable packaging solutions.
Revenues in Pallet Management Services as compared to 2009 were nearly unchanged during the first 3 quarters of 2010, although slowed somewhat down in Q4 2010 due to the impact of inclement weather across several regions. Although full year average pricing levels in 2010 remained below comparable 2009 levels, average pricing during Q4 2010 surpassed the comparable prior year quarter for the first time in ten quarters. Pallet sales volumes were flat compared to prior year, while 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 2010 by 2.1 percentage points to 22.6%. RPC Management Services’ gross profit margin grew by 2.2 percentage points from 26.4% in 2009 to 28.6% in 2010. Gross profit margin in our European RPC business benefited from higher per trip revenues because of changes in the mixture of rented RPCs, under proportional growth of per unit cost of goods sold and relative lower depreciation. Gross profit margin in the RPC US business decreased as a result of marginally lower prices, as well as higher freight costs resulting from higher fuel prices, a higher rate of expedited RPC pool movements in order to meet the increasing customer demand and general cost increases in the US truckload and intermodal carrier market. 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 increased by 0.7 percentage points to 14.4% in 2010 from 13.7% in 2009. Gains related to the lower overall average cost of pallet cores, greater direct labor productivity, and improved fixed cost leverage were partly offset by the effect of lower customer prices, higher common carrier spend to move inventories between locations to meet customer demand, higher year-over-year fuel prices, and lower margins in our Custom Crating division.
Currency adjusted group EBITDA increased in 2010 by 20.1% to US $149.7 million. EBITDA on a currency adjusted basis in RPC Management Services increased in 2010 by 20.4% to US $134.7 million. RPC Management Services EBITDA margin grew from 29.3% in 2009 to 29.8% in 2010. EBITDA in Pallet Management Services increased by 10.3% to US $25.4 million in 2010. EBITDA margin in Pallet Management Services grew to 7.6% in 2010 from 6.8% in 2009.
Currency adjusted EBIT significantly increased by 24.6% to US $105.8 million in 2010 compared to 2009. EBIT margin improved from 12.0% in 2009 to 13.5% in 2010.
Net profit increased from US $20.0 million in 2009 to US $34.8 million in 2010. The net operational improvements described above and lower finance activities were partially offset by a higher income tax provision. Reported interest expenses decreased in 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, increased significantly by 34.1% to US $181.4 million in 2010 from US $135.3 million in 2009 as a result of higher profit levels and favourable working capital development. Working capital significantly improved through lower inventory levels, reduced accounts receivable day sales outstanding and increased refundable deposits as our RPC Management Services business continues to grow.
Our capital expenditure levels significantly increased by US $64.0 million, or 110.2%, to US $122.1 million during 2010. The realization of the planned growth in Europe and the US and new retailer wins have led to continued investments in our RPC pools in 2010.
ROCE from continuing operations on a LTM basis increased to a level of 23.3% in 2010 after 19.0% in 2009. This positive development is the result of the Company’s increased profitability and further RPC pool utilization gains, which led to comparatively lower capital expenditure requirements. During 2010, we continued to increase our efforts and resources to improve our RPC asset management and control capabilities.
Our sources of liquidity currently include cash from operations, cash and cash equivalents on hand, amounts available under our RCF and certain factoring agreements. As of December 31, 2010, our liquidity declined by 12.9% (currency adjusted by 7.1%) to US $120.4 million compared to US $138.2 million (currency adjusted US $129.5 million) as of December 31, 2009. Despite the growth driven increases in RPC pool capex, ICE related payments, the dividend payment made during Q2 2010 and the STECO seller note payment, the Company’s currency adjusted liquidity decreased only 7.1%, which is the result of higher operational profitability and better working capital management. We believe that these sources of liquidity are sufficient to finance our future capital and operational requirements in accordance with our business plans.
Outlook: As the recent financial crisis continued to impact the worldwide economy during 2010, challenging economic climates remained in many of our markets. While the economy in the United States remained in a weak but slightly improved condition during 2010, the European economy experienced an impressive recovery during 2010.
Accordingly, our European RPC Management Services business will continue to leverage our leadership position and market experience to meet or exceed overall market development. We plan to increase our sales initiatives and to continue to expand our geographic presence in Western Europe, Central Eastern Europe (CEE) and South America. Recent wins of new retailers, like Carrefour in France, Spar in Austria and MERCATOR in Slovenia support our expectations. In the United States, we realized increases in the overall RPC penetration among grocery food retailers and plan to grow in excess of this market development. Based on our solid RPC business model, we expect that the RPC Management Services businesses will continue to grow in 2011. Our investments to support this growth will be carefully aligned with our business development and are targeted to continually increase the return on our invested capital.
Our focus will remain on new and innovative products and markets where we can achieve profitable growth, as well as continuing to deliver on our ongoing responsibility to our global environment.
Our Pallet Management Services business continued to feel the negative impact of the recent economic downturn, primarily as a result of pressure on prices from weak market demand. Nevertheless, we remain 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 our Pallet Management Services segment to grow revenues and increase profitability in 2011.
We believe that our current assessment of the markets and our business development as described above should result in overall significant gains in both revenues and operational profitability in 2011 as compared to 2010.
Financially, we expect to be able to fund our capital, operational and debt service requirements through our own operating cash flows.
For further explanations, please see IFCO’s annual report, which will be filed with the Deutsche Börse AG on or about March 3, 2011, and will be available on the Company’s website www.ifcosystems.com:
http://www.ifcosystems.com/ or www.ifcosystems.de:
http://www.ifcosystems.de. The Company will hold a conference call on March 15, 2011. The details are available on the Company’s website.
This release contains forward-looking statements that reflect Management’s current view with respect to future events. All statements contained in this release that are not clearly historical in nature or necessarily depend on future events are forward-looking. The words “anticipate”, “believe”, “expect”, “estimate”, “planned” and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections of the Management on currently available information. Many factors could cause the actual results, performance or achievements to be materially different from those that may be expressed or implied by such statements. We do not assume any obligation to update the forward-looking statements contained in this release.
IFCO SYSTEMS N.V.
Tel: +49 89 744 91 316
Fax: +49 89 744 767 316
IFCO is an international logistics service provider with more than 210 locations worldwide. IFCO operates a pool of over 116 million Reusable Plastic Containers (RPCs) globally, which are used primarily to transport fresh produce from growers to leading grocery retailers. In the United States, IFCO also provides a national network of pallet management services. IFCO is the market leader in this industry with almost 200 million pallets sorted, repaired and recycled annually.
WORLDWIDE RESPONSIBILITY is an IFCO initiative, under which IFCO not only continues to assume its social and environmental responsibility but, working with strong project partners, expands its sphere of responsible activities. With the initiative’s first social-engagement project, IFCO supports Food Banks worldwide in their honorable effort to provide food to the needy through the provision of reusable containers and by co-financing delivery vehicles.
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