Highlights Successful consolidation of businesses following Lehnkering acquisition in previous year. Imperial Shipping Group received the Green Award for ecological standards in inland shipping. Revenue and operating profit up 39% and 27% respectively, in South African Rand. Establishing new offices in China and South America in line with our internationalisation strategy. Gerhard Riemann, CEO of International Logistics

Key stats – Biggest fleet of subcontracted inland water vessels in Europe – Access to more than 700 inland vessels – 2 000 000 m² of storage capacity – 20 hazardous goods warehouses with 328 000 pallet places – 100 million tonnes of handling volume per – Employs around 7 500 people Key macro drivers – Growth in Germany – Import and export volume growth in and out of Germany – International trade growth

Divisional overview

Imperial Logistics International occupies crucial industrial choke points in Europe’s strongest economy, Germany. It is a leading logistics partner to the automobile, steel, aluminium, paper and chemical industries, as well as the mechanical and plant engineering sectors. In providing tailored logistics services it plays a key role in trade flows in and out of Germany and broader European economies.

The division offers holistic, industry-wide logistics solutions for its clients; from transport, storage and distribution to outsourced production services. It is a leading player in many of its niche markets and it makes a significant contribution to Germany’s powerful manufacturing and export industries.

Imperial Logistics International operates through five divisions: Imperial Shipping Group, Lehnkering, Panopa, Neska and Brouwer.

Operating units

Imperial Shipping Group		Europe’s leading inland shipping company, with a range of transportation services. It provides dry bulk services; chartering services; liquid cargo services; plus short sea and special services. Materials transported include coal, iron ore, bulk, liquid bulk, gas, chemicals, mineral oils, steel, construction materials, agricultural products, heavy lift and project cargo. 24 locations in Europe. Approximately 1 100 employees. 60 million tonnes a year transported. More than 700 inland vessels.
Lehnkering		Experts in chemical logistics offering transport, warehousing distribution and extensive value added services such as manufacturing and packaging on behalf of its customers. 55 locations in Europe and one in the USA. Transport capacity of more than 3 million tonnes a year. Storage space of 300 000 m 2.
Panopa		A contract logistics specialist providing a broad range of services from the beginning to the end of the supply chain. Panopa services the steel, automotive and spare parts industries, offering consulting and planning, warehouse management, order picking and sequencing, partial processing and preliminary assembly, as well as transport and freight forwarding. 65 locations in Europe, one in China and one in the USA. Handling of 6 million tonnes of steel and transports 1,6 million tonnes of truck freight a year. Storage space of 700 000 m 2.
Neska		A specialist for intermodal shipments of diverse goods, Neska operates bulk and container terminals in the main industrial centres along Germany’s inland waterways. It manages the transshipment of containers; paper and forestry products; refractory products; ferro alloys and minerals; aluminium; steel; coal; sand and gravel. 13 companies with 23 locations in Europe, six multi-modal terminals. Cargo handling volume of 8 million tonnes of general and bulk cargo and 1,5 million container handlings a year. Storage space of more than 1 million m 2.
Brouwer (associate)		Maritime transport specialists offering varied solutions and concepts for shipping bulk cargo. Activities include worldwide shipment of all bulk commodities; pipe, project and heavy-lift cargoes; arrangement of cargo handling services worldwide, including domestic transport; operating and handling of time charters; clearance and agency in all German ports. Located in Hamburg. Transport capacity of more than 25 million tonnes a year.

Market conditions

We experienced tough market conditions due to the slowdown in the European economy. Transport volumes were depressed, although activity levels in certain of our core markets like the chemical industry and gas shipping market held up well. We also benefited from exports out of Germany into markets outside Europe.

Results

€ million	2013			2012		Change %		H2 2013			H2 2012		Change % on H2 2013		H1 2013		Change % on H1 2013
Revenue	1 363			1 087		25,4		694			690		0,6		669		3,7
Operating profit	66			59		11,9		37			39		(5,1)		29		27,6
Operating margin (%)	4,8			5,4				5,3			5,7				4,3

R million	2013			2012		Change %		H2 2013			H2 2012		Change % on H2 2013		H1 2013		Change % on H1 2013
Revenue	15 574			11 247		38,5		8 363			7 088		18,0		7 211		16,0
Operating profit	759			598		26,9		452			396		14,1		307		47,2
Operating margin (%)	4,9			5,3				5,4			5,6				4,3

	2013			2012
Return on invested capital (%)	8,9			11,0
Return on invested capital before amortisation of intangibles and acquisition cost (%)	11,2			14,8
WACC (%)	7,6			11,9

The prior year is not directly comparable as the acquisition of Lehnkering was only included for six months. The division had a robust second half and performed satisfactorily for the year despite tougher trading conditions as a result of a slowing German economy. Transport volumes across the German inland shipping industry were down and freight rates have been under pressure. Activity levels in certain of our core markets held up well, namely the chemical industry and the gas shipping market. We also benefited from exports from Germany into markets outside Europe.

The group’s shipping activities, including those of Lehnkering, have been integrated into one unit, namely the Imperial Shipping Group. The business performed well despite difficult trading conditions where volumes and freight rates were under pressure. To counter this, we gained business from existing and new customers, managed our costs better and optimised our fleet of contracted vessels.

Lehnkering, which after restructuring of our operations houses all our non-shipping chemical industry logistics activities, including warehousing, road transport and chemical manufacturing services, experienced normal seasonally low activity levels in the first half and performed much better in the second half, in line with expectations. The agrochemicals industry typically generates higher revenues in the second half of the financial year. Lehnkering was affected by once-off charges, mainly in the first half due to corrective action required in certain areas.

Panopa, which provides parts distribution and in-plant logistics services to the automotive, machinery, and steel manufacturers performed well despite a depressed steel market and the slowing European automotive industry. Contract gains and renewals were the main drivers of good performance. The integration of Lehnkering’s steel and retail contract logistics divisions into Panopa was successfully completed and is performing in line with expectations.

Neska, the terminal operator, had a more challenging year. Its performance was affected by one client being placed under administration and another having a fire which disrupted operations at the container terminal in Krefeld. It is expected that the utilisation of the terminal will improve in the new financial year. The remaining terminals performed in line with expectations.

Gross capital expenditure of R441 million was incurred, up 28% when compared to the prior year, mainly due to the weaker Rand.

Risks, opportunities and performance drivers
Risks		Opportunities		Performance drivers
Change in transport flows		Drive for efficiency in the logistics supply chain		New contract gains
Exchange rates		Environmentally friendly logistics solutions		Broadening service offerings to clients
Decreasing foreign trade growth		Exposure to industries with good medium-to long-term growth prospects		Cost control and efficiencies
Worsening of European economic conditions		Trend to outsourcing		Strict asset management
Low levels of manufacturing activity		Following our customer base into other geographies		Return on invested capital

Sustainability

Our people

Qualified employees are very important to the success of the company and Imperial Logistics International invests extensively in apprenticeship programmes. Roughly 8% to 10% of the company’s employees in Germany are apprentices participating in “Duales System” training programmes – a dual education system combining theory and practical training that culminates in a nationally recognised vocational qualification.

Imperial Logistics International continues to be successful in attracting a steady supply of apprentices for the approximately 360 apprenticeship training positions available. However, it regularly participates in career and recruitment events for students and graduates to proactively ensure it continues to attract qualified young people for apprenticeship training positions.

Recently, Imperial Logistics International started a management trainee programme for young, high-potential employees. Around 12 to 20 young managers will be selected annually and coached for their future career at Imperial Logistics International.

Quality, environment, health and safety

Issues of quality, environment, health and safety (QEHS) are high on the company’s agenda and all divisions meet internationally recognised standards that include:

A comprehensive risk analysis process is in place to monitor adherence to these standards and measure QEHS performance.

On the environmental management front, Imperial International Logistics is recognised as a market leader and has received numerous awards. During the year a further two gas tankers from Imperial Shipping Group received the Green Award for ecological standards in inland shipping.

A number of businesses continued to implement energy and water-saving initiatives during the year, including the installation of energy-efficient lighting, dust and noise pollution reduction measures and water treatment and recycling projects.

Outlook and strategic objectives

Imperial Logistics International remains well positioned in attractive niches in the German logistics industry. Despite the tough conditions in Europe, we are positive about the division’s prospects and its ability to show growth due to its positioning and the industries it serves. We will continue to follow our customers who are entering new markets and potential acquisitions will also be a further growth driver.

Strategic objectives