Panalpina Reports 10% Slump In Sea Freight Volumes

International freight forwarding and logistics company Panalpina maintained its profitability in the first quarter of 2016 despite the continued contraction of the global oil and gas sector that forms a significant part of its forwarding business, with increases in air freight volumes offsetting falling margins in its dominant air freight business.
But the continued contraction of the global oil and gas sector was most evident in the Swiss group’s ocean freight forwarding business, where “significantly lower volumes in oil and gas and a discontinued high-volume contract” meant that Panalpina’s ocean freight volumes decreased 10% year-on-year while the market shrank by an estimated 1%.
However, gross profit per TEU increased 10% to CHF 339, resulting in a stable gross profit of CHF 118.1 million within the group’s ocean freight forwarding business (Q1 2015: CHF 119.1 million). EBIT and EBIT-to-gross profit margin remained stable with CHF 4.3 million (Q1 2015: CHF 4.5 million) and 3.7% respectively (Q1 2015: 3.8%).
Panalpina’s air freight volumes grew 5% in the first quarter, in a market that shrank by an estimated 3%. While volumes “contracted substantially in oil and gas, they grew in all other industries including perishables”, the company said.
The company blamed the continued soft market and said the conversion ratio reduced as a result of lower gross profit in its oil and gas-related business.
Gross profit per tonne decreased 5% to CHF 688, but gross profit overall remained unchanged at CHF 148.6 million (Q1 2015: CHF 148.0 million), as the volume growth offset the fall in yields.
Nevertheless, operating profits within the group’s air freight business slipped, achieving an EBIT of CHF 17.8 million, down from CHF 19.6 million in Q1 2015. And the EBIT-to-gross-profit margin for the first quarter decreased to 12.0%, down from 13.2% in the first quarter of last year.
Meanwhile, the group’s Logistics business reported its fifth consecutive quarter of operating profits. The company’s continued exit from underperforming sites meant that the gross profit of the group’s Logistics product decreased 6% to CHF 98.2 million, but EBIT increased from CHF 1.2 million to CHF 1.8 million.
Looking at the quarter overall, group gross profit decreased by 2% to CHF 364.9 million, while total operating expenses were reduced by CHF 4.3 million, year-on-year, to CHF 328.7 million. Panalpina achieved an EBIT of CHF 24.0 million, a decrease of 5% compared to last year’s first quarter figure of CHF 25.3 million.
The EBIT-to-gross-profit margin came in at 6.6%, down slightly year on year from 6.8%. The consolidated profit of the group reached CHF 17.3 million, also down slightly compared with the Q1 2015 figure of CHF 19.6 million.
CEO Peter Ulber commented: “In the first three months of the year, we succeeded in counterbalancing the lower transport volumes in oil and gas. This was due to the positive development in the rest of the business as well as the fast adjustment of our cost base.
“The results reflect our changing business mix. While the contraction in oil and gas continued, we saw growth in all the other industries that we serve.”
In terms of outlook, he said the company expected continued contraction in the oil and gas sector and the soft market environment in air and ocean freight expected to remain.
Meanwhile, the group’s priorities would be to continue to “counterbalance” its portfolio with less “cyclical” business in air freight; further improve productivity and efficiency in ocean freight; “extend innovative value-added logistics services”; and continue the roll-out of its SAP Transport Management operating platform.