Panalpina consolidated profit stable despite “very soft” air freight

by Payload Asia

International freight forwarding and logistics company Panalpina achieved a stable consolidated profit of CHF 69.3 million (US$72.5 million– currency adjusted: CHF 75.8 million or +9.5 per cent) in the first nine months of 2015 despite a slowdown in the oil and gas market and what it described as a “very soft” air freight market.

Group gross profit decreased six per cent to CHF 1.107 billion (currency adjusted: CHF 1.177.0 billion – flat year-on-year), while EBIT decreased two per cent to CHF 92.4 million (currency adjusted: CHF 102.7 million or +9.0 per cent). EBIT was up in Ocean Freight and positive in Logistics (compared to a loss from January to September 2014) but down in Air Freight.

In a “very soft” air freight market that grew less than 1.0 per cent from January to September 2015, Panalpina’s Air Freight volumes decreased 2.0 per cent in the same period. Panalpina transported less oil and gas and automotive cargo, but more perishables.

Gross profit per tonne decreased 4.0 per cent to CHF 715 (YTD 2014: CHF 745), resulting in a total gross profit of CHF 439.7 million (YTD 2014: CHF 469.0 million). Air Freight achieved an EBIT of CHF 67.6 million (YTD 2014: CHF 85.3 million), while the EBIT-to-gross-profit margin for the first nine months of 2015 decreased to 15.4 per cent (YTD 2014: 18.2 per cent).

“In the first nine months of the year we succeeded in keeping EBIT and consolidated profit at previous year levels, despite a contracting air freight market in the third quarter, our exposure to the oil and gas industry and historically high IT investments,” says Panalpina CEO Peter Ulber.

“Currency adjusted, EBIT and consolidated profit would have been up by 9.0 per cent and 10 per cent respectively. Ocean Freight increased EBIT significantly and Logistics delivered the third positive quarterly EBIT in a row, resulting in an EBIT year-to-date of CHF two million compared to a loss of almost CHF seven million last year.”

Total operating expenses amounted to CHF 975.9 million, 6.0 per cent less (adjusted: -1.0 per cent) than in the same period of the previous year (YTD 2014: CHF 1.041 billion).

Panalpina achieved an EBIT of CHF 92.4 million, a decrease of 2.0 per cent (adjusted: +9.0 per cent) compared to the same period of last year (YTD 2014: CHF 94.4 million). The EBIT-to-gross-profit margin increased to 8.3 per cent (YTD 2014: 8.0 per cent). The consolidated profit of the group remained stable at CHF 69.3 million (YTD 2014: CHF 69.2 million).

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In Logistics, gross profit decreased 10 per cent to CHF 305.5 million (YTD 2014: CHF 339.3 million) as a result of currency translation and the continued exit from underperforming sites. In the first nine months of 2015, a positive EBIT of CHF 2.0 million was achieved, compared to an EBIT loss of CHF 6.9 million in the same period of last year. Logistics recorded the third positive quarter on EBIT level in a row, according to Panalpina.

Panalpina’s Ocean Freight volumes grew 1.0 per cent in the first nine months of 2015, which was slightly below market growth of two per cent. Gross profit per TEU decreased three per cent to CHF 300 (YTD 2014: CHF 309), resulting in a total gross profit of CHF 362.2 million (YTD 2014: CHF 370.4 million). Ocean Freight posted an EBIT of CHF 22.8 million (YTD 2014: CHF 16.0 million) and the EBIT-to-gross profit margin increased to 6.3 per cent in the first nine months of 2015 (YTD 2014: 4.3 per cent).

Looking ahead Ulber said: “The air and ocean freight markets will continue to be soft at best and a rebound of the oil price in the near future seems unlikely. It is all the more important that we continue to control cost with great discipline and implement new IT systems and processes in order to improve our productivity,” he said. “We will accelerate our investments in less cyclical business to further reduce our exposure to certain industries.”