Struggling air freight division causes major disappointment at Panalpina

Panalpina has confessed its disappointment with its financial performance in 2012. Monika Ribar, CEO of Panalpina, described the results as “unsatisfactory.” Despite positive gains for sea freight and logistics, the weak performance of the air freight division was a major hindrance to the company’s overall results.

The company reported revenues of CHF6.6bn in 2012 (€5.34bn), a 1.8% increase compared to 2011. In addition, gross profit remained largely unchanged at CHF1.5bn (€1.2bn).

However, underlying EBITDA fell 43% from CHF212m to CHF121m and bottom line figures were heavily impacted by non-recurring charges totalling CHF114m. This resulted in a consolidated loss of CHF70m for Panalpina in 2012, compared to a profit of CHF127m in 2011.

It is often the case that Panalpina reports that it has been negatively impacted by currency fluctuations, however it was telling that the company reported that this was not a significant factor in its 2012 financial results.

The air freight division is the largest reporting segment of Panalpina and therefore its poor performance was particularly damaging to the company’s overall result. This was outlined by Ribar who said, “We did not manage to compensate for the setback in air freight. In ocean freight and logistics we considerably expanded our business despite a slowing market growth, but it was simply not sufficient.” The division reported gross profit of CHF627m, an 8.8% year-on-year decline on a 5.3% decline in revenues. This was attributed to a 6% decline in air freight volumes to 801,000 tons and lower air freight rates.

It was not all bad news for the Swiss-based freight forwarder. Panalpina’s ocean freight business reported record volumes of 1.39m TEUs, 6% more than it transported in 2011. The increase was attributed to growth on trade lanes to and from Asia including Africa, Latin America and the Middle East. The division improved its revenues by 13.0% to CHF2.6bn and its gross profit by 4.8% to CHF460m.

In addition, Panalpina was pleased with the growth of its logistics business. Despite a small decline in its net revenues, the division reported a gross profit of CHF378m in 2012, compared to CHF350m in 2011. The division established four new competence centres and several logistics centres in 2012, bringing its total warehouse space to more than 1.2m sq m. It appears that Panalpina is willing to put a lot of faith in the continued growth of the logistics division, “In 2013, Panalpina will continue to invest in logistics to grow this part of the business” announced Ribar.

In light of the company’s performance in 2012 and the volatile market environment, the company stated it was “very cautious regarding forecasts for 2013.” The company is tightening its belt and will focus on reducing costs to improve profitability rather than any significant investments in its freight forwarding businesses.