Panalpina focuses on margins as it suffers from oil and gas fall

By Danny

The 9 month and 3^rd quarter results released yesterday show that the leadership of Peter Ulber has provided Panalpina with stability, but this has not compensated for the tough markets in air and sea forwarding. Although the company has continued to improve margins, volumes reflect the increasingly becalmed nature of world trade.

Being a Swiss company there is a significant amount of currency ‘noise’ around the numbers. ‘Net forwarding revenue’ over the past nine months saw an 11% fall at CHF4,409.3m, which Panalpina describe as a 6% year-on-year fall after the effects of currency are stripped-out. Gross profit fell by 6% but although EBITDA (Earnings Before Interest, Depreciation and Amortisation) at CHF131.5m fell by 4.4% year-on-year in absolute terms, after the effects of currency it rose by 4.2% over the year-to-date. EBIT (Earnings Before Interest and Tax) increased by 8.7% on the same terms.

Panalpina’s largest business, air freight forwarding, was hit by a tough market and saw volumes fall 2.3% in terms of tonnage. EBIT fell CHF17.7m to CHF67.6m over the period whilst the EBIT-to-gross-profit margin fell by 2.8%. It appears that Panalpina has been hit badly by the fall in oil and gas related activity as well as problems in one of its automotive clients.

Ocean freight was a slightly better picture. Volumes in terms of TEU were up 3% on average over the past three quarters and EBIT-to-gross profit margin hardened from 4.3% in the same period of 2014 to 6.3%, pushing up EBIT by over CHF6m year-on-year to CHF22.8m. Volume growth may have been less than the market overall but this may have been due to a wish to preserve margins.

The logistics business edged back into profit from the beginning of the year, with the year-to-date seeing an EBIT of CHF2m on a net forwarding revenue down slightly at CHF 468.3m. As well as the effects of the rising Swiss Franc the lower revenue number was influenced by exits from certain contracts.

Continued investment in a new SAP system illustrates that improving performance at Panalpina is still work in progress. However Peter Ulber also commented that Panalpina needed to reduce its exposure to “cyclical” sectors, presumably referring to oil and gas. He also hinted during a call with analysts that the company is considering acquisitions in the medium term.

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