Panalpina reports improving profitability amid below-market air and sea volume growth

In the first quarter of 2018, Panalpina reported net forwarding revenue growth of 10.7%, with EBIT up from CHF16m to CHF24m.

“We’ve had an encouraging start into 2018. Profitability per transported unit increased in both Air and Ocean Freight,” said Panalpina CEO Stefan Karlen. “In Ocean Freight we still recorded a loss, but it has come down from the last quarter of 2017. Logistics contributed to the good overall performance with a solid EBIT result.”

Panalpina’s Air Freight volumes increased 3% in the first quarter of 2018. The company asserted that market growth was higher at 5%. Compared to the same period of last year, Panalpina’s gross profit per ton increased by 19%, while EBIT increased from CHF17.1m to CHF 26.9m. The EBIT-to-gross-profit margin (conversion ratio) came in at 15.1% compared to 11.8% a year before.

Panalpina’s Ocean Freight volumes decreased 4% year-on-year, mainly as a result of a discontinued high-volume contract. The company assessed that market growth was considerably higher at 5%. Panalpina’s gross profit per TEU increased by 7%, while an EBIT loss of CHF5.8m was reported compared to a loss of CHF3.2m a year ago. The conversion ratio was -5.3% compared to -3.0% a year before.

As for the Logistics division, gross profit increased 2% to CHF 84.0m year-on-year. EBIT reached CHF3.4m for the first three months of 2018, compared to CHF2.4m for the same period of last year.

On the outlook for market dynamics, Panalpina stated that “political and macroeconomic uncertainties add complexity”, and that “air freight rates are expected to increase while ocean freight rates are expected to remain stable”. It asserted that for air freight it expected to grow at or above the market whereas ocean freight growth would be below market performance.

Its priorities for the year included speeding up the optimisation of cost structure, pushing ahead with the implementation of SAP TM, focusing on top line growth and unit profitability, improving EBIT in Ocean Freight and accelerating growth through selected bolt-on acquisitions.

Karlen remarked: “Global air freight demand continues to be healthy and the carriers have begun to increase rates substantially. We will have to be very disciplined in passing these rate increases on as we head for a summer season that could be busier than usual again. In Ocean Freight, our immediate focus is clearly on improving profitability. In Logistics, we have made important investments that put us in a good position for top-line growth during the rest of the year.”

Source: Panalpina