Panalpina’s growth through forwarding slowed by contract logistics

A “path to recovery” is how Panalpina described its performance over the past 12 months, although there is still some work to do if the Swiss forwarder is to fulfil its promise, particularly in the area of contract logistics.

As so often has been Panalpina’s fate over the past few years, profits were hampered by fines which in 2013 amounted to CHF40.9m but EBITDA bounced back from CHF34.3m in 2012 to CHF119.9m in 2013, consolidated profit emerged from last year’s loss to a positive figure of CHF11.7m whilst revenue was up 2.1% at CHF6,757.6m.

The core air freight forwarding business grew at 3%, better than the market growth generally which Panalpina said was 1%. However, Gross Profit edged up 1%, illustrating that freight rates were weak through the peak-season. Yet better cost control resulted in Earnings Before Interest and Tax (EBIT) up almost half at CHF119.3m. The oil and gas business in particular, combined with automotive and manufacturing, grew whilst the technology sector saw lower volumes.

The smaller ocean freight business saw healthy volumes, up 8% year-on-year whilst rates were almost stable pushing-up gross profit by 7% and EBIT leapt from CHF8.9m in 2012 to CHF28m an EBIT-to-gross profit margin of 5.7%. Panalpina ascribed this performance to its success in the oil and gas sector with demand growing in ‘strong double-digits’.

The problems of contract logistics remained. Although demand was strong, with gross-profit up by 16%, the business made a loss before interest and tax of CHF39.3m, this figure was roughly the same as last year. Panalpina blamed this on “a number of loss-making facilities and unprofitable road activities”. IT investments also appear to be taking a toll.

Panalpina expect that their business will grow at the same rate as the market in 2014 although judging by the performance of 2013 the health of the oil and gas investment market is likely to be vital to the forwarders prospects. None-the-less the ability to grow faster than the market in air but especially sea without driving-down profits is a healthy sign, even if it might be harder to continue to reduce costs next year.