For the second quarter (Q2) of 2017, Panalpina reported total net forwarding revenues of CHF1,354.9m, with EBIT of CHF25.6m. These results reflected increases of 5% and 139%, respectively, though the latter was heavily influenced by the impact of non-recurring items suffered during the previous year.
When performance is assessed for the half-year period (H1), the overall picture is more moderate; top line growth of a mere 1% to take the company to CHF2,632.1m, with a 5% increase in forwarding expenses limiting absolute EBIT gains to 21%.
The story on the surface of these results is that Panalpina benefitted from volume growth in both its air and sea freight businesses, as well as increased profitability in its logistics operations.
However, filtering out the one-off results of Q2 2016, the picture appears far less positive. Adjusted for these effects, the company’s income statement shows a 30% decline in EBIT for Q2 2017 (a 31% decline for H1 2017), which has been at least partially influenced by an 11% rise in forwarding expenses.
This is indicative of a wider market trend within the air freight industry, which has seen carriers benefit from increasing yields throughout 2017, and thus comes as little surprise. Despite a 7% rise in air freight volumes during Q2, the forwarder suffered a 15% increase in expenses for the quarter, as demand rose relative to supply. Consequently, whilst the top line rose by 10%, adjusted EBIT contracted by 21%.
In ocean freight, revenues increased by 5%, though expenses increased by 8%, demonstrating that shifting capacity also presents somewhat of an issue in this side of the business. Demand has not picked up quite so much on the seas however, and Panalpina saw only a 3% increase in volumes. The bottom line continues to be poor in this area of the business, with EBIT standing at -CHF0.6m for Q2, and -CHF2.6m for H1.
The company’s Logistics division tells a tale of strategic realignment. Panalpina has sought to reposition this business in a manner that would secure more profitable business, and it appears to be achieving its aim if the most recent numbers are to be believed. Whilst divisional revenues contracted by 15% in Q2, adjusted EBIT rose by 35%, though at CHF3.1m, these profits are insignificant for the organisation overall.
As ever, the future of the company will be decided by its air freight business, which represents Panalpina’s largest and most profitable division. The company has been busy building up its perishables business, and recently acquired the Kenyan freight forwarder Air Connection. Nonetheless, it must address the performance of its Ocean freight operations, which have been earmarked as problematic for some time.
Source: Transport Intelligence, July 20, 2017
