Although Panalpina described both ocean and air forwarding markets as “shrinking” it has managed to grow its air freight business significantly over the past nine-months. Unfortunately falling volumes at Ocean freight counter-balanced this whilst the company has engaged in substantial adjustment in its oil and gas logistics business.
Net forwarding revenue fell heavily, from CHF4.4bn for the first nine months of 2015 to CHF3.36bn for same period in 2016, yet gross profit was down just 1.4%. Adjusted for the provisions in its oil and gas business Earnings Before Interest and Tax (EBIT) rose by 1.3%, but including its restructuring costs in oil and gas logistics EBIT fell significantly.
Panalpina has experienced an acceleration in its air freight business over the past three quarters, with volumes increasing by 5% in Q1, 11% in Q2 and 10% in Q3 year-on-year. However, gross profit per tonne fell over this period. Yet this growth was in the teeth of what Panalpina assert was a fall in volume in the market generally over quarters 1 and 2. The result was a rise in adjusted EBIT from CHF67.6m in the first nine months of 2015 to CHF72.6m for the same period 2016. However, the reported, unadjusted number saw a 12% fall to CHF60m for the 9 months. Panalpina stated that growth in perishables was strong, however by implication, the oil and gas business suffered.
Panalpina had a tougher time in sea freight forwarding. Volumes fell heavily through the period, with volumes falling in Q3 by 9%. Yet although gross profit per tonne fell in Q3, it rose strongly in the earlier quarters suggesting that Panalpina’s attempts to improve the quality of earnings played a part in the fall in volumes. The market was generally flat, according to Panalpina, with falls of 1% in Q1 and Q2. Even on an adjusted basis this resulted in a fall in EBIT year-on-year to CHF16m, whilst on a reported basis EBIT fell to CHF6.3m.
The contract logistics business was also hit by the down turn in oil and gas related demand. Gross profit fell by 2.6% whilst reported EBIT fell to CHF1.2m for the nine months, down from CHF2m, although on an adjusted basis it rose to CHF5m.
Clearly these results still reflect the effects of the downturn in the oil and gas sector on Panalpina’s business, yet the message that the company is trying to get across is that it is growing in other sectors. Certainly, the performance in air freight was good and suggests that the company will benefit from any recovery here, but it is still to get on track in sea forwarding.
Source: Transport Intelligence, October 28, 2016
Author: Thomas Cullen
