Through 2016 Panalpina has suffered from the same problem as many other forwarders; higher demand but lower profitability. However, the effect has been harsher on Panalpina than many others and the top line figures are worrying.
Gross profit fell by 3.3% year-on-year, operational profits measured in EBIT (Earnings Before Interest and Tax) were down by 29% whilst consolidated profit fell from CHF88.2m in FY2015 to CHF52.3 in 2016. Even after stripping out exceptional and non-recurring items, Panalpina estimates that EBIT was down 6.3% and consolidated profit down 9.1%.
The problem with Panalpina was not shortage of demand, rather it was scarcity of supply driving-up freight rates. In air cargo, which is Panalpina’s largest segment, demand started off the year in a weak state but reversed dramatically in the latter half of the year, with volumes handled measured in tonnes rising by 14% in the last quarter. The effect of this was that the supply of air freight capacity tightened and price went up. The result for Panalpina was a fall of 14% in gross profit per tonne for the fourth quarter. For the year, EBIT was CHF80.8m, down by CHF7.7m from 2015.
The situation in ocean forwarding was worse. Volume fell heavily in the first half of the year but recovered in the fourth quarter but this just led to a fall in the gross profit per TEU. The result was a loss of CHF0.6m in 2016, compared to a profit of CHF26.6m in 2015. Overall Panalpina lagged behind growth in the market, with a fall measured in TEUs of 7% compared to the market’s increase of 1% for the year.
The logistics business continues to be profitable but the numbers here also took a down-turn, possibly due to the continuing weakness in the oil and gas sector. Reported profit fell from CHF2.1m in 2015 to CHF1.8m in 2016, however Panalpina stated that after exceptional items, write-offs and currency fluctuations EBIT increased to CHF5.6m.
In the air forwarding business, the vigorousness of the peak-season seems to have taken Panalpina by surprise in 2016. Its positioning in the market was incorrect and losses resulted. The situation in sea forwarding is more concerning. This must be disappointing for company that appeared to have re-organised itself and was heading in the right direction.
Source: Transport Intelligence, March 6, 2017
Author: Thomas Cullen
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)