Friday 28th Jul 2017 - Logistics Manager

Panalpina feels margin pressure in air and ocean freight

Pressure on margins in both air and ocean freight hit profits at Panalpina, with adjusted EBIT some six per cent lower at CHF109.9m for 2016.

Panalpina_Flag_webRevenue fell from CHF 5.9 billion in 2015 to CHF 5.2bn last year.

Chief executive Stefan Karlen said: “2016 represented a very challenging year. Much lower volumes from the oil and gas sector meant that we had to restructure that part of our business during the first half-year. In the second half, the Hanjin collapse and the very busy air freight peak season led to tight capacities and soaring rates which put strong pressure on our margins.

“While we continued to perform well on volumes, pressure on yields impacted our profits.”

Air Freight volumes increased 10 per cent (4 per cent organic growth) in 2016, in a market that grew by an estimated 1-2 per cent. But gross profit per ton decreased 7.5 per cent to CHF 646 (2015: CHF 699), resulting in a total gross profit of CHF 595.2 million (2015: CHF 584.1 million).

Ocean Freight volumes decreased 7 per cent year-on-year, but increased from quarter to quarter as the year progressed. The market grew by an estimated 1 per cent in 2016. Gross profit per TEU decreased by 1.1 per cent to CHF 298 (2015: CHF 301), resulting in a gross profit overall of CHF 443.8 million (2015: CHF 480.4 million).

In Logistics, gross profit decreased 5.8 per cent to CHF 385.7 million and adjusted EBIT increased to CHF 5.6 million for 2016, compared to CHF 2.1 million last year.

Looking ahead, Karlen said: “The unusually strong air freight peak season, and the temporary capacity constraints in the ocean freight market in 2016, mean that we have to concentrate even more on improving our yield management, especially when it comes to our Ocean Freight operating model.

“Yields have continued to remain under pressure in January and February and we expect the first quarter to come in below the previous year. Despite 2017 being a year of great political and macroeconomic uncertainties, we are keeping to our long-term goals and are confident that we can maintain stable costs to position the business for volume growth.” Panalpina expects the air and ocean freight markets to grow by 2 per cent in 2017.