Profits fall at Panalpina as shippers balk at higher rates
Panalpina did its best to present its lackluster second-quarter results as upbeat, but the Swiss logistics company is running up against shipper’s reluctance to pay higher rates, which pushing down yields. The company reported first-half gross profit down 9 percent, at US$707 million.
Citing higher freight rates and ongoing margin pressure as evidence of a “challenging market environment,” Panalpina’s reported EBIT (earnings before interest and taxes) and consolidated profit increased, year-over-year, but decreased when compared to respective 2016 figures adjusted for restructuring costs – prompted, in part, from an over-reliance on oil-and-gas revenues that have dwindled over the last half decade).
Reported EBIT for the first half of 2017 reached $44.2 million, compared to $36.5 million a year before.
While Panalpina logged “robust volume growth” in both its Air and Ocean Freight divisions in the first half-year of 2017, it’s air freight volumes increased 7 percent in the first half of 2017, just shy of estimated market growth of about 8 percent. That figure is well behind the airfreight numbers reported earlier this week by the other major Switzerland-based forwarder, Kuehne + Nagel. Volumes reported by K+N were up 18 percent for the first half of 2017, compared with the previous year.
David Kerstens, an analyst for Jefferies, told The Loadstar that Panalpina had attempted to increase prices, but that customers had balked. He said that Panalpina was now, “struggling to pass higher prices on to customers.”
In seafreight, Panalpina’s volumes in the first half-year increased 5 percent over 2016, above an estimated market growth of about 4 percent. However, gross profit per twenty-foot-equivalent unit decreased 12 percent to $297.6 – resulting in a gross profit overall of $225.6 million.
“While we are confident that we can improve unit profitability in Ocean Freight in the second half of the year, unit profitability in Air Freight will remain under pressure,” said Panalpina CEO Stefan Karlen. “We will therefore concentrate on what we can influence directly: controlling cost very effectively and pushing ahead with our operations transformation program.”
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