Panalpina sees airfreight grow but profits under pressure

Panalpina has recorded an above market increase in airfreight demand but in contrast profitability was flat.
The first-quarter figures released by the forwarder revealed that airfreight demand during the period increased by 8% year on year to 233,000 tons, driven by Far East trade lanes. This is ahead of the estimated market growth of 6% during the period.
First-quarter revenues from its air cargo business meanwhile increased by the lower amount of 3.8% to Sfr657m, gross profits were down by 2.6% to Sfr144.7m and earnings before interest and tax (EBIT) were down from Sfr17.8m last year to Sfr17.1m.
Its gross profit/EBIT margin for the period was 11.8% compared with 12% at the same time last year, while the company’s gross profit/ton margin Sfr620 against Sfr688 last year.
Panalpina’s airfreight forwarding expenses for the period increased to Sfr512.5m from Sfr484.6m last year.
Kuehne + Nagel yesterday reported similar results with airfreight volumes increasing but margins and profitability remaining flat.
Overall, Panalpina saw revenues decrease by 2.3% year on year to Sfr1.3bn, EBIT slipped 28.4% to Sfr16.4bn and net profit was down 28.5% to Sfr12.3bn.
The revenue decrease and profit pressure comes as the company exited under-performing logistics sites and its ocean division made an EBIT loss as it faced challenging market dynamics.
Panalpina chief executive Stefan Karlen said: “In the first three months of the year, we succeeded in outperforming the markets with volume increases of 8% in airfreight and 7% in ocean freight.
“As expected, margins remained under pressure, however, they are slowly recovering since we saw an upturn in unit profitability in both Air and Ocean Freight compared to the last quarter of 2016.”
“While the challenging market dynamics are expected to continue throughout 2017, we are well-positioned in the market and cautiously optimistic that we can keep up the strong volume growth in air and ocean freight, further gaining market share.
“In a market environment where rates are currently going up instead of down as last year, we also expect to make progress in yield management. One of our top priorities remains, of course, to restore profitability in ocean freight.”