Panalpina Reports Higher Volumes and Reduced Profit in 2016
While Panalpina recorded high volumes in 2016, gross profit margins in both Air and Ocean Freight came under pressure throughout the year. This resulted in lower full-year earnings for the international freight forwarding and logistics company.
“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,” says Panalpina CEO Stefan Karlen. “While we continued to perform well on volumes, pressure on yields impacted our profits.”
Panalpina’s Air Freight volumes increased 10% (4% organic growth) in 2016, in a market that grew by an estimated 1-2%. The air freight industry had its busiest peak season since 2008 and Panalpina recorded their highest air freight volumes since 2007. The company transported 921,400 tons of air cargo last year (2015: 836,200 tons). Gross profit per ton decreased 7.5% to CHF 646 (2015: CHF 699), resulting in a total gross profit of CHF 595.2 million (2015: CHF 584.1 million). On an operating profit level, Air Freight achieved an adjusted EBIT of CHF 93.5 million (reported 2016: CHF 80.8 million), compared to CHF 88.5 million the year before.
“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,” says Mr. Karlen. “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% in 2017.