Panalpina profits plummet in ‘challenging’ 2016

Consolidated net profits for the year dropped 40.7 percent to 52.3 million Swiss francs compared with the previous year as tight peak season airfreight capacity and the collapse of South Korean ocean carrier Hanjin Shipping put pressure on margins.    Swiss-based international freight forwarding and third-party logistics provider Panalpina saw its consolidated profits plummet 40.7 percent to 42.3 million Swiss francs (U.S. $51.7 million) for the full year in 2016, according to the company’s most recent financial statements.
   Earnings per share (EPS) stood at CHF 2.29 for the year, down from CHF 3.69 per share in 2015, as net forwarding revenues fell 11.3 percent year-over-year to CHF 5.2 billion.
   Panalpina attributed the decline in earnings and revenues primarily to pressure put on margins by tight peak season airfreight capacity and the collapse of South Korean ocean carrier Hanjin Shipping.
   “2016 represented a very challenging year,” Panalpina CEO Stefan Karlen said of the results. “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,” he added.
   The company reported its highest airfreight volumes since 2007, transporting 921,400 tons of air cargo last year compared with 836,200 tons in 2015. Operating profits in Panalpina’s airfreight division, however, slid 8.7 percent from the previous year to CHF 80.8 million as EBIT-to-gross profit margin fell from 15.2 percent to 13.6 percent.
   Panalpina’s ocean freight division saw 2016 volumes slip 7 percent year-over-year to 1.49 million TEUs as tightened capacity following Hanjin’s bankruptcy announcement caused rates to rise and put pressure on margins. The segment posted a CHF 0.6 million operating loss for the year compared with an EBIT of CHF 26.6 million in 2015 as EBIT-to-gross profit margin fell from 5.5 percent last year to negative 0.1 percent in 2016.
   Gross profits in the company’s logistics segment decreased 5.8 percent to CHF 385.7 million and EBIT fell 14.3 percent to CHF 1.8 million, the second positive year for the segment on EBIT level.
   Looking ahead to 2017, Panalpina said it expects both the air and ocean freight markets to grow 2 percent from 2016 levels.
   “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,” said 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.”