In the first half of 2016, Panalpina demonstrated that it can compensate for contracting oil and gas business with organic growth in other sectors even as air and ocean freight markets declined.
The successful integration of acquired business also helped to keep gross profit at the previous-year level. Since the international freight forwarding and logistics company does not expect an imminent upturn in the oil and gas business, it recognized a restructuring provision of CHF 26 million in the second quarter. Adjusted for these one-off costs, EBIT remained stable at CHF 60.8 million and consolidated profit increased slightly to CHF 47.9 million for the first six months of the year.
“During the second quarter it became evident that the oil and gas business will not bounce back any time soon. Therefore we decided to realign our capacities with the current volumes and not wait for the market to recover. We took the full restructuring costs in the second quarter instead of later,” says Panalpina CEO Peter Ulber. “The encouraging news is that the rest of the business continued to show considerable robustness against the backdrop of receding markets in air and ocean freight. The underlying profitability remained stable for the first half year.”
Group gross profit remained stable at CHF 736.3 million in the first half of 2016 (HY 2015: CHF 736.1 million). Total operating expenses also remained practically unchanged at CHF 651.0 million (HY 2015: 649.5 million). Adjusted for the oil and gas related restructuring provision of CHF 26.1 million, EBIT reached CHF 60.8 million (reported HY 2016: CHF 34.7 million; HY 2015: CHF 60.4 million). The adjusted EBIT-to-gross-profit margin came in at 8.3% (HY 2015: 8.2%) and the adjusted consolidated profit amounted to CHF 47.9 million (reported HY 2016: CHF 21.8 million; HY 2015: CHF 45.3 million).
In airfreight, Panalpina’s volumes increased 8% in the first six months of 2016, while the market decreased by an estimated 3%. Volumes from acquired companies accounted for 6% of the Air Freight growth. With higher volumes in the perishables sector but lower volumes in the oil and gas sector the gross profit per ton decreased 4% to CHF 690 (HY 2015: CHF 720), resulting in a gross profit overall of CHF 304.5 million (HY 2015: CHF 293.6 million). Air Freight achieved an adjusted EBIT of CHF 45.7 million (reported HY 2016: CHF 33.1 million; HY 2015: CHF 46.0 million). The adjusted EBIT-to-gross-profit margin for the first half of 2016 stood at 15.0% (reported HY 2016: 10.9%; HY 2015: 15.7%).
In ocean freight, significantly lower volumes in oil and gas and a discontinued high-volume contract meant that Panalpina’s ocean freight volumes in the first half year decreased 9% year-on-year while the market shrank by an estimated 1%. However, gross profit per TEU increased 8% to CHF 323 (HY 2015: CHF 299), resulting in a gross profit overall of CHF 232.9 million (HY 2015: CHF 237.3 million). Adjusted EBIT in Ocean Freight amounted to CHF 10.9 million (reported HY 2016: CHF 1.3 million; HY 2015: CHF 12.8 million). The adjusted EBIT-to-gross-profit margin came in at 4.7% for the first half of 2016 (reported HY 2016: 0.5%; HY 2015: 5.4%).
The group’s logistics gross profit stayed virtually stable with a gross profit of CHF 198.9 million in the first half-year (HY 2015: CHF 205.2 million). Logistics posted an adjusted EBIT of CHF 4.1 million for the first six months of 2016, compared to CHF 1.5 million in the same period of last year (reported HY 2016: CHF 0.3 million).
“We still consider the oil and gas industry as a strategic business and are confident that we have taken the right measures in a market that is slowly stabilizing,” says Ulber. “In all other industries, our business has shown good momentum and we expect this to continue throughout the year. Cost control remains a key priority as we continue to balance our business and product mix.”