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 Ocean Freight volumes decreased 7% year-on-year, but increased from quarter to quarter as the year progressed. The market grew by an estimated 1% in 2016. Panalpina transported 1,488,500 TEUs (twenty-foot equivalent units) in 2016 (2015: 1,593,900 TEUs). When carriers tightened capacity following the Hanjin collapse in August, rates went up and margins came under pressure. Gross profit per TEU of Ocean Freight decreased slightly by 1.1% to CHF 298 (2015: CHF 301), resulting in a gross profit overall of CHF 443.8 million (2015: CHF 480.4 million).
“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.