International freight forwarding and logistics company Panalpina has kept profitability stable in the first half of 2015 despite a challenging environment. While the group’s gross profit decreased 5% (adjusted at constant currency rates: +2%) to CHF 736.1 million, EBIT and consolidated profit remained stable, reaching CHF 60.4 million (+0.4%; adjusted: +7%) and CHF 45.3 million (+3%; adjusted: +10%), respectively. EBIT was up in Ocean Freight but down in Air Freight. Logistics reported a positive EBIT of CHF 1.5 million for the half-year, after a loss of CHF 4.3 million for the same period of last year.

“We succeeded in keeping profitability stable in the first six months of the year despite a soft air and ocean freight market. We are doing an increasingly better job of getting our costs under control. Currency adjusted, profitability was higher than last year,” says Panalpina CEO Peter Ulber. “In the first six months of the year, we grew volumes in line with the market in Ocean Freight but fell behind market growth in Air Freight, where we clearly felt the headwind in the energy sector. Overall, global transport demand softened considerably in the second quarter of the year.”

Panalpina Group: Results for the first half of 2015

Gross profit and EBIT impacted by currencies

Group gross profit decreased 5% (adjusted: +2%) to CHF 736.1 million in the first half of 2015 (HY 2014: CHF 777.9 million). Total operating expenses decreased 6% (adjusted: +2%) to CHF 649.5 million, (HY 2014: CHF 689.2 million). Panalpina achieved an EBIT of CHF 60.4 million, an increase of 0.4% (adjusted: +7%) compared to the same period of last year (HY 2014: CHF 60.1 million). The EBIT-to-gross-profit margin came in at 8.2%, up from 7.7% for the same time period a year before. Consolidated profit amounted to CHF 45.3 million, which was up 3% (adjusted: +10%) from last year (HY 2014: CHF 44.0 million).

Air Freight

Panalpina’s Air Freight volumes decreased 2% in the first six months of 2015, while the market grew by 1 to 2%. Lower volumes in the automotive and energy sector were at the heart of the decrease in Air Freight volumes. Gross profit per ton decreased 3% to CHF 720 (HY 2014: CHF 745), resulting in a gross profit of CHF 293.6 million (HY 2014: CHF 310.8 million). Air Freight achieved an EBIT of CHF 46.0 million (HY 2014: CHF 57.3 million). The EBIT-to-gross-profit margin for the first half of 2015 decreased to 15.7% (HY 2014: 18.4%), but was up sequentially from 13.2% (Q1 2015) to 18.2% (Q2 2015) due to lower costs.

Ocean Freight

Panalpina’s Ocean Freight volumes grew 3% in the first six months of 2015, in line with market growth. Gross profit per TEU decreased 7% to CHF 299 (HY 2014: CHF 320), which resulted in a gross profit of CHF 237.3 million (HY 2014: CHF 246.6 million). Ocean Freight significantly improved EBIT to CHF 12.8 million (HY 2014: CHF 7.2 million). The EBIT-to-gross-profit margin increased to 5.4% for the first half of 2015 (HY 2014: 2.9%).

Logistics

The Group’s Logistics gross profit decreased 7% to CHF 205.2 million in the first half-year (HY 2014: CHF 220.6 million) as a result of currency translation and the exit from underperforming sites. Logistics posted a positive EBIT of CHF 1.5 million for the first six months of 2015. A year ago, there was an EBIT loss of CHF 4.3 million for the same period.

Outlook

“Our main focus remains on cost control and improving productivity. We have come a long way in cutting losses and transforming our operations, but we still see a lot of upside potential,” says Ulber. “Despite the headwind in the energy sector, we are confident that we can recover lost ground in Air Freight during the second half of the year. Our pipeline looks promising.”

Panalpina expects the slow growth of the air and ocean freight markets to continue throughout 2015.