Panalpina with solid half-year and plenty of work ahead

"The results for the first half of 2014 show two things," says Panalpina CEO Peter Ulber. "One, our uncompromising execution of the strategy that we outlined in November is starting to bear fruit. Logistics has cut losses considerably. Two, there is still a lot of work to be done in terms of profitability, especially in Ocean Freight, where - expectedly - it will take some time to make it to calmer waters."

Panalpina Group: Results for the first half of 2014

Half-Year Results 2014 - Consolidated Financial Statements

Half-Year Results 2014 - Investor Presentation

Gross profit and EBIT impacted by currencies

Group gross profit increased 2% (adjusted: +8%) to CHF 777.9 million in the first half of 2014 (HY 2013: CHF 764.9 million). Total operating expenses amounted to CHF 689.2 million, 1% (adjusted: +7%) more than in the previous half-year (HY 2013: CHF 682.7 million). Panalpina achieved an EBIT of CHF 60.1 million, an increase of 2% (adjusted: +7%) compared to the same period of last year (HY 2013: CHF 58.8 million). The EBIT-to-gross-profit margin remained unchanged at 7.7% year-on-year.

Air Freight

Panalpina's Air Freight volumes grew 4% in the first six months of 2014, in line with market growth. While rates remained under strong pressure, Panalpina put the focus on trade lane optimization. Gross profit per ton decreased 4% to CHF 745 (HY 2013: CHF 778). As a result, gross profit remained practically stable at CHF 310.8 million (HY 2013: CHF 312.2 million). Air Freight achieved an EBIT of CHF 57.3 million, slightly less than in the same period of last year (HY 2013: CHF 59.6 million). The EBIT-to-gross-profit margin for the first half of 2014 decreased to 18.4% (HY 2013: 19.1%).

Ocean Freight

Panalpina's Ocean Freight volumes grew 8% in the first six months of 2014. The ocean freight market grew approximately 3% as high rate volatility remained an issue. Gross profit per TEU decreased 5% to CHF 320 (HY 2013: CHF 338), which resulted in a gross profit of CHF 246.6 million (HY 2013: CHF 242.0 million). Ocean Freight posted an EBIT of CHF 7.2 million (HY 2013: CHF 16.8 million). The EBIT-to-gross profit margin decreased to 2.9% in the first half of 2014 (HY 2013: 6.9%).

Logistics

The Group's Logistics gross profit increased 5% to CHF 220.6 million in the first half-year (HY 2013: CHF 210.7 million). Logistics cut its EBIT loss of CHF 17.6 million in the first half-year of 2013 to a loss of CHF 4.3 million in the same period this year. This was a result of successfully exiting overland contracts in Europe, turning around loss-making facilities and implementing value-added services (VAS).

Outlook

"The fact that low margins have absorbed much of the growth in the first half of 2014, particularly in Ocean Freight, goes to show just how important it is that we stay absolutely on course with our strategic execution. Turning around loss-making operations continues to be our firm focus. In the mid- and long-term better IT systems and processes will help us improve productivity and profitability as we keep restructuring and rolling out our new operational system SAP TM," says Ulber. Panalpina expects the air and ocean freight markets to grow by 3-4% and 4-5% respectively in 2014.

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