Panalpina Financial Results
The world’s fourth largest air freight and sea freight forwarder, Swiss group Panalpina, continued its strong organic growth in the first six months of 2007, with revenues, earnings and market share all registering impressive growth.
While turnover and profits have increased, Praveen Ojha, Lead Analyst with independent market analysts Datamonitor’s logistics and express research unit, says the bigger positive signs for the future lie in Panalpina’s non-freight forwarding results- the Supply Chain Management (SCM) division. With increasing margins in the SCM business, Panalpina continues to swell its cash-kitty for any potential acquisitions.
After posting strong first quarter results earlier this year, Panalpina extended the good performance throughout the second quarter and, over the first half as a whole, increased both its operating and net profits by over 50 pct.
Net forwarding revenue increased to CHF 4.0 billion, from CHF 3.7 billion a year earlier. The first half net earnings jumped to CHF 108.4 million, up from CHF 69.3 million in 2006, while EBIT increased to CHF 148.3 million, up from CHF 96.6 million a year earlier. Panalpina has also announced plans to launch a share buyback program later this month, and, according to the company, this will not impact plans for further capital expenditure or inorganic growth.
One of Panalpina’s strongest aspects is its well diversified business across all regions as well as across most customer industries. Coupled with this, the sheer volume of Air freight and Sea freight handled by Panalpina provides the company with significant pricing power as well as cross-selling opportunity for its highest margin business: Supply Chain Management. The SCM division along with Air freight is increasingly injecting cash into Panalpina’s balance sheet, which will then potentially act as the catalyst for further inorganic activity.
Although supported by complimentary market demand conditions, the company’s focus on higher margin SCM and air freight operations also helped boost profits. However, its sea freight operations failed to perform as impressively, primarily because of currency fluctuations and higher rates.
Panalpina is coping well with the overall imbalance in trade across the world, which is more severe in sea freight in comparison to air freight. The company managed to increase its global freight forwarding market share in both air and sea freight, outpacing the market volume growth rates by over 5 pct in both air and sea freight.
Panalpina’s revenue growth in the APAC, EMEA and Latin American trade lanes more than offset the under-performance of the North American lane in the first half of this year. The outbound volumes on the Asia-Pacific lane still remain the most significant revenue generator for Panalpina. However, the sea freight market continued to experience capacity constraints, especially on APAC outbound routes, resulting in increased freight rates and lower margins for the company.
Going forward, Panalpina seems to be right on track to meet its financial and volume targets for the year, primarily deriving gains from buoyant market demand and a focus on higher margin businesses.
