Panalpina Q3 Figures Hit by Air Freight Downturn

SWITZERLAND – Panalpina has revealed the damage done to the company’s profitability by a particularly weak September when its air freight volumes were substantially down. The group will publish detailed financial results and an outlook on the 2nd November but on Friday CEO Monika Ribar issued a statement saying:

“After a weak July and an improvement in August, we expected our Air Freight volumes to grow sequentially in September. However, compared to August they came in much weaker than seasonally normal, especially on Europe-related trade lanes. During the course of the third quarter it became evident that the expected volume recovery in Air Freight in the second half of 2012 would not materialize.”

Panalpina’s substantial exposure to air freight and its most important market Europe has left its mark on the company’s latest financial results with the company suffering significant volume decreases on most import and export European trade lanes. Panalpina’s Air Freight division accounts for almost 50% of the company’s net forwarding revenue and around two thirds of the Air Freight volumes come from trade lanes involving Europe.

Panalpina say that with substantial across the board reductions in cargo levels particularly in industries key to airfreight, high-tech, telecom and chemicals etc., products which account for around 40% of the group’s air freight volumes, and a tendency for customers to reduce consignment sizes, the net result was a drop in third quarter tonnage of around 8% year on year, this despite roughly the same number of shipments being recorded for the period.

Panalpina has reduced its workforce accordingly but says the associated cost savings have not yet had a positive effect in that period. Operating expenses increased from the last quarter, partly because of provisions of around CHF 12 million in September for accrued salaries of staff leaving the company. The cost savings are expected to kick in as of the fourth quarter.

On the bright side ocean freight levels rose, but not enough to counter the drop in air trade, despite an increase in healthcare, oil and gas as well as manufacturing shipments by air freight. Based on the preliminary financial figures the Group expects a third quarter EBITDA of CHF 15-20 million.