Panalpina’s mediocre 2018 results reflect a challenging Q4 for air segment

A day after Kuehne + Nagel released its fourth-quarter and full-year figures for 2018, the “other” giant Swiss forwarder, Panalpina, did the same, underpinning a unifying theme that the last quarter of 2018 was a challenge for most of the international logistics community.

Panalpina reported that its airfreight volumes grew by 5 percent, year-over-year, during Q4 2018 – which is a respectable feat considering market average, which Panalpina estimated to be zero.

However, despite the growth in Panalpina’s Q4 volume of airfreight, both gross profit per tonne and earnings before interest and taxes (EBIT) from airfreight decreased – the former by 5 percent and the latter by a margin of 32 percent, from US$42 to $28 million, y-o-y. The significant decrease in EBIT, or operating profit, is largely due to a spike in forwarding expenses, which increased by about $46 million y-o-y for Q4.

The notable hit to operating profit for the airfreight segment during Q4 is at least partially due to company’s adoption of new leasing standards from the International Financial Reporting Standards (IFRS), in compliance with Swiss law. Stacked on top of an underwhelming peak season, these results are not surprising.

Competitors like K+N have reported full-year figures that are generally more positive than their performance during fourth quarter. Panalpina’s overall operating profit from 2017 to 2018 did follow that theme, increasing 15 percent to about $119 million.

However, operating profit from its airfreight segment declined by 2 percent to about $108 million over the year, suggesting that, at least for Panalpina, poor performance in airfreight was not isolated to Q4.