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The flower business may have given Panalpina a boost, but the forwarder has been forced to retreat from dwindling oil and gas moves, cutting staff, according to its latest results.
Announcing gross profit of Sfr736.3m ($745.8m) for the first half of this year, broadly flat with last year, according to CEO Peter Ulber the company took a restructuring hit of Sfr26m ($26.3m) to allow it to “realign our capacities with the current volumes and not wait for the market to recover”.
He added: “During the second quarter it became evident that the oil and gas business will not bounce back any time soon. We took the full restructuring costs in the second quarter instead of later.”
A spokesman for Panalpina explained: “This is about realigning our capacities with the current volumes mostly in the US, Africa and the Middle East. It concerns manpower and infrastructure in hubs such as Houston.”
He added: “We did not close anything in Houston, but we are obviously adapting our workforce to the current demand.”
In its consolidated results, the company explained: “This plan is related to the right-sizing of certain energy solution operations and sites (mainly in the US and in some African countries from the oil and gas sector) due to lower volumes. The rest of the restructuring provision balance (Sfr2.2m) relates to the remaining portion of the 2015 provisioned headcount reductions in Europe, Singapore and certain countries in Africa.”
Panalpina is closing its large JFK airport facility in New York next month, with some 35 job losses, and outsourcing the handling to a third party. Customers will be served from Chicago instead.
Tulsa was also expected to be affected, but the spokesman said: “We still have a presence in Tulsa but operations are actually handled from Houston.”
Mr Ulber said: “Cost control remains a key priority as we continue to balance our business and product mix.
“We still consider the oil and gas industry as a strategic business and are confident that we have taken the right measures in a market that is slowly stabilising. In all other industries, our business has shown good momentum and we expect this to continue throughout the year.”
Among other “lowlights”, the company included the delay in rolling out its new IT system, SAP Transportation Management, although it is now underway.
The group saw first-half net forwarding revenue fall nearly 12% to Sfr2.59bn, while EBIT fell some 42% to Sfr34.7m. However, adjusted for restructuring costs, saw consolidated profit rise, year-on-year, to Sfr47.9m, up 5%.
While the decreasing oil and gas business ate into Q2 revenue, as it did in the first quarter, Panalpina’s 2015 acquisition of Kenya flower forwarder Airflo ensured that air freight volumes rose 8% in the first six months, with 6% contributed by acquired companies. The low oil and gas volumes meant gross profit per ton fell 4% to Sfr690, but there was an increase in gross profit overall of Sfr304.5m, up from Sfr293.6m in 2015.
The depressed oil and gas market also hit Panalpina’s ocean freight, along with one lost high-volume contract. Ocean volumes fell 9% year-on-year, against a market fall of just 1%. Nevertheless, the forwarder increased gross profit per tea by 8%, to Sfr323, with adjusted EBIT at Sfr10.9m.
Logistics remained a relatively stable business unit, shrinking just 3% to bring in a gross profit of Sfr198.9m.
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