DSV Panalpina's airfreight volumes rise but profits decline due to integration
DSV's air freight revenues and volumes improved last year after buying Panalpina
DSV's air freight revenues and volumes improved last year after buying Panalpina. Total DSV Panalpina Group 2019 revenues swelled by 19.8 per cent compared to 2018 to DKK94.7 billion (US$13.82 billion), earnings before interest and tax (ebit) rose by 22.1 per cent to DKK6.6 billion, yet profits slumped seven per cent to DKK3.7 billion.
The company attributed the drop in net profits to integration costs and higher net financial expenses, reported London's Air Cargo News.
The operating margin, when excluding the impact of new accounting standards, slipped from 6.9 to 6.6 per cent.
'The decline in margins was attributable to the Panalpina integration, which initially had an adverse effect on the margins of the group,' the company said. 'As integration progresses and synergies are realised, margins are expected to increase.'
Looking at the air freight business, full-year volumes rose by 55 per cent compared to 2018 to 1.1 million tonnes, while revenues were up 43.6 per cent to DKK27.1 billion and gross profit jumped by 42.5 per cent to DKK6.6 billion.
If Panalpina's figures are taken out of the equation, DSV would have registered a two per cent decrease in air freight demand.
'The global air freight market saw a decline in transport volumes of three to four per cent in 2019,' DSV Panalpina said in a statement.
'Exports out of China and Germany were among the weakest markets measured by volume. From an industry perspective, the slowdown in the automotive industry had a negative impact on air volumes, but several other sectors were also in decline.
'The weak air freight market led to overcapacity and low air freight rates on most trade lanes.
DSV Panalpina said the second half of the year was intensely focussed on integrating the two businesses.
In addition to the physical integration, a comprehensive IT integration was initiated across the whole organisation, gradually migrating Panalpina users and customers onto DSV's IT infrastructure and merging back-office functions.
Panalpina added new activities to the division: Perishables represented a significant part of its airfreight volume.
Also, through its freighter network, the company now controls a limited amount of own air freight capacity, including a leased Boeing 747 freighter.
Looking ahead, the Panalpina integration is expected to be wrapped up next year.
'Our ability to take market share will be limited in the busiest integration period, but we will do our utmost to get back on the growth track as soon as possible,' said chief executive Jens Bjorn Andersen. 'We are well-positioned for further growth within all three divisions.'