TNT Express has taken off on an international network expansion drive for 2006. Following itsstrong results for 2005, the TNT division is focusing on areas such as China, the rest of Asia and
the Middle East for geographical expansion. The integrator is also looking into the parcels marketand more special services to broaden its portfolio. “We are actively looking into further businessopportunities and potential acquisitions to expand our express operations in Europe and Asia,” TNTsaid in its 2005 annual report.The 2005 TNT group results show that the express division performed strongly and is well oncourse for the 10 per cent operating profit margin targeted for 2007. In the medium-term, TNT aimsfor a margin of 10-15 per cent from the business. TNT Express made an operating profit of €474million (+26.4%) on turnover of €5.3 billion (+8.3%) last year, increasing its operating margin to8.9 per cent from 7.6 per cent the year before. Growth was slightly slower in Q4. The numberof consignments rose just 1.6 per cent to 179.3 million and tonnage rose 4.2 per cent to 3.5million tonnes. In its annual report, TNT said that despite mixed worldwide economic conditions,and weak European markets in particular, the express business achieved strong results, driven byinternational traffic. Key growth factors were a more balanced customer portfolio, more globalaccounts, continued positive revenue quality yield, improved network optimisation and careful costmanagement.
Europe, which accounts for 81 per cent of express revenues, grew by 7.6 per cent in revenueterms last year. Although TNT does not release country data, the company said that most Europeanbusiness units contributed to the revenue increase, particularly Germany, Benelux, Italy, Spain,Turkey and the Scandinavian and Eastern European countries. In the fourth quarter, Italy, Beneluxand Germany maintained their growth while France and the UK slowed due mainly to the domesticeconomies. Countries that improved profitability significantly last year, according to the annualreport, were the Benelux countries, Germany, the Scandinavian countries, Turkey, Switzerland,Spain, Austria, Czech Republic and Poland.
The Rest of the World figures showed an 11.7 per cent rise to full-year revenues of €985million. Growth was driven by China and the Middle East, with Q4 growth rates of about 25 per cent.In the fourth quarter, South East Asia and the Americas saw solid growth, but Australia was lessfirm due to the weak domestic economy.
In 2006, the main focus of expansion is likely to lie in Asia, and in China and India inparticular. TNT aims to distinguish itself in the fast-growing Chinese market by developing anextensive road network. The acquisition of Hoau, the country’s largest private transport group,gives TNT China additional revenues of €120 million, 10 million shipments and 1.2 million annualtonnes, together with a network of 1,000 depots and 56 hubs. This domestic expansion will be backedup with the launch of TNT Express freighter flights from Shanghai to the European hub at Liegelater this year. TNT is also profiting from its cooperation with China Post as the outbound carrierfor international EMS consignments.
In India, TNT is launching domestic air and road express services under a €100 millioninvestment programme designed to turn it into the country’s number one express operator by 2010.TNT India is scheduled to have 144 locations by end-2006 compared to 50 at the end of 2005. Japanis another market where TNT aims to grow thanks to its forthcoming cooperation with Japan Post forinternational express. The Asian road network, initially covering Singapore, Malaysia and Thailand,is due to be extended to Cambodia and Vietnam this later. This could then be linked up with the newChinese road network in 2007. Elsewhere, Russia and Brazil are on the agenda for expansion,according to CEO Peter Bakker.
In terms of products and services, TNT is actively looking at the parcels market where it has alimited presence to date. In the December 6 presentation of the new networks strategy, the companyhighlighted the synergies between its mail and express networks from a commercial and operationalperspective, particularly in Europe. The “missing link” – parcels delivery – was described as ahigh growth market that is complementary to mail and express, and “an acquisition could help tostrengthen the portfolio”. CEO Peter Bakker confirmed at the company’s February 27 annual resultspress conference that the Mail and Express divisions were working on a business plan due forcompletion later this year. “Our best route of entrance is not yet clear,” he said. Specialservices will also play a more important role for the TNT in future, Bakker noted.
