TNT recorded an overall solid revenue growth for the first quarter and half year 2008 with expressand air volumes suddenly slowing down in June due to increasing fuel prices during the quarter.
Despite the temporary volumes drop, the road volumes through European Road Network have continuedto grow throughout the quarter and the emerging markets in Brazil, China and India have all showndouble-digit growth, CEO Peter Bakker said today during the company’s press conference. He alsoannounced the implementation of the express cost optimisation programme expected to save €100 –€125 million with the most savings to be realised in 2009.In Q2 2008, TNT increased group revenues by 7.5% to €2,809 million, leaving H1 revenues up5.8% to €5,532 million. Second-quarter operating profits slightly dropped by 0.3% to €324 millionwith half-year operating profits down 8.5% to €613 million. Net profit from continuing operationsalso dropped 8.2% to €207 million in Q2 and fell even further by 15.2% to €386 million in H1. Thehalf-year profit attributable to shareholders ended with a 41.3% drop to €384 million.
TNT Express increased Q2 revenues by 10.7% to €1,716 million while its operating profit(EBIT) was 5.3% up to €153 million. The operating margin dropped back to 8.9% from 9.4% in the sameperiod last year. Over the first half of 2008, express revenues were up 8.6% to €3,330 million, butEBIT dropped by 4.6% to €259 million. The H1 operating margin fell to 7.8% from 8.9% in the firsthalf of 2007.
The second quarter of 2008 showed an unusual business mix for Express of continued stabletrading conditions in April and May, with markedly lower volume growth witnessed in June in some ofthe key domestic and international markets. The impact of the sudden volume pressure in June wasaggravated by sharply increasing fuel prices during the quarter, which led to additional temporarycost pressure due to the time lag in fuel surcharge pass-on. Air volumes also fell below last year’s levels in June.
EBIT was impacted positively by Easter but negatively by foreign exchange, sharplyaccelerating fuel costs through the quarter, and lower international express volumes, which led tolower capacity utilisation of the air network in particular. Inflationary pressures and generalstrikes, linked to fuel price increases, in various countries in Europe, in particular Spain, hadan additional negative impact.
International and Domestic revenues grew 9.2%, at constant foreign exchange. Good volumedevelopment underpinned this solid operational revenue growth. Emerging platforms achievedoperational revenue growth of 18.3%. The margin developed in line with TNT’s 2008 outlook.
In Europe, the large countries TNT operates in (UK, France, Benelux, Germany, Italy), showeda mixed picture with good volume and high revenues in April and May, but the last three weeks ofthe quarter saw a marked volume deceleration of the international express products (mainly air) inmost business units. International products and revenues in the quarter overall continued to growcompared to the first quarter, with particular strength in Germany and the Benelux. DomesticExpress saw an average volume growth, but at lower yield and with increased costs, which includesthe effect of fuel strikes.
During the quarter, TNT announced the start of the only scheduled road services between Chinaand five countries of Southeast Asia, using its Asia Road Network. This is the focus of TNT’sEmerging Platforms strategy, which will be concentrating on intra-regional flows. While this andother investment continues, the underlying operating margin developed in line with TNT’s outlook.
In the rest of the world, China, the Middle East and Asia Pacific/India all continued to growrevenues double digit at constant rates of exchange.
TNT Post, the company’s mail business, increased Q2 revenues by 2.2% to €1,028 million butEBIT dropped 3.8 % to €173 million. H1 revenues were up 1.2% to €2,077 million and EBIT down by10.7% to €367 million.
On 18 July, TNT and trade unions signed the new collective labour agreement, following anagreement in principle in May, which is central to TNT’s Master plan targets of €395 million costsavings by 2015. As per the agreement, all employees are to receive a salary increase in the formof a structural increase of 3%, with retroactive effect to 1 April 2008, plus 0.5% as a monthlypayment until 1 April 2009.
Looking ahead, TNT Express is expected to show a high single digit organic revenue growth inInternational and Domestic, with a low double digit operating margin. The Express Emergingplatforms are expected to deliver organic revenue growth in the high teens, with a low single digitoperating margin. Mail is expected to show a low single digit organic revenue increase overall,with an operating margin around 16.5%.
In addition, TNT Express has developed a €100 – €125 million cost optimisation programme, asindicated at the 2007 Analyst Day. Most of the savings will be realised during 2009, the fullamount is expected to be reached in 2010. The one-off costs related to this programme are expectedto be limited.
Peter Bakker commented on the results: “The quality and mix of our network, combined withcost saving programmes as announced today, give me confidence in our performance, also under moredifficult circumstances. The development in Brazil, China and India, continue to show thedifferentiating nature of our strategy is working.”
