TNT today announced it aims to save between €270 million and €330 million during 2009-2010,including downsizing European air operations and more efficient road operations, but did not
disclose any job losses. Growth plans focus primarily on emerging markets and parcels.The Dutch group announced the cutbacks at its annual Analyst Day where senior managementprovided detailed updates on strategy, financial performance, business development and medium-termobjectives.
Outlining current trends, TNT CEO Peter Bakker said that TNT Express air volumes continued todrop sharply in October and November, while road volumes are also now down on last year’s levels.TNT Express will thus make a lower profit than previously expected this year since no immediateimprovement in demand is likely.
“These are tough times for our customers and our industry. Although TNT is of course notsatisfied with its performance in 2008, this was heavily impacted by unprecedented sharplydeteriorating economic conditions. For 2009, TNT is aggressively implementing cost savings andpreparing for a longer phase of economic recession,” he declared.
In response to lower volumes, TNT Express has launched a range of cost-cutting measurestargeting total structural savings of €170-210 million by end-2010, including €90-125 million in2009. If volumes weaken further, it is ready to implement more cuts to save a further €120 millionin 2009.
TNT Express managing director Marie-Christine Lombard said the bulk of savings would comefrom operational cost savings which assumed Q1 and Q2 2009 volumes at Q4 decline levels and Q3 andQ4 2009 volumes flat compared to the second half of 2008.
The European air fleet, previously comprising 40 aircraft flying to 62 destinations withinEurope, will be downsized to 34 planes serving 53 airports next year. Together with other costsavings, TNT Airlines would thus reduce its costs by 12%. In addition, the 738 depots in Europehave each been given productivity targets to reduce PUD costs, a new ‘lean warehouse’ concept wouldbe introduced and tariffs for sub-contracted road network trucking companies would be cut, Lombardstated.
At the same time, TNT Express will seek to increase revenues by regionalising its salesstructure, penetrating its key vertical markets more deeply and broadening sales into new verticalmarkets, she said.
The express operator will also continue to invest in emerging markets, especially in thedomestic and regional road networks, Lombard stressed. In South America, for example, TNT will seekto expand in Brazil, Chile, Argentina, Columbia and Peru, initially in the highly fragmenteddomestic markets and then in intra-regional and intercontinental segments.
TNT Post will meanwhile expand its B2B and B2C parcels business, Harry Koestra, managingdirector Mail, told analysts. The division expects 2008 revenues of €420 million from its existingparcel delivery operations in the Netherlands and Belgium. TNT Post Parcels will seek to strengthenits Benelux position, benefit from e-commerce, develop a brokerage model for cross-border parcelsand target any “suitable and sizeable” acquisition opportunities, he said. The 2015 target is forrevenues of €1 billion and a 10-12% margin.
On its financial outlook, TNT said it would not make any forecasts for 2009 due to thecurrent “extremely volatile” business environment, and would only indicate its 2009 expectations ona quarterly basis starting with the 2008 results announcement on February 16, 2009. In addition,the 2012 objectives announced in 2007 will be reviewed next year.
“TNT is confident that the combination of its short term structural cost savings andoperational leverage in its markets will provide a solid performance under expected challengingeconomic circumstances,” the company stated.
