TNT has seen the decline in its express volumes flatten out during the first quarter of this yearand expects its express business to remain profitable in Q1, CEO Peter Bakker told today’s annual
general meeting. He also highlighted the strategic benefits of acquiring a stake in Royal Mail.The international express volume decline seen in the second half of last year worsened in thefirst two weeks of January due to factory closures but has stabilised since then, Bakker toldshareholders. Air volumes were down 23% and road volumes down 15% year-on-year in the firstquarter, while domestic volumes fell 8% year-on-year.
The Q1 yield was lower year-on-year mainly because of reduced fuel surcharges in line withlower fuel prices, while overall revenue was also impacted by the lower volumes, Bakker said. Goodprogress was made in the cost savings initiatives announced in December 2008, and the Expressbusiness is expected to be profitable in Q1, 2009. The Q1 results will be published on 4 May.
Priorities for TNT Express during 2009 will be to implement €200 million worth of structuralcost savings, reduce locally incurred costs and continue expanding in emerging markets, Bakker toldshareholders. In all, TNT Express revenues are expected to decline this year due to lower volumesand reduced fuel surcharges.
TNT Express managing director Marie-Christine Lombard told the AGM that the company had notlost any major customers but customers were downtrading to slower products. As a result, theoperator needed to continue adapting its air and delivery networks, she said. However, there weresome signs of companies re-stocking, indicating that volumes might recover in the third or fourthquarter, she added.
CFO Henk van Dalen told the AGM that the nine aircraft taken out of service from the Europeanair network with a €37 million writeoff were now up for sale. But they were older planes with abook value of only €11 million, he noted.
Asked about the potential for consolidation in the European express and parcels market,Bakker forecast that some smaller players might get into financial problems because of the economiccrisis. Larger operators such as TNT would benefit from this and thus also increase their marketshare. Acquisitions “are not on the agenda at present”, he stated. Referring to the recentagreement with US trucking company Con-Way for Europe-US cooperation, Bakker stressed this waspurely a commercial partnership and should not be interpreted as indicating that TNT would startoperations in the USA.
Questioned about the reasons for wanting to buy into Royal Mail, Bakker said that TNT had a “wonderful” record in the Netherlands of making postal companies more efficient. If it could do thisin Britain, then this would increase Royal Mail profits and benefit TNT shareholders. Thealternative of creating its own nationwide delivery network in the UK would be time-consuming andhighly expensive. In addition, there would be benefits for the two group’s parcels and expressbusinesses across Europe, he added.
However, TNT needed to negotiate a shareholder package enabling it to make “tough decisions”at Royal Mail, he declared. Bakker noted the political debate in Britain over the proposed partialprivatisation, commenting: “We can only watch what’s happening. It’s up in the air.” Asked about apossible bidding war with Deutsche Post and CVC, Bakker stressed TNT would only do what is “sensible” for the company and that it would seek shareholder approval for any deal agreed withRoyal Mail.
On the future of its German mail business, Bakker said that TNT would await the outcome ofthe third and final court case on the issue of the fixed minimum wage later this year or early nextyear, and then decide whether or not to remain in the market. TNT Post Germany had made losses ofabout €30 million in 2007 and 2008, he noted.
On the Dutch mail business, Bakker highlighted the March 9 agreement with unions on a newcollective labour agreement designed to save €125 million a year in future. The pay difference toprivate competitors would also be partly closed by the new collective deal between those companiesand unions. The Dutch mail market was fully liberalised on April 1.
TNT will this year have to pay out only an additional €50 million for pensions rather thanthe originally expected €140 million following a relaxation of the rules over the time period forachieving minimum coverage of a pension plan.
