TNT today announced a new five-year strategy – “Vision 2015” – focusing on day-definite deliveriesof parcels and freight, a new business model for its Dutch mail business and a partial withdrawal
from some European mail markets.In Day-Definite Delivery Services, TNT said it will focus on four key areas: Europeanparcels, international freight, Special Delivery Solutions and emerging platforms. The MailNetherlands business will concentrate on restructuring, while the European Mail Networks willrealise and free up its value through partnerships and sale.
The Dutch group said at today’s Analysts Meeting that it had successfully implemented its “Focus on Networks” strategy, launched in 2005, by developing a strong European express business andestablishing new networks in Asia and South America. While the Dutch mail business had successfullydealt with a declining market, European profits had not yet reached target levels, however.
Addressing the market environment, TNT said customer demand was growing fastest forlower-priced economy services while e-commerce represented a big opportunity. However, the Dutchmail business faced accelerated further volume declines due to substitution and competition,burdened by relatively high labour costs and an uncertain regulatory environment. Moreover, theEuropean Mail Networks business (EMN) is operating in a deteriorating perspective, due to theuncertain implementation of European mail liberalisation, regulatory restraints, price competition,volume declines and high start-up costs.
The new “Vision 2015” strategy, covering 2010 – 2015, therefore aimed for “a further businesstransformation towards a more coherent high growth portfolio, with a strong focus on specific partsof the day definite deliveries markets, combined with actively maintaining a sustainable Dutch Mailbusiness”.
TNT said it aims to position itself for accelerated growth in its Day Definite DeliveryServices by concentrating on four areas: European Parcels, Freight, Emerging Platforms and SpecialDelivery Solutions. The businesses will continue to operate one strong network and common salesplatforms, focused on achieving customer satisfaction and cost leadership.
European Parcels will target additional growth in the €20 billion Standard Parcels market byextending its existing leadership position in next day domestic and in economy cross-borderparcels. Differentiated solutions will be offered by market segment (Business to Business, Businessto Consumer) in each major European geography.
On the basis of TNT’s strong European road network as well as high growth inboundintercontinental volumes, the Freight activities will aim to extend TNT’s lead in the day definitefreight transport within Europe and add global extensions through partnerships like the one withCon-way in the USA and owned networks in all emerging markets. In Europe, TNT expects that overtime Freight will grow into partial separate networks to underline cost leadership and customerrequirements.
Emerging Platforms will aim to capitalise on its first mover advantage towards leadershippositions in the day definite markets of South America and China. Next to that TNT will continue toexpand and connect its road networks in “greater ASPAC” (Asia Pacific incl. India and Australia),Middle East / Africa and South America.
Special Delivery Solutions (SDS) aims to develop focused multi-customer network solutionsthat provide dedicated service quality while improving the economics of the TNT delivery networks.Vertical delivery solutions for sectors like pharma, health, electronics, automotive, defence,energy and high-end non-food retail will be developed. TNT said it is excellently positioned toservice the fastest growing market for delivery solutions from E-commerce for which a dedicatedsolutions team has been put in place to target the chosen supply chains.
In the period 2010 – 2015 TNT will focus its mail activities on the business in theNetherlands, which will also include Cendris data and document management, VSP and EMN Belgium.Mail NL operates in an environment of sharp further volume decline, driven by substitution andcompetition. The continued implementation of Master plans will include further organisationalcentralisation and delivery model adjustments leading to significant savings at the originallycommunicated levels. If no agreement with unions can be reached on the alignment to market level oflabour costs, the socially less preferred route of higher employment reduction becomes unavoidable,as revenue in Mail NL is expected to decrease with approximately 4 to 6% per year, TNT stated.
The European Mail Network business (EMN) will be managed for value realisation throughpartnerships and sale, TNT announced. For EMN Germany, a final review will be undertaken in 2010,in the context of the expected market development including the outcome of the minimum wage courtcase and the developments regarding the VAT exempt position of the incumbent. TNT said it expectsto give a further update on EMN by the time it announces the full year 2009 results in February2010.
In financial terms, TNT aims to increase the current Parcels & Freight revenues of €4.35billion by 7-9% a year over the 2010-2015 period and increase the EBITDA margin from the current 9%to the 13-16% range. Emerging platforms should grow their present €1.6 billion revenues by 10-15% ayear and improve their operating margin from 3% to 7-10%. SDS should grow the €650 million revenuesby 14-18% a year and slightly improve the 12% operating margin to the 10-14% range. The MailNetherlands business, with revenues of some €2.75 billion, is expected to have an annual revenuedecline of 4-6% but TNT aims to maintain the 16% operating margin.
TNT said its organisation will over time reflect the five strategic focus areas of EuropeanParcels, Freight, Emerging Platforms, Special Delivery Solutions and Mail Netherlands.
TNT also gave a brief business update. From October 2009 onwards, the company has seen apositive development of its air volumes against 2008, with road volumes steadily improving as well.Overall Express volumes and revenue in October and November 2009 were still below the comparable2008 period, but underlying margins have further restored due to continued successful cost savings.Operating margin in Express over the last two months was close to last year’s level. Mailperformance will be in line with expectations for the year 2009, assuming no further CLA impact.
Looking ahead to 2010, TNT said it is still uncertain how the current further stabilisationof the global economy will shape up over the next year. The development of the Express volumes inthe fourth quarter of 2009 and the first quarter of 2010 will be important to determine TNT’s viewon the underlying strength of the economic recovery. Mail expects a volume decline in theNetherlands in 2010 of 7-9% due to the first full year effect of liberalisation combined withnormal substitution. This does however not change the around 6% per year volume decline average forthe period up to 2015. In this context, TNT will continue to focus on costs and cash and announcesa target for 2010 of € 200 million structural savings.
