Profits at TNT’s mail and express businesses both dropped more than 30% in the first quarter of2011, the Dutch group announced today ahead of the expected demerger of TNT Express at the end of
May.TNT shares fell back today on news of diverse problems in the Express business and a continuedvolume decline for the Mail operation. Tomorrow (May 3), the company will hold a Capital MarketsDay for Express to be followed by a similar event for Mail on May 9.
In the first three months of the year, TNT NV, which now only includes the mail business asoperating activities, increased underlying revenues by 3.8% to €1.1 billion. But this included apositive effect of €77 million from German VAT changes. Excluding this effect and currency impacts,revenues were 2.8% lower. Mail’s underlying operating profit dropped by 33% to €120 million,leaving the profit margin at 10.8%, while the underlying cash operating income was 34% lower at €76million, which was a 6.9% profit margin.
In the Netherlands, addressed mail volumes fell 8.6%, leaving underlying revenues down 6.3% at€612 million, and the underlying operating profit fell 38% to €76 million. The small parcelsbusiness continued to grow, with underlying revenues up 7.7% to €153 million and volumes up 6.1%.The unit’s underlying profits improved 4% to €26 million and it achieved a profit margin of 17%.All international mail businesses improved their results, and the unit reduced its overall loss to€2 million from €6 million one year earlier. Revenues rose 24.5% to €366 million thanks to theGerman VAT effect. Without this, the underlying revenues were 1.3% lower.
For 2011, TNT expects the mail business to see an 8-10% drop in Dutch mail volumes and end theyear with underlying cash operating income in the €130 – 170 million range. The company aims toachieve annual cost savings of €50 – 60 million this year.
TNT Express, now shown as a ‘discontinued operation’ prior to the end-May de-merger, increasedits underlying revenues by 4.4% to €1.76 billion. The reported revenue rose 6.6% to €1.8 billion.Volumes rose, with average daily consignments up 1.5% and tonnage (in kgs) up by 6.5%. But yieldsdropped 1.8% (-0.4% including fuel surcharges) due to the price and customer mix. Economy volumesgrew more strongly than express products.
But the Express business’ underlying operating profit declined by 31% to €49 million, reducingthe operating margin by 1.4 percentage points to just 2.8%. This was due to lower yields, aircapacity under-utilisation in Europe and losses in Brazil. The reported result was a loss of €79million, including a €120 million impairment charge.
The company took the €120 million impairment on the value of its Brazilian business which hasbeen hit by integration problems and, more recently, a loss of customers. An experienced newmanagement team has been put in place and given a deadline to bring the operation back into profitby the second half of 2012. The Americas region as a whole saw revenues drop 7.9% to €105 millionand its loss more than doubled to €31 million.
In Asia Pacific, volumes between China and Europe dropped at the start of the year but haverecovered since mid-March. The region increased revenues by 9.9% to €398 million but its operatingloss widened to €17 million. Floods and strikes in Australia also had a negative effect on results.CFO Bernard Bot stressed that TNT was the China-Europe market leader with a 33% market share, whichwas “higher than all competitors” taken together, and had invested in capacity on the route.
In Europe & MEA, TNT Express had shown a “resilient” performance, increasing its underlyingrevenues by 4% to €1.14 billion and underlying operating profit by the same figure to €105million.
TNT Express is introducing a new cost savings programme aimed at reducing costs by €40 – 50million a year, but this will include charges and write-offs of €45 – 65 million, the company said.For 2011, TNT Express is expected to have modest revenue growth and stable profits in Europe, arecovery in Asia Pacific and Americas losses addressed by “a full range of corrective measures”.
Speaking on a media conference call, Bot reaffirmed that TNT welcomed the anti-mafia moves takenby authorities at TNT Express Italy’s Milan depots.
