TNT Express today scaled back profit expectations for the July-September 2011 third quarter dueto a ‘challenging’ trading environment and diverse operational problems.
The Dutch express operator, which will present its Q3, 2011 results on 31 October, issued atrading update on Q3 trends along with revised aims for the full year. In response, its share pricedropped back by up to 6% in early trading today but then recovered and was only 0.43% lower bymid-afternoon.
Over the first half of 2011, TNT Express increased underlying revenues by 3.6 per cent to €3.6billion but operating profits dropped 18.5 per cent to €128 million, leaving the profit margin at3.6 per cent. In Q2, it reported a 2.9% underlying revenue increase while reported operatingprofits were 23% lower.
In the July-September third quarter, the company said it had “relatively resilient” trading inthe Europe, Middle East and Africa region with “overall steady” volume development. But a worseningproduct mix negatively impacted the operating performance, although cost control and efficiencygains helped mitigate revenue pressure.
For the full year, Europe & MEA revenue is now expected to achieve “muted growth”, with anunderlying operating margin of 8-9%. On August 1, when announcing its Q2, 2011 results, TNT saidthe region was likely to have “modest” revenue growth and stable profits with an underlyingoperating profit margin of at least 9%. The Q2 EBIT margin was 9.5%.
In Asia Pacific, TNT said profitability suffered from continuing weak Asia-Europe demand,leading to sub-optimal capacity utilisation in a soft pricing environment, and it is continuing tooptimise its exposure to intercontinental capacity. The Domestic China business saw an improvedproduct mix but this was offset by general and wage cost inflation, and the 2013 deadline forprofitability remains. For the year as a whole, Asia Pacific’s H2 operating result will continuethe first half-year trend and the region will focus on optimising intercontinental capacityexposure, TNT said.
In the Americas region, Brazil’s operational quality continued to improve but revenue was notsufficient to cover the past loss of major customers, TNT said. Progress has been made towards theH2, 2012 turnaround deadline and there will be a value assessment in Q4, 2011, it noted. In Q2, theregion had an adjusted operating loss of €33 million, excluding a further €12 million ofrestructuring and one-off costs.
TNT added that the first phase of the indirect and overhead cost-reduction programme has beensuccessfully implemented. The company aims to achieve about €50 million in cost savings this year,while it expects to have related charges and write-offs in the range of €45-65 million.
