TNT Express is pressing ahead with plans to sell Hoau, its Chinese domestic subsidiary, but willretain its loss-making Brazilian business after today unveiling a return to profit in the first
quarter of 2012 ahead of the expected takeover by UPS.The Dutch company released figures showing a sharp drop in European profits as customersswitch from express to economy products but much lower losses in the Americas, with higher revenuesin Brazil, as well as lower Asia Pacific losses, driven by a strong performance in Australia.
In the January-March first quarter, TNT’s reported revenues rose by 1.3 per cent to €1.82billion. The previous year’s €79 million operating loss was transformed into a €37 millionoperating profit, which was a two per cent profit margin. The company made a net profit of €16million compared to last year’s €106 million loss.
CEO Marie-Christine Lombard described Q1 as “challenging given the ongoing sluggish businessenvironment” and said mixed economic conditions in Europe and lower Asia-Europe trading volumeswere expected to persist this year.
She stressed in a conference call that there was no sign of customers leaving TNT due to theUPS offer and that the planned integration with UPS “will take care of customers first”. Managementhas also visited key countries to reassure staff and will create programmes “to retain key people”,she added. The proposed UPS offer is expected to be discussed at an extraordinary shareholders’meeting in Q3, 2012.
In Europe, Middle East and Africa, TNT’s revenues dropped back 0.5 per cent to just under€1.5 billion and the operating profit fell 34 per cent to €68 million, pushing the margin down from8.9 per cent to 5.9 per cent. Volumes (measured in consignments per days) increased two per cent.The company saw a drop in International Express volumes offset by increased Economy volumes, alongwith slightly lower Domestic volumes. But the average revenue per consignment declined by 2.9 percent due to the switch from express to economy products.
Lombard said: “We see International Economy growing faster than International Express.Customers are electing cheaper products.” This pressure on prices was likely to continue, shecommented. CFO Bernard Bot stressed that TNT was making progress on its cost savings programme,with reduced air capacity in Europe.
In Asia Pacific, TNT revenues improved 2.6 per cent to €430 million and the operating losswas reduced by 61 per cent to €7 million. However, adjusted revenues declined by 4.8 per cent andvolumes were down by 8.7 per cent due to lower international revenues, the disposal of the Indiandomestic business and shift from LTL to more Day-Definite shipments in China. The yield was fourper cent higher.
The better operating result was due to a strong performance by Australia and better resultsin Southeast Asia as well as the India disposal that outweighed the weaker China internationalperformance.
Asked about the future of the China Domestic business (Hoau), where TNT had previously saidit would seek “partnerships”, Bot said: “We are engaging with a number of partners with theobjective of being able to make an announcement by Q3 or Q4.” TNT is currently restructuring theChinese company, getting rid of smaller depots and has reduced the staff headcount by about 3,000.
Bot added that half of the capacity of the three B777 international freighters would beabsorbed by the code-share and block-share agreement with Emirates as of Q2, 2012.
In the Americas, revenues grew 5.4 per cent to €118 million and the operating loss was scaledback to €23 million from the previous year’s €152 million. Volumes declined two per cent but theyield was 7.8 per cent higher. Brazil losses declined and its revenues grew due to higher pricesand continuing volume recovery, with growth in the automotive and telecom sectors, TNT noted.
Asked if TNT was still seeking a partner for its Brazil business, Bot said: “We are notlooking for partnership options any more. UPS wants to integrate it into their network.”
