TNT Express today reported reduced third-quarter revenues and operating income despite“remarkable” improvements in its Brazil business, insisting it had taken the measures needed to
improve the results of its under-performing activities in Italy and Australia.Reported revenues for the quarter were down 6.6% to €1.62 billion, while reported operatingincome declined by more than 80%, dropping to €9m from €62m the previous year, due partly torestructuring charges and foreign exchange differences. Removing these factors, adjusted revenueswere down by 1.8% to €1.70 billion, and adjusted operating income was down by around 16% to€54m.
Year to date, adjusted revenue decreased by 2.3% and adjusted operating income by 24.2%, whileadjusted operating expenses declined by 1.4%. The company said its year-to-date performance hadbeen “consistent”, with on-going yield pressure in its Europe Main activities but “an improvingtrend” in its Europe Other & Americas and its Asia Middle East & Africa (AMEA)businesses.
CFO Bernard Bot said the company’s two-year Deliver restructuring programme launched in Marchwas on track and had already generated savings of €10 million in the quarter, with adjustedoperating expenses down by 1.3%. Restructuring provisions of €38 million were booked for thequarter, out of a total restructuring programme expected to cost around €150 million.
Bot told journalists: “While we are seeing some positive signs in some parts of the business,other parts are suffering, and overall we would characterise the trading environment as stillfragile. We also see that customers continue to optimise their supply chains and the pricingpressure remains. In response to these trends, we continue to develop initiatives to reinforce ourmarket and operational positions.”
He said Europe remained a mixed picture, describing the overall European trading environment as “ demanding”. He added: “We have seen particular pressure on our results in Italy. We’ve takenaccelerated restructuring measures there, including discontinuing loss-making customers.”
Adjusted revenues for the company’s Europe Main business declined by more than 3%, althoughexcluding Italy and the impact from the loss of a major fashion contract in the UK, the adjustedrevenue would have been flat, Bot explained. “Looking at the overall situation, we did continue tosee pricing pressure, but the quarter-on-quarter trend is becoming less negative.
“The result of all that is still a decline in operating income, but we have made very goodprogress on cost containment, with adjusted operating expenses improving by more than 2%, and thatoffset some of the declines in revenues that we saw through mainly pricing.”
He described Europe Other and Americas as “an improving picture”, with operating income up 45%in the quarter. “Yield management initiatives have paid off, and we’re focusing on our bestcustomers and making commercial decisions about others, and so what you can see is that volumes aredown but the quality of the revenue we are getting in is up. This, plus good cost and capacitymanagement, explains why our operating income is so much better.”
Bot said trading conditions for the company’s Pacific business remained tough. “In Australia, wehave seen the impact of the difficult economic situation, but in particular lower spend in sectorsthat are important for us, such as the mining and industrial sectors. What we see is that while theconsignments are still there, the weight per consignment is significantly down, and this obviouslyhas a big impact on yield and therefore our profitability. Adding to this we continue to see wageand other inflation in our Australian business.”
On the positive side, he said TNT was growing its base in Australia and gaining marketshare.
“With all this in mind, we are not standing still,” said Bot. “Good productivity gains are beingachieved, and we are also pushing through overhead reductions and targeting higher weightshipments. And we are taking specific measures on pricing and implementing further efficiency andrestructuring measures.”
He said the company had just formally approved a large investment in its Sydney and Melbournefacilities. “This should increase automation and efficiency, and through that boost the operatingincome in the region,” Bot insisted.
He said the company’s AMEA business had delivered a solid performance, with all units aheadyear-on-year. Although volumes were lower, yields had increased, “due to two things going on: Oneis lower Asia export activity, and the other is successful contract and yield management, and thelatter is benefiting our operating result,” said Bot.
For the company’s Unallocated and Brazil business, Bot said: “In Brazil, the turnaround I wouldsay is quite remarkable: significantly better operating results, with lots of things done includingimprovements in customer mix, in conjunction with good cost control. I would say that those arepaying off in a significant way.”
However, the operating result for the company’s Unallocated and Brazil business was €6 millionlower, due to lower results in the Innight and Dutch fashion activities – which are included inthese numbers – and lower contributions from network operations on the one hand, and also higherpensions and project costs.
Bot said TNT’s Brazil business was expected to continue to reduce its losses, but the companystill planned to go ahead with the sale of the business there.
“We are actively engaged with a number of parties to sell our Brazilian operations, so for themoment there is no change in strategy. The turnaround is going quite well, and what we have alwayssaid is that we won’t be forced sellers; we will take a decision that is in the interests of ourshareholders, weighing the disposal and the proceeds that we will get there against the maintenanceof the business.”
He continued: We will see what comes out of the sales process, and then we will look at what theoptions are, and then we will take a decision that is in the interests of our shareholders.”
