TNT today unveiled a heavy fall in Q1 profits due to the worldwide economic downturn but revealedfigures showing the express volume decline of the last 6-9 months may have bottomed out. It expects
tough conditions throughout the rest of the year, however.The Dutch express and mail group saw reported group revenues decline by 10.2% to €2,444million over the first three months while underlying revenues, excluding currency and other specialeffects, dropped 7.8% to €2,509 million. Underlying operating profits fell by 41.2% to €174 millionand net profits ended down 53.3% at €86 million.
In a statement, CEO Peter Bakker commented: “The global economic operating environment hasremained challenging. Despite this environment, I am pleased with the quick response of ourmanagement teams around the world. Significant cost savings have already been achieved without anysacrifice in our service levels towards our customers.”
TNT Express underlying revenues dropped 12.6% to €1,411 million, principally because of lowerrevenue per consignment caused by lower weight per consignment and lower yield. The operatingprofit was down 71.7% to €30 million due to lower revenues and volumes, leaving the operatingmargin down 4.5 percentage points at 2.1%.
International & Domestic organic revenues ended the quarter down 13.8%, withinternational volumes (in kgs) at -17% and domestic volumes at -10.6%. International expressvolumes continued to decline throughout the quarter but, after “terrible” declines of up to 50% inthe first two weeks of January due to industrial production stops, the fall appears to havestabilised at -14.4% for road volumes and -22.8% for air volumes from weeks 3 to 16, CFO Henk vanDalen told a media briefing.
In Europe, all major markets (UK, France, Benelux, Germany and Italy) experienced revenuedeclines because of continuing weak volumes, TNT said. All business units saw a drop inInternational product revenues and most reported lower Domestic product revenues.
Underlying revenues in Emerging Markets dropped 6.4%. China experienced the sharpest declinedue to the large fall in export activities in January and February, although domestic volumes havedeveloped strongly since the Chinese New Year (resulting in an overall Q1 underlying revenuedecline of only 1.6% in Domestic China) and international volumes have also recovered well sincethen. South America reported lower revenues but the Middle East continued to grow.
In addition, TNT Express is ahead of plan for the targeted cost savings of about €320 millionthis year having already reduced expenses by more than €100 million in the first quarter. About twothirds of this is the result of lower volumes and one third is due to measures such as thedownsizing of the European air network and renegotiated rates with sub-contractors, van Dalen said.
Mail underlying revenues fell 0.5% to €1,044 million and operating profits declined 25.4% to€150 million. In the Netherlands, addressed mail volumes dropped 4.7% year-on-year and revenuesfell 5.8%. The main factors were a negative product mix trend, price pressure and higher operatingexpenses.
In the rest of Europe, TNT’s Emerging Mail & Parcels business (excluding Germany)generated good revenue growth of 10.9% and increased operating income thanks to a strongperformance from the Parcel Service. EMN Germany (TNT Post Germany) increased revenues 7% andreduced losses by 28%.
In response to the recent union vote against the Collective Labour Agreement for TNT PostNetherlands, van Dalen reiterated that TNT remains open for new talks with the union but stressedthat the company will embark on restructuring target savings of €395 million. These measures couldinvolve 11,000 postal job cuts if no new union agreement is reached. He highlighted operationalchanges on Monday, which have particularly low volumes, as one option, although six days a weekdelivery will be maintained under USO requirements.
Looking ahead to the rest of 2009, TNT said it assumes the severe pressure on the globaleconomy will persist throughout the year. Express revenues are expected to decline for the fullyear as a result of lower fuel surcharges and lower volumes.
