TNT’s quarterly core profit fell 45%, its fourth consecutive year-on-year decline, and the Dutch mail company boosted its cost savings target to cope with weaker demand for delivery services, report Reuters.
TNT decided to issue an interim dividend of 0.18 euro per share on the back of strong cash flow, which analysts had anticipated would be a sign of a nascent recovery, the news agency states.
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The cash or shares dividend payment was a first sign of confidence in underlying operations and dividends would continue if cash conditions remained strong, chief executive Peter Bakker told reporters, but added that tough conditions would continue.
“The global economy, and Europe, are still in a recession and we cannot say for sure when we can expect a recovery,” Bakker said.
TNT posted earnings before interest and taxes (EBIT) of €178m, compared with an average of analysts’ forecasts of €184m and €324m a year earlier.
Excluding restructuring charges, currency effects and other items, TNT reported an adjusted EBIT of €226m, which compared with an average forecast of €194mllion.
Revenue fell 10% to €2.53bn.
TNT also increased its annual cost savings target for 2009 to between €550-600m, up from €400m. Savings achieved so far in 2009 are €275m.
“TNT in this second quarter report is clearly showing recovery from its lows,” said Petercam analyst Thijs Berkelder in a note. “TNT further has reinstated a cash dividend payment as it clearly is more confident on its balance sheet position.”
Sluggish consumer spending and shrinking business investment have been hurting shippers around the world, although Deutsche Post reported a better than expected second-quarter operating profit on the back of aggressive cost-cutting.
TNT’s express business made adjusted EBIT of €89m, down 42% and ahead of the average forecast of €55m. In the mail division, adjusted EBIT was €138m, which compared with a forecast of €143m.
TNT said it more than doubled cash flow during the second quarter to €410m from €195m a year earlier, which helped it issue the interim dividend and reduce debt to €1.4bn from the first quarter’s €1.7bn.
Optimising cash flow was a “key focus”, the mail group said.
TNT also said it had formally withdrawn from discussions for a strategic partnership with Britain’s Royal Mail. The British government had been talking to potential buyers for Royal Mail, including private equity firms and TNT, but shelved those plans in July.
“As a result, mergers and acquisitions will be low on the list of priorities,” TNT said in a statement.
TNT, a former state monopoly, also reiterated it expects to shed 11,000 postal jobs over the next three years, as it faces liberalisation of the Dutch postal market. TNT, which is also trying to finalise a collective labour agreement with its unions, said it expects to make further jobs-related announcements in the second half.

Source: Reuters

Tags: Netherlands, Priv Source, Statistics/Economics, TNT, Worldwide