TPG turns focus on China for acquisitions

TPG, the Dutch postal group, yesterday said it was eyeing three or four acquisition candidates in China to boost its logistics activities, but noted with concern the poor performance of its French transportation operations. Jan Haars, chief financial officer, said TPG was mulling acquisitions priced at €150m-€250m ($190m-$320m).

In August it completed the €257m purchase of Wilson Logistics, a Swedish freight forwarding company.

The world’s second-largest logistics group said it faced challenging conditions due to higher than expected costs resulting from price pressure in France.

“We are facing very high fixed-costs in transportation for which it is difficult to find a solution,” said Mr Haars.

“It is an area of concern that we are working hard to get under control.”

That would mean overall operating margins in logistics were unlikely to achieve a 4 per cent target this year, falling from 4.1 per cent in the third quarter, he said.

TPG shares fell 3.3 per cent to €18.64 in early trade, a decline TPG blamed on an earlier poll of analysts’ forecasts issued by Reuters that had suggested it would post higher operating earnings. Mr Haars said the actual result was in line with the company’s prior guidance.

Net income of €125m was 12.6 per cent higher than a year earlier, when the company posted an €88m quarterly loss due to goodwill and asset write-downs associated mainly with a logistics unit overhaul.

Earnings before interest, tax and amortisation rose to €255m from €202m a year earlier, on sales 5.2 per cent higher at €2.98bn.

It reiterated a full-year forecast for “good improvements” in operating and net income, adding that revenues would rise by about 5 per cent, driven by an expected near-10 per cent sales increase from its express unit, which generates about a quarter of earnings.

Its mail division, which accounts for more than half group earnings, would achieve its goal of a full-year operating margin of 21.5 per cent, even though it fell to 17.6 per cent in the third quarter, while margins in express would be 7.5-8 per cent, up from 6.4 per cent.

Separately Mr Haars said the Danish government would announce on November 15 the outcome of a process to sell a 25 per cent stake in Post Danmark.

TPG is among the European postal companies that have bid for the stake, which would offer a valuable first-mover advantage in the consolidation of the European mail market.

The Danish mail business has sales of €1.4bn, roughly a third of TPG’s existing mail operations, but TPG expects to be able to lift margins, which are currently only one-third of those achieved in its domestic postal business.