TNT 2nd quarter results
TNT NV slumped as much as 11 percent after second-quarter profit fell short of analyst estimates and it said 2008 earnings will be at the low end of a forecast range.
The shares declined as much as 2.61 euros to 21.37 euros in Amsterdam after TNT said today net income dropped to 205 million euros (USD 322 million), or 55.9 cents a share, from 244 million euros, or 63 cents, a year earlier. Profit missed the 224 million-euro median estimate of seven analysts surveyed by Bloomberg. Sales rose 4.5 percent to 2.81 billion euros.
TNT experienced slowing growth in deliveries of air express packages as customers moved to cheaper road-based options, amid soaring fuel prices, echoing trends at competitors such as United Parcel Service Inc. The strength of the euro against other currencies hurt profit by 7 million euros. TNT said 2008 earnings will be at the “low end” of its outlook as Europe’s economy soften.
The Dutch company’s stock rose 30 percent in the previous two weeks on media reports that FedEx Corp., the second-largest U.S. package-shipping company, might buy the company. FedEx was in preliminary talks to buy TNT, the Financial Times said July 12. The two companies had “low-level” talks about a takeover recently, though the discussions didn’t lead the U.S. company to make an offer, the Wall Street Journal reported last week. TNT and FedEx declined to comment on the reports.
TNT shares were down 2.21 euros, or 9.2 percent, to 21.77 euros at 12:36 p.m.
Chief Executive Officer Peter Bakker declined during a news conference today to comment on the reports. He added that the Dutch company would review any “serious” takeover proposal.
TNT reiterated a forecast that the express division’s Dutch and international operations will generate “high single-digit” sales growth this year, excluding acquisitions, and that earnings before interest and taxes as a proportion of sales will be in the low double-digit percentage range. Mail-unit revenue will rise by a low single-digit percentage, also excluding takeovers, producing an operating margin of about 16.5 percent, TNT said, repeating earlier targets.
“The sharp rise in fuel prices during the quarter and the general economic outlook have impacted both our customers and us,” Bakker said in the statement.
TNT NV slumped as much as 11 percent after second-quarter profit fell short of analyst estimates and it said 2008 earnings will be at the low end of a forecast range.
The shares declined as much as 2.61 euros to 21.37 euros in Amsterdam after TNT said today net income dropped to 205 million euros (USD 322 million), or 55.9 cents a share, from 244 million euros, or 63 cents, a year earlier. Profit missed the 224 million-euro median estimate of seven analysts surveyed by Bloomberg. Sales rose 4.5 percent to 2.81 billion euros.
TNT experienced slowing growth in deliveries of air express packages as customers moved to cheaper road-based options, amid soaring fuel prices, echoing trends at competitors such as United Parcel Service Inc. The strength of the euro against other currencies hurt profit by 7 million euros. TNT said 2008 earnings will be at the “low end'' of its outlook as Europe's economy soften.
“The direction is negative,'' said Axel Funhoff, an analyst at ING in Brussels with a “buy'' recommendation on the stock, in a note to clients today. There may be “further pressure on the outlook and hence overall expectations.''
The Dutch company's stock rose 30 percent in the previous two weeks on media reports that FedEx Corp., the second-largest U.S. package-shipping company, might buy the company. FedEx was in preliminary talks to buy TNT, the Financial Times said July 12. The two companies had “low-level'' talks about a takeover recently, though the discussions didn't lead the U.S. company to make an offer, the Wall Street Journal reported last week. TNT and FedEx declined to comment on the reports.
TNT shares were down 2.21 euros, or 9.2 percent, to 21.77 euros at 12:36 p.m.
Chief Executive Officer Peter Bakker declined during a news conference today to comment on the reports. He added that the Dutch company would review any “serious'' takeover proposal.
TNT reiterated a forecast that the express division's Dutch and international operations will generate “high single-digit'' sales growth this year, excluding acquisitions, and that earnings before interest and taxes as a proportion of sales will be in the low double-digit percentage range. Mail-unit revenue will rise by a low single-digit percentage, also excluding takeovers, producing an operating margin of about 16.5 percent, TNT said, repeating earlier targets.
“The sharp rise in fuel prices during the quarter and the general economic outlook have impacted both our customers and us,'' Bakker said in the statement.
Air Shipments
The remainder of the year will see more customers switching to cheaper road-based deliveries from air shipments amid high fuel costs, the CEO told reporters. The company plans to cut costs at the express unit by 100 million euros to 125 million euros, with the effects expected to be fully realized in 2010, he said.
TNT has a strategy of passing on higher fuel costs to customers through fuel surcharges, causing rising prices for express shipments. Jet-fuel prices in northwest Europe have risen 43 percent this year, Bloomberg data show.
The company aims to transport as much as possible by road rather than air, helping to hold back costs as prices for diesel fuel rise more slowly than for jet kerosene, Jan Willem Breen, head of marketing and sales at the express unit, said last month.
FedEx reported its first quarterly loss in 11 years last month because of higher fuel expenses and a writedown on its Kinko's chain of copy centers. Atlanta-based UPS, the world's largest package-delivery company, said July 22 that second- quarter profit fell 21 percent as fuel costs rose and a cooling U.S. economy dampened domestic shipments.
Interest Expenses
TNT's second-quarter net income was also hurt by additional interest expenses due to higher debt.
TNT has kept a monopoly this year for handling mail items weighing 50 grams (1.8 ounces) or less. The Dutch cabinet decided in May against allowing full competition for letter deliveries by July 1, a date that had been considered for deregulation, after Germany protected its own market by introducing a minimum wage for letter carriers. TNT has begun legal action in Germany against the move, which helps protect Bonn-based Deutsche Post AG, the country's biggest postal service.
Second-quarter Ebit at the mail division dropped 4.4 percent to 173 million euros as the company delivered less mail in the Netherlands. TNT, also the Netherlands' biggest mail carrier, faces increasing competition in its home market from Deutsche Post and local operators such as Apeldoorn, Netherlands-based Sandd BV and the substitution of mail by e- mails.
European Union lawmakers passed legislation in late January requiring member countries, including the Netherlands, to open all local mail service to competition starting in 2011. Under an agreement with national governments, 11 countries, including Greece and several new EU members in eastern Europe, can wait until 2013 to admit competitors.
