TNT reports Q2 profit slump
Net profit at TNT dropped by 96% in Q2 compared to the same period last year. Net profit figures were reported at EUR 3m, compare to EUR 81m for Q2 2009.
Group operating income stood at EUR 55m (€ 178m in Q2 2009), impacted by an initial EUR 168m net Master plan III provision.
The Express arms underlying revenues increase of € 150m (+10.3%), whilst mail underlying revenues suffered a decline of € 28m (-2.7%).
TNT also confirmed that it is to fully separate its Mail and Express businesses. The company said that internal separation is expected to be implemented by 1 January 2011; capital market transaction separating the equity of Mail and Express will follow after further exploration
The separation aims to position Mail and Express for long-term success, as two strategically coherent and financially strong businesses.
A spokesman said: “TNT sees a modest improvement in the European economy. However, given that the global economic recovery remains fragile, caution remains warranted. The focus on costs and cash will therefore continue.
“In Express, volumes and revenues are expected to be well above 2009 levels, with operating margin improvement for the year clearly tempered by yield pressure and cost inflation offsetting some efficiency gains. Specific yield management and cost actions, once phased in, aim to improve the margins coming from the higher volumes.
“In Mail, TNT expects addressed volume decline in the Netherlands of 7-9%, due to the first full-year effect of liberalisation combined with ongoing substitution. Master plan savings of EUR 75m are targeted. Mail operating income is expected to be below 2009 levels, including the impact of higher P&L charges for pensions.”
TNT CEO Peter Bakker said: ‘In Q2 2010, TNT experienced generally improving business conditions. Express volumes were up significantly and Mail performed well.
“However, integration costs and certain temporary cost pressures in emerging markets and intercontinental linehaul, along with continuing yield pressure in our core markets, are holding back Express’ margin expansion. All of TNT’s Express management is focused on improving the yield and margin to reflect the now more positive volumes we are carrying.
“Mail put in a good quarter, with pleasing developments in Emerging Mail & Parcels. Following announcements on the large-scale Master plan restructuring in Mail NL, we today announce provisions for mobility and social plan payments. While clearly painful to many of our Dutch Mail employees, the reality of structurally declining postal volumes and continuing low-wage competition has forced us to redesign how we run our business.
“As announced earlier this year, we have explored the best structure to secure the continued success of our Express and Mail divisions. Based on this review, we have concluded that a full separation will best serve both units. On a standalone basis, Mail and Express will be able to operate as best-in-class in their respective industries, by building on strong management and a solid capital structure to successfully implement their strategies. Before full separation can be implemented, the Supervisory Board and Board of Management have more work to do, including the involvement of the works councils and approval requests to our shareholders.”
