TNT Express shifts focus back to Europe after difficult 2011
As it recorded a EUR 272m loss for 2011 today, struggling integrator TNT Express announced it will pursue a new strategy – focusing on Europe and downsizing its intercontinental operations. The company, currently an acquisition target for rivals UPS and the subject of shareholder attempts to bring in new board-level leadership, is looking to shed 10-12 of its 60-strong air fleet and improve its prospects outside Europe through partnerships.
Meanwhile, TNT will focus on Europe, where its operational model will be streamlined to take out EUR 150m in fixed costs. Executives said its home region offered its most attractive prospect for growth given its current geographic footprint.
In its latest results, the fourth quarter of 2011 saw the previous year’s EUR 4m net profit turned into a EUR 174m net loss after tax. Revenues for the quarter grew year-on-year by 2.3% to EUR 1.87bn.
For the full year, TNT saw its revenues increase 2.7% to EUR 7.25bn, but the EUR 66m net profit achieved in 2010 was turned into a EUR 272m net loss for 2011 after tax.
TNT Express chief executive Marie-Christine Lombard said today that 2012 was likely to see the company’s challenges continue given the “uncertain” global economy.
She said the new “Building on Strengths” strategy would seek to reduce the company’s exposure on its intercontinental routes by engaging in cooperation agreements with airlines, cutting TNT’s fixed costs in its own intercontinental fleet.
The company insists its domestic operations in Brazil and China are developing positively, and under the new plan TNT will be looking to forge new partnerships in those markets.
During 2011 financial performances in Asia and the Americas region worsened for TNT, its Asia Pacific operations achieving a EUR 33m operating loss, compared to a EUR 14m operating income in 2010, while its Americas region saw a EUR 125m operating loss in 2011 against a EUR 39m operating loss the previous year.
Europe
The bulk of the new strategy will be to build on TNT’s presence in Europe, with Lombard talking about transforming the company’s business model in its core market to take EUR 130m of fixed costs out of the network by the end of 2013.
“Our franchise in Europe is unrivalled,” she said. “With its unique service portfolio, dense networks and leading presence in all countries – this franchise gives us confidence in the future.
TNT Express said its Europe and Middle East segment had seen an 8.4% adjusted operating margin in 2011 on revenue growth of 2.1%. Although there had been a “difficult start” to 2012 in Europe, the company said it was expecting to see its operating margin in the region grow to between 10% and 11% in the medium term assuming economic trends do not destabilise.
“We have ample opportunity to grow, not only in our traditional business-to-business segments but also in new services, such as PharmaSafe for the healthcare sector or pan-European B2C deliveries for high value goods,” said Lombard.
The focus on Europe would fit well with the kind of strategy being undertaken by a buyer like UPS, which has been looking to build its presence in Europe, for example through its recent acquisition of the e-commerce delivery network Kiala, which has a presence in the Benelux countries, France and Spain.
Last week, TNT’s board rejected a EUR 5bn offer from UPS, but talks with the US shipping giant remain open, with TNT facing some pressure from shareholders to find an acceptable price.
