TNT Express records improved Q2 with air fleet cutbacks
TNT Express has beaten expectations to record improved results in its second quarter despite increasingly difficult economic conditions, as the company awaits possible takeover by UPS. The Netherlands-based integrator saw its overall revenues up 1.7% to EUR 1.83bn for the three months to the end of June 2012, with operating income up 67% to EUR 77m.
On a comparable basis not including one-off impacts, the company would have seen its operating income down 6.8% compared to the same quarter last year, to EUR 69m.
The company said it had been quite surprised by the stable volumes in Europe, Middle East and Asia considering the “challenging” economic conditions.
However, as with its rivals, TNT Express did see a significant shift by customers towards its more economic service options, but executives said continuing cost control measures had helped counter this shift to non-premium products.
Outside its European heartland, the company said Asia Pacific profits were stronger within the region, although international volumes declined particularly the Asia-to-Europe route where a double-digit drop was seen, mainly from larger accounts.
In South America, the company said its performance in Brazil was improving, but “challenges remain” in the country.
TNT’s restructuring efforts, including the reduction of excess capacity in its intercontinental air fleet, have helped counter some of the impacts of customers responding to the current global economic pressures. A further EUR 50m in cost reductions are planned for the rest of 2012.
Executives said the company had also benefited from currency movements, particularly in Asia.
Commenting on the results, CEO Marie-Christine Lombard said her company was able to maintain profitability in an increasingly challenging economic environment.
She said: “In Europe, good volume growth underscores the strength of our diversified product portfolio. Cost savings and revenue-enhancement initiatives also supported profits.
“Performance in Asia Pacific and Americas continued to improve as a result of business development and restructuring measures.”
Air network and UPS
TNT Express was not revealing much new information on its EUR 5bn offer from rivals UPS ahead of an Extraordinary General Meeting on the issue called for 6th August.
The offer from UPS is currently the subject of an extended investigation by the EU Commission, which has recently given notice that its probe could now last until 12 December 2012.
Bernard Bot, the TNT Express CFO did discuss with analysts today the need to divest the company’s airline to satisfy competition concerns.
“In order for UPS to consummate the deal and to maintain the market access rights that we have, it needs to be in independent hands,” Bot said of the TNT Airline. “Ultimately somebody else needs to be the owner of the Airline, and UPS and TNT is currently looking to find a structure that can ensure the continuity of that operation.”
Bot said the search for a new owner for the TNT Airline was “well in hand” and would be completed before the UPS deal is concluded.
The TNT Express CFO said as part of cost-reduction measures, TNT had taken about 10-15% of capacity out of its European air network, and was monitoring existing capacity on a quarter by quarter basis.
But Bot said the situation in Europe had not been quite as bad as expected, saying: “To some extend we have been positively surprised by the volume in international express – which has been flattish compared to last year, where perhaps we would have expected it to be more under pressure.”
