TNT facing challenging 2015 ahead of FedEx takeover bid
FedEx acquisition target TNT made an EUR 11m operating loss in its first quarter as revenue fell 1.5% year-on-year on “disappointing” sales in Western Europe. The Netherlands-based international carrier reported revenues of EUR 1.6bn in its latest results today, which were impacted by a drop in fuel surcharges.
The company claimed that adjusting for this, and a trading day effect, would have seen the quarter’s revenues up by 2.1%.
The quarter has seen TNT working to bring online upgraded facilities as it continues its turnaround efforts, but also lower volumes from international accounts and pricing pressures, particularly in its core European market.
The quarter also saw TNT stepping up its capital investment levels, tripling the investment seen in the same quarter in 2014 to EUR 78m.
Nevertheless, the firm said it expected the rest of the year to be challenging, with adverse trading conditions continuing, particularly in Western Europe, and an ongoing impact of its global transformation programme.
The so-called Outlook transformation strategy deployed in the wake of UPS’s failure to acquire TNT added EUR 20m in costs to the company’s bottom line this quarter.
In the next quarter, the firm said it was expecting EUR 25-30m in restructuring and other charges.
TNT Gunning, the TNT chief executive, said he believed “good progress” was being made in the execution of the Outlook strategy.
Commenting on the quarter’s results, he said: “Service performance and revenues from SMEs further improved, supported by ongoing investments in infrastructure and IT.
“During the FedEx offer process, we will continue to focus on our customers and operational efficiency. The first quarter results were impacted by transition costs associated with the Outlook strategy. Our guidance is unchanged: we expect 2015 to be a challenging year of transition, followed by year-on-year improvements from 2016 onwards.”
FedEx made a $4.8bn offer to buy TNT earlier this month, a little over two years after European regulators blocked a similar takeover offer by UPS over concerns that a TNT-UPS merger would have left the company holding too large a market share in certain parts of the EU.
Q1 results
Among the TNT divisions, the company’s International Europe business saw its revenue down 1.3% year-on-year in the first quarter thanks in part to “disappointing” sales in large Western European markets.
Transformational costs saw operating income down by EUR 23m to EUR 8m, along with investment in new air and road connections improving links to countries including Germany, Italy, Turkey and Israel.
Despite the weaker sales in large Western European markets, there was some growth in most other markets. While revenues from large accounts declined, gains were made with SMEs.
Volumes were largely flat compared to last year’s first quarter in the International European operation.
TNT’s International Americas, Middle East and Asia segment saw its revenue up 17.1% year-on-year to EUR 233m. Adjusted operating income grew EUR 4m to EUR 9m.
Volumes were down, but average daily weight grew 8.3% year-on-year with growth in Express Freight, Economy Parcels and Economy Freight services.
Meanwhile, TNT’s Domestics business saw revenue up 4.4% year-on-year to EUR 621m. The company said its volumes were up by 4.1% year-on-year, but revenue per piece was down 2.6% because of pricing pressures and the fuel surcharge drop.
The company said it achieved growth with SME clients, supported by improving service performance. Improvement was seen in the UK Domestics unit,
Improvement came in the UK, but revenues fell in the Pacific unit, and pressures on yields were seen particularly in France and Australia, leading to a EUR 4m operating loss being made, compared to a EUR 19m operating income the same quarter in 2014.
