TNT Express on track but logistics profits halve
TPG, the global mail, express and logistics company, has announced its interim results for the first half of 2003. Although the group as a whole saw growth in revenues and profits on the back of its mail and express businesses, the results were detrimentally affected by continued weakness in the logistics division.
The express business returned the best performance, increasing operating profits by 15.7% to €118m compared with the same period in 2002. Headline sales growth in the division was much smaller at only 0.7% although this was affected by foreign currency fluctuation. The company put the rise in profitability down to the on-going programme of yield management which has involved a no-discount policy to new small and medium sized customers. An increase in profitability was particularly marked in Benelux, Germany, eastern Europe and Australia, where the company has focused specifically on turning around the local business.
However the logistics division’s performance is of on-going concern. Revenues grew on a constant currency rate at 10.9% although after currency fluctuations were taken into account this translated to a much smaller 2.7% at €1,829m. The operating profits fell by 53.4% to €41m. Three poorly performing businesses were blamed for the decrease: France, Italy non-automotive and Germany. The management put this down to low volumes, inefficiencies on existing contracts, the inability to pass on costs to the customers and operational difficulties.
In order to address the problems the company has initiated the Transformation through Standardisation (TtS) programme with particular emphasis on the poorly performing units. Savings of €55m per year have been identified although there will be one off costs of €65m, most of which relate to the termination of loss making contracts and warehousing. In a further move, TPG has also appointed a new board level director to head up logistics, Dave Kulik. He presently runs the TtS programme as well as being managing director of TNT Logistics North America. He replaces the long standing director Roberto Rossi.
