TNT June Express Volume Down

In the 10 years TNT has been publicly traded on the Amsterdam Stock Exchange, it has seen many rumors, said Peter Bakker, CEO. It is the company policy, he said, never to comment on market rumors. And with that, he began the earnings announcements for the first half and dismissed any possibility of even a hint on the veracity of a rumor that FedEx was seeking to acquire TNT.

Bakker said he was pleased with the results for the second quarter and the first half despite a substantial drop in Express volumes in June. The drop was the result of customers responding to high prices and shifting from premium air services to ground alternatives. In that, TNT's experience lags a trend already exhibited at FedEx and UPS in the US. But with Europe's largest road network, Bakker was satisfied TNT was well positioned to retain that traffic that was seeking lower cost alternatives by road.

Road networks will be important to TNT's growth, said Bakker, recounting the company's position in emerging markets such as China, India, Brazil, the Middle East, and Southeast Asia. In each case the company has built or is building a solid road network through acquisition, expansion and integration of those operations. China, India and Brazil are all now fully integrated into TNT's international network, said Bakker.

In the Middle East, TNT is the only company connecting all countries, he pointed out. Asked about Iran, he noted that operation is handled by an independent agent and TNT was extending its Middle East Road Network to that agent.

For those who were starved for a major announcement, Bakker offered only a statement that TNT would embark on a major cost cutting program for Express. It will optimize its network over the next 18 months and consider, in that process, whether portions of the air network are being replaced by road services. It will also pursue lean operations in hubs and depots.

TNT reported overall growth for the group of 7.5% for the second quarter.

Express operational revenue grew 10.7% and core volume was up 6.9%. The sharp volume decline in June was recovering somewhat in July. The lag in recovering higher fuel costs during the quarter cost the Express group an estimated €7 million ($11 million).

Mail showed operational revenue growth of 15.6%.

TNT expects its full-year 2008 results to come in at the low end of its expected range. Express cost savings targeted at €100-€125 million are expected to be fully realized by 2010. And, TNT expects to generate €300-€400 million from real estate sales and working capital by the end of 2009.

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