TNT Benefits From Cost and Cash Control As Markets Stabilize

Nov. 2, 2009
Group profits at Netherlands-based postal and express carrier TNT were down 10%, but quarterly profit was €102 million ($150 million)

“In this quarter the trading environment has stabilized further—with some early signs of positive underlying developments,” said Peter Bakker, CEO of Netherlands-based global post and express carrier TNT. “With Q3 being the low volume season, the EBIT of both our divisions is at a satisfactory level,” he added. The rate of decline of Express volumes has modestly improved, Bakker continued. “In particular, the average weight per consignment developed positively for the first time in a year, while price pressure remained. At the same time, our people continue to deliver on cost.”

Express revenues were down 9.4% to € 1.5 billion ($2.2 billion), TNT reported. “This decrease is caused by the revenue impact of reduced core consignment volumes (-1.6%), lower fuel surcharges (-3.4%), lower average weight per core consignment (-2.1%) and price/mix and non core business (-2.3%). Air volumes (in kilos) were 8.4% behind last year, and road volumes 10.1% [lower].”

“Once again, aggressive cost savings in Express of € 128 million ($189 million) played a significant role in the profitability performance this quarter. At constant rates of exchange and adjusting for € 5 million ($7.3 million) relating to various one-off charges, Express’s operating income was € 77 million ($113 million) , representing an underlying 5.1% operating margin, which compares with 6.0% last year. Given the typical seasonal weakness of Q3, this margin compares favorably with the 5.8% of Q2 2009 which was 3.1% below Q2 2008.”

In February 2009, TNT announced it would not give a 2009 outlook. The following paragraph describes the operating environment TNT sees itself to be in.

“TNT assumes that its trading environment is likely to continue to be under pressure still although it seems to show initial signs of recovery through to the end of 2009. In line herewith the first 4 weeks in Q4 2009 of the Express business show an improving volume trend. Given continuing low visibility and the still-tentative economic recovery, however, management continues to refrain from giving a more detailed outlook for 2009. Express revenues in 2009 are expected to be down compared to 2008, as a result of lower volumes and lower fuel surcharges.”

Year-to-date operating revenues for the group are off 7.4% at €7.4 billion ($11 billion) or 9.3% when the effects of foreign exchange rates are included. Express operating revenues were down 11.8% and mail showed a 0.1% improvement which was turned into a 1.3% decline after the effects of foreign exchange rates.

Said TNT, “Express revenues were impacted by the current economic environment. TNT Express has seen improving underlying results from Q1 to Q3, mainly as a result of implementing cost-savings initiatives. The overall year-on-year volume decline slowed down sequentially through the second and third quarters. In total for the nine months to the end of September, Express reached savings of €368 million ($543 million) against a full year target of around €500 million ($738 million). Year to date Q3 the underlying operating income is €176 million ($260 million) versus €358 million ($528 million at current exchange rate) in 2008.”