TNT Logistics Ends Margin Slide

May 4, 2004
With earnings at 5% higher levels than the previous years first quarter, TNT Logistics first financial report in 2004 also said operating margins had

With earnings at 5% higher levels than the previous year’s first quarter, TNT Logistics’ first financial report in 2004 also said operating margins had reached 2.3%, “marking the end of the recent downward trend.” Among the highlights of TNT Logistics’ first-quarter report were organic revenue growth of 6.1% (at constant exchange rates); earnings growth of 5%; margins at 2.3%; representing a rate of improvement of 10%.

When the adverse foreign exchange translation is included, nominal revenue growth was 4.0% in the first quarter.

TPG’s CEO, Peter Bakker, credits TNT Logistics’ Transformation through Standardization with helping the 3PL to achieve a turnaround in three under performing countries: France, Italy, and Germany. The improvement was a mix of cost reductions and termination of loss-making contracts. Net organic revenue growth of 6.1% for the quarter was achieved from new contracts (10.6%) and positive volume and price impact (2.3%) offset by terminated contracts (-6.8%).

New contracts in the first quarter have annualized revenue of 97 million Euros. Contract renewals in the quarter have further annualized revenues of 290 million Euros (boosted by the renewal of the Fiat spare parts contract in Europe worth 1 billion Euros over five years). Contract terminations represented an annualized revenue of 65 million Euros, about half due to TNT’s contract rationalization program. The value of the business development pipeline stands at 1.1 billion Euros at the end of the first quarter, according to TNT.

In the first quarter, TNT Logistics realized 4 million Euros in savings as a result of its Transformation through Standardization program. Annualized savings for 2004 are estimated at 40 million Euros. The effort delivered 15 million Euros in 2003.

In Europe, revenues grew 6.2% in the quarter. North America revenues dropped by 14.1%, mainly due to adverse foreign exchange translation. Rest-of-the-world revenues rose 26.2%, driven by significant growth in China and Australia.

Overall, TPG revenues rose 2.3% to 2.9 billion Euros. Net income was up 16.4% in the first quarter to 163 million Euros.

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