TNT's profit hit by volatility ahead of demerger of express and mail

DUTCH express delivery giant, TNT, has announced that as part of its preparations for the demerger of its express and mail businesses it has revised its full year 2011 plans for the express segment, a move driven by volatile trading conditions in the first 12 weeks of the year.

"Year-to-date trading conditions have been much more volatile than had been previously assumed. Volatility has been caused by a sharp increase in the oil price, social and political unrest and natural disasters. This was exacerbated by unforeseen effects from the integration issues in Brazil," a company statement said.

It said the total underlying operating income for the first 12 weeks is around EUR25 million (US$35.96 million) lower than in 2010.

The company said the European activities of the express business are performing at "satisfactory" levels. However, the oil price increase has led to lower international express volumes owing to an under utilisation of the air network with customers opting for cheaper road freight transportation, as well as a lag in the recovery of higher fuel costs.

In the Americas, Brazil suffered from domestic volume losses related to integration problems. As reported in February, Asia Pacific has seen much lower Asia-Europe volumes, with a recovery only in the last two weeks of March. Floods and strikes in Australia have also held back the region's operating result.

As a result of these problems, the company forecasts Europe, Middle East and Africa revenue will grow modestly, with an operating margin of nine per cent or slightly above being in line with last year. Asia Pacific revenue is expected to "partially" recover on the back of improving intercontinental volumes, while the ongoing negative performance of the Americas will be addressed with corrective measures, including the restructuring of the management team. Other networks are forecast to perform in line with last year.

For the medium term, Europe, Middle East and Africa revenue for express is forecast to grow organically and through new initiatives, with the operating margin expected to increase to 10 - 11 per cent. Asia Pacific and the Americas are expected to realise double-digit revenue growth and provide a "solid" contribution to profitability, it said.

With the demerger preparations finalised, the plan will be put to a shareholder vote on May 25. Provided shareholders vote in favour of the plan, express shares are expected to be traded on NYSE Euronext Amsterdam from May 26.

New supervisory boards will be appointed for mail and express, and the mail business will operate under the new name of PostNL. Express will operate as TNT Express NV, the company said.
(Source:http://www.schednet.com)