TNT Express stable, but still faced with usual problems

As the dust has settled on UPS’s failed bid to acquire the company, TNT Express has released its fourth quarter and full year 2012 financial results which show a stable business in the short-term, but one which remains troubled by price pressures in Europe and losses in Brazil and China.

Overall, revenues in the fourth quarter were down by 0.5% year-on-year at €1.86bn, whilst the operating income was still negative at -€71m, although this was still an improvement over last year’s -€104m. For the full year, revenues were up 1% at €7.33bn, whilst the business moved from an operating loss in 2011 to an operating profit of €89m in 2012. However, principally, taxes pushed the company into a loss of €81m for the year.

The company’s business in Europe proceeded very much in line with market conditions. Revenues were up 1% at €1.1bn in the fourth quarter, but operating income adjusted for currency was down 25.8% at €69m. This decline was attributed to tougher price pressure and customers continuing to prefer cheaper services. In the fourth quarter, the number of consignments rose by over 10%, yet average kilo per day increased by only 0.7%, whilst revenue per consignment fell. Interestingly, sales were propped up by intercontinental air freight. For the financial year 2012, revenues were down 0.2%, operating profit was down 26.8% and average volumes in kilos were up 1.2%.

In Asia Pacific, the company saw revenues fall, in great part because TNT Express is shrinking its business in India and China. Revenues for the quarter fell 11.6% and for the year 10%, but the business is now profitable in the region, with an €11m adjusted operating income for the whole of 2012. Volumes are down, as are the average number of consignments, but revenue per consignment increased sharply. However, TNT Express faces problems with too much capacity on its aircraft in the region. TNT Express’ CEO Bernard Bot admitted that the company has the equivalent of one aircraft sitting idle, even after space not used for Express business is subcontracted out for other types of airfreight. Unsurprisingly, the company continues to attempt to sell aircraft as well as looking to sell its Chinese domestic Express business.

The domestic Brazilian business remains problematic, with continuing, albeit shrinking, losses of €72m for the year. In announcing its results, TNT Express promised details of a sale in the region, although it appears that the previous attempts to divest the business have stumbled. International business out of the Americas also saw a loss of €21m.

It is clear that there will be no radical developments in TNT Express’ corporate strategy in the short-term. Bernard Bot stated that the company would give more information on the company’s future strategy in March, but that this would be primarily concerned with cost control measures. He also suggested that these measures could contain more space for subcontracting for pick-up and delivery as well as possible job losses. Overall, the company said that it expected market conditions to remain much the same as last year and that it would concentrate on retaining TNT Express’ financial stability.