TNT Express to Step Up Savings as Europe Stays Weak

TNT Express NV posted an 85 percent decline in third-quarter earnings as trading remained difficult in main European markets, prompting the Dutch package-delivery company to intensify efficiency measures.

Operating income fell to 9 million euros ($12.4 million) from 62 million euros in the quarter ended Sept. 30, TNT said in a statement today. Sales declined 6.6 percent to 1.62 billion euros, with unfavorable currency swings depressing revenue by 83 million euros. The Hoofddorp-based company said it will step up restructuring efforts, without providing further details.

“Overall trading conditions remain demanding and visibility limited,” Chief Executive Officer Tex Gunning said in the statement. “Our ultimate goal is to make TNT Express robust for the long term. We are therefore developing further initiatives to reinforce our market and operational positions.”

TNT is revamping after United Parcel Service Inc., the biggest package-delivery company, terminated a 5.16 billion-euro bid in January amid opposition from European Union regulators. The overhaul includes the disposal of a unit in Brazil and the company’s domestic road business in China, and may also result in disposal of its fashion-logistics unit.

TNT today reiterated a forecast to lift the company’s operating profit margin to 8 percent by 2015. The company’s efficiency program, which targets profit improvement of 220 million euros by then, will generate 30 million euros in savings this year.

Corner Turned

The Italian unit will “turn the corner” in the next quarters, Chief Financial Officer Bernard Bot said on a call with journalists. Cost control was “good” and TNT continues to expect it can conclude the sale of China business by year-end.

The shares rose 3.6 percent at 9.43 a.m. in Amsterdam, paring the decline for the year to 16 percent. That makes TNT the worst performer in the 12-member Bloomberg Europe Transportation Index, which is up 27 percent since the end of 2012.

Sales in the company’s Europe Main region fell an adjusted 3.4 percent in the quarter, with operating income declining by 25 percent, on weaker profitability in Italy and the loss of a major fashion contract in the U.K.

United Parcel Service, the world’s largest package-delivery company, on Oct. 25 posted third-quarter earnings that beat analysts’ estimates after carrying more U.S. shipments at higher rates. FedEx Corp. beat profit estimates in its most recent quarter after moving lower-priority packages to cheaper transportation methods, such as ocean shipping.

(Corrects attribution of comments in sixth paragraph.)
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