TNT says it must “move more by road”
Netherlands-based express company TNT reported first-quarter 2014 net income of €1 million, down from €144 million in the first quarter of 2013, as revenue declined 6.6% to €1.61 billion. Reported operating income for the quarter was down 92.2% to €17 million, from €219 million in 1Q13. However, the reported figures include a variety of one-time charges and benefits that make comparison difficult. Principal among these is the payment to TNT by UPS of a €200 million termination fee in last year’s quarter when the US company’s acquisition attempt was prevented by the EU’s competition authority. As shown in the chart at right, adjusting for the one-time items, and for foreign exchange effects, total revenue was down just 2.8%, and operating income in fact more than doubled to €51 million. Following the sale of its domestic China operations, and the failure to sell its domestic Brazil operations, TNT now organizes its business into five reporting segments.
- In the company’s core Europe Main segment, consignment volumes were down, but average weight per consignment rose (as shown in the chart below right). Revenue per consignment did not keep pace with rising weight, though, and segment revenue was down 3.1% to €790 million. However, thanks to cost-cutting measures put in place under the so-called “Deliver” plan, operating income was up substantially (31%) to €38 million.
- In the Europe Other & Americas segment consignment volumes were unchanged from 1Q13, but all other operating metrics – weight per day, revenue per consignment, and revenue per kilo – were all up. Segment revenue rose 6.2% to €291 million, and operating income jumped 88.9% to €17 million.
In the Asia, Middle East & Africa segment, year-over-year comparisons of operating results were distorted by the sale of the domestic China business, but revenue per consignment and per kilo grew strongly. Despite lower segment revenue, adjusted operating income rose from a loss of €5 million in 1Q13 to a profit of €7 million in this year’s quarter.
- The Brazil Domestic segment showed a significant turnaround. TNT said that by offering better customer service it was able to keep existing customers and win new business. A slight drop in consignments per day was matched by an increase in average consignment weight, but more importantly, revenue per consignment was up strongly and the segment went from a €10 million operating loss to break even.
- Things were not so rosy in the Pacific (Australasia) segment, where “continued pressure on mining and retail volumes led to lower weight per consignment.” Segment revenue was down 1.8% to €164 million, and the segment continued to report a small operating loss.
Looking ahead, TNT said it expected results for the rest of 2014 to be similar to the first quarter, with improving results in all segments except Pacific. The company initiated a new strategy: “Outlook,” to succeed the expiring “Deliver.” The Outlook plan is made up of 10 “initiatives,” the first of which will be of particular interest to readers of Cargo Facts. It is called “Move More by Road.”
