TNT Express plans disposals after further losses

AMSTERDAM Mon Feb 18, 2013 7:34am EST

The logo of TNT is seen in Hoofddorp, the Netherlands March 19, 2012. REUTERS/Robin van Lonkhuijsen/United Photos

The logo of TNT is seen in Hoofddorp, the Netherlands March 19, 2012.

Credit: Reuters/Robin van Lonkhuijsen/United Photos

AMSTERDAM (Reuters) - TNT Express (TNTE.AS), whose $7 billion takeover by United Parcel Service (UPS.N) was blocked last month, reported a further loss on Monday, saying it would sell units in Brazil and China and cut costs as it prepares for a future alone.

The Dutch package delivery firm does not expect offers from other rivals given regulators' concerns about competition in Europe, and is not a break-up target, its interim chief executive said on Monday.

"We've cleansed ourselves of all that speculation, all this is now behind us," Bernard Bot told reporters on a conference call, adding the company envisioned a "standalone future."

"We are keenly aware that further urgent improvements are required," he said, adding that the company would announce its strategy on March 25.

TNT Express faces an uncertain future. It has cut capacity in Europe because of weak demand while continuing to struggle with problems in its Brazilian and Chinese businesses. And its chief executive quit soon after UPS made its offer in March 2012.

The takeover by UPS was intended to create a global express delivery group with a strong market position in the United States, Europe, Asia and Latin America.

The smallest of the four world leaders in the express delivery of goods and documents around the globe - after UPS, FedEx (FDX.N), and Deutsche Post DHL (DPWGn.DE) - the Dutch firm had come under pressure from shareholders to improve on its financial performance.

But with the collapse of the UPS deal, TNT Express now has to confront a weak European market on its own, and has dusted off some of the moves it had proposed before UPS made its offer and which were put on hold during the year of negotiations.

"There are many positive actions we can take to improve profitability and we look forward to providing a full update on 25 March," Bot said in a statement.

The firm is also looking at cutting jobs and overheads, Bot said, stressing that the outlook in Europe where TNT Express has the bulk of its business, remains tough.

Many of its customers are switching to cheaper delivery options, and a major customer in the UK fashion business did not renew its contract when it expired recently.

The company reported a net loss for the final quarter of 2012 of 148 million euros ($198 million), down from a loss of 173 million euros a year ago on flat revenue of 1.86 billion euros.

Analysts had on average forecast a net profit of 32.2 million euros on revenue of 1.886 billion euros but the company said it had lost 120 million euros in one-off charges and impairments, mainly on its domestic China and India businesses, and on the value of its freight aircraft.

For the full year the company reported a net attributable loss of 83 million euros, down from a 270 million deficit in 2011.

EXIT BRAZIL, CHINA

The company has now revived plans to sell some of its long-haul aircraft in order to cut capacity on international routes - a plan which was mothballed when UPS made its offer a year ago and which is likely to net less money now because the market for such aircraft has deteriorated since then, it said.

However, Bot said the company also plans to sell its domestic operations in Brazil and China, with the outcome of the China deal expected soon, while a sale of the Brazilian business is expected by year-end.

The shares, which initially fell 2 percent, later rebounded and traded up more than 4 percent, with analysts saying investors were encouraged by the plan to bale out of the problematic local businesses.

TNT Express declined to give financial details of the two businesses but analysts have said in the past that its Chinese business is too small to compete effectively.

The Brazilian business has been a burden for TNT Express for several years, making an operating loss of 73 million euros last year and a loss of 332 million euros in 2011, when the company took impairment and restructuring charges on the business of 236 million euros.

"They intend to divest the domestic Chinese activities and are looking at what to do with Brazil," said Dieter Furniere, an analyst at KBC in Brussels.

"Since both of these are loss-making, a potential sale could really improve the underlying results whereas if they keep the domestic Chinese business they will have to really invest in it," he said.

TNT Express proposed a dividend of 3 euro cents and said its dividend policy, paying out about 40 percent of normalized income, was sustainable.

But it said shareholders, which include Dutch mail firm PostNL (PTNL.AS) with a near 30 percent stake, should not expect a special dividend after UPS paid a 200 million euro break-up fee this month.

TNT Express was split off from PostNL in May 2011 in an attempt to better profit from development of the express operations while the traditional mail business declined.

But TNT's ensuing weak performance quickly prompted other shareholders to call for a management shake-up or an outright sale, pushing it into the arms of UPS last year, only to have the EU competition regulator block the marriage 12 months later. ($1=0.7490 euros)

(Editing by Greg Mahlich)

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