CORRECTED-UPDATE 2-TNT Express makes loss after southern Europe write-offs

Mon Jul 29, 2013 8:14am EDT

(Removes goodwill from 1st paragraph, adds full details of write-off in 4th paragraph)

AMSTERDAM, July 29 (Reuters) - TNT Express said on Monday tough trading conditions in southern Europe contributed to a 350 million euro ($464 million) write-off that pushed the Dutch delivery group to a second-quarter loss.

The company is restructuring to bounce back from the collapse of a 5.2 billion euro takeover by rival United Parcel Service, which was blocked by European regulators in January on competition grounds.

But its express delivery business has been hit by overcapacity and an economic downturn in Europe, with many customers choosing cheaper delivery options, putting pressure on prices.

TNT Express said the adjustments consisted of 296 million euros of goodwill impairments and 53 million euros of fair value adjustments.

About half the goodwill write-offs were due to worsening trade conditions in southern Europe, particularly Italy and France, Bernard Bot, chief financial officer, told a conference call. He said even without the group's reorganisation, TNT Express would have had to take impairments.

"We probably would have taken a different impairment, we still would have taken a hit, probably on our southern Europe activities," Bot said.

The Dutch firm's write-offs and other one-offs for the second quarter were related to restructuring following the collapse of the UPS deal. TNT Express said it remained on track with planned divestments and cost-cuts to meet turnaround targets.

TNT Express has already announced 4,000 job cuts and asset sales to improve profitability.

It has agreed to sell Hoau, its Chinese parcel business, to private equity funds in March, and has put its troubled Brazilian unit up for sale.

Bot said on Monday there had been "good interest" in the Brazilian business from international and local transport companies, as well as from private equity firms, but did not give details.

TRADITIONAL POST IN DECLINE

TNT Express was spliced off from PostNL two years ago to ring fence the express delivery operations from a traditional post business that was in decline because of the growth in electronic mail. Both companies have struggled to improve returns.

In Britain, the government is planning to sell off a majority stake in the country's postal service Royal Mail, which is also trying to shift its business away from falling letter volumes towards parcels, where demand is growing because of internet shopping.

TNT Express reported a second-quarter operating loss of 280 million euros on revenue of 1.7 billion euros.

Adjusted operating income fell 26 percent to 71 million euros in the second quarter from 97 million euros a year ago, broadly in line with analysts' forecasts.

"Although the outlook is confirmed, it still flags that the second half will remain challenging," Dieter Furniere, analyst at KBC Securities, said.

Bot said while the outlook for southern Europe was bleak, eastern Europe was doing well, with TNT Express focusing on higher-margin business from small- and mid-sized customers as well as the lifestyle and healthcare sectors which have shown brisker growth.

TNT Express shares fell 6.27 percent to trade at 5.756 euros by 0836 GMT. ($1 = 0.7539 euros) (Reporting by Sara Webb. Editing by Jane Merriman)

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