TNT Keeps Express Spin-off On Track

TNT Keeps Express Spin-off On Track

TNT, the Dutch mail and express company, said it will proceed with plans to spin off its express division in May despite a slump in the unit's earnings due to political unrest and natural disasters.

The downbeat outlook for express operations slashed TNT's market value by 10 percent, or $995 million April 8, enhancing its attraction as a takeover target for rivals like UPS and FedEx.

Trading conditions are much more volatile than had been previously assumed, TNT said in a business update as it scrapped its previous projection of operating income of $568 million to $596 million in 2011 for the express unit.

Sharp increases in the price of oil, political unrest in the Middle East and floods and strikes earlier in the year in Australia have reduced delivery volume.

This was exacerbated by unforeseen effects, including a decline in volume at Brazilian units acquired in 2007 and 2009 that are being integrated into TNT's global network.

Underlying operating income at the express unit, Europe's second largest after Deutsche Post's DHL, fell by about $36 million in the first 12 weeks of 2011, TNT said.

TNT said it is taking commercial and operational measures in each geographical region, including specific pricing action and the reduction of indirect costs.

Express revenue in Europe, the Middle East and Africa will rise "modestly" in 2011, and the operating margin will match the 9 percent achieved in 2010.

Sales in the Americas and Asia-Pacific region will grow at a double digit rate in 2011.

TNT said it plans to list the express unit on the NYSE Euronext Amsterdam on May 26. The company will temporarily retain a 29.9 percent stake in the business.

FedEx has long been viewed as a bidder for TNT's express business, but its Chief Financial Officer Alan Graf said Thursday the Dutch company is "too expensive."

FedEx said it has its own organic plans to expand capacity in Europe and does not need to make any major acquisitions.

-- Contact Bruce Barnard at