TNT is to separate fully its Mail and Express businesses saying that this will position them for “long-term success, as two strategically coherent and financially strong businesses”.
The company announced that it would go ahead with the separation as it released its second quarter results.
Internal separation is expected to be implemented 1st January 2011, and the equity of Mail and Express will be separated “after further exploration”.
Chief executive Peter Bakker said: “We have explored the best structure to secure the continued success of our Express and Mail divisions. Based on this review, we have concluded that a full separation will best serve both units.
“On a standalone basis, Mail and Express will be able to operate as best-in-class in their respective industries, by building on strong management and a solid capital structure to successfully implement their strategies.
“Before full separation can be implemented, the Supervisory Board and Board of Management have more work to do, including the involvement of the works councils and approval requests to our shareholders.”
Sales in the Express business were up 11.1 per cent to 1.7bn euros while operating income was up 169 per cent to 86m euros.
In contrast, the Mail business, the Dutch equivalent of Royal Mail, reported sales down 3.2 per cent to 993m euros. As a result, it slipped to a loss of 27m euros from a profit of 150m euros the year before.
In Express, the underlying operating income was 73m euros – up from 63m euros in 2009. In Mail, underlying operating income was 136m euros – down from 139m euros in 2009. The underlying figures are at constant currency and exclude the impact of working days and one-offs. In 2010 underlying operating income Express is € 31 million lower and Mail is € 144 million higher than reported. Restructuring related costs and one-offs are also taken into account for 2009, see table on page 4 of the full press release.
Looking ahead, in Express, volumes and revenues are expected to be well above 2009 levels, with operating margin improvement for the year clearly tempered by yield pressure and cost inflation offsetting some efficiency gains. Specific yield management and cost actions, once phased in, aim to improve the margins coming from the higher volumes.
In Mail, TNT expects addressed volume decline in the Netherlands of 7-9 per cent, due to the first full-year effect of liberalisation combined with ongoing substitution. Master plan savings of 75m euros are targeted. Mail operating income is expected to be below 2009 levels, including the impact of higher P&L charges for pensions.
Bakker said: “Mail put in a good quarter, with pleasing developments in Emerging Mail & Parcels. Following announcements on the large-scale Master plan restructuring in Mail NL, we today announce provisions for mobility and social plan payments. While clearly painful to many of our Dutch Mail employees, the reality of structurally declining postal volumes and continuing low-wage competition has forced us to redesign how we run our business.”