Dutch mail and logistics company TNT yesterday posted a 2.1 per cent rise in operating profit, slightly below expectations, as one-off costs and price pressure hurt results at its logistics division.
TNT said third-quarter earnings before interest and tax (EBIT) rose to 246 million euros (£168.4 million) from 241 million euros (£165 million) a year earlier, falling short of a 252 million euros (£172.6 million) average forecast.
Revenue rose 8.6 per cent to 3 . 23 billion euros (£2.21 billion), broadly in line with analysts' expectations of 3 . 29 billion euros (£2.25 billion), buoyed by the express division, which competes with Deutsche Post's DHL as well as FedEx and UPS.
TNT, whose British operations are centred on Atherstone, Warwickshire, also announced a strategic partnership with Japan Post, Japan's internal mail delivery group, with the aim of establishing a joint express operation between Japan and the rest of the world by the second quarter of 2006. By 2007, the two firms also plan joint logistics activities.
"As soon as the privatisation of Japan Post is finalised, we will see what we can do next," said chief executive Peter Bakker. "This alliance has the potential to achieve a leading position in the Asia-Pacific express market."
Analysts said the results of TNT's mail division, whose operating profit rose 2.1 per cent, where in line with expectations, and the express division had again posted good results with a 37-per cent rise in EBIT.
Results in TNT's logistics division, which manages supply chains, were hurt by eight million euros (£5.4 million) in restructuring costs for its French business, part of a 140 million euros (£95.8 million) pretax charge the firm expects to take for the sale of loss-making French logistics activities.
TNT said it expected to take most of the charge in the fourth quarter. TNT announced earlier this month that it had received offers for most the French activities it plans to sell.
"In the rest of logistics, partly resulting from an unexpected law change in Italy, margin pressure remained, although we did see some positive signs in business development," Mr Bakker said.
WestLB analyst Tue Ostergaard said the margin pressure reflected a general trend in the logistics market.
"It's not entirely TNT's problem. There's heavy competition in the European market, and that is reflected in the margins. It is going to stay an issue. But you have to bear in mind that the mail and the express divisions are by far the most important. From an EBIT point of view, logistics is marginal," he said.
The logistics division generated 34 per cent of TNT's third-quarter revenue, but only five per cent of operating profit.
TNT said it was too early to give details on the expected financial impact of an investigation into tax irregularities at subsidiaries that the group revealed last month.
Net profit increased to 148 million euros ( £ 101 . 3 million) from 147 million euros (£100.6 million) a year ago. Analysts had forecast 151 million euros (£103.4 million).
The express division improved its operating margin to 7.8 per cent from 6.2 per cent a year ago, looking on track for its operating margin target of ten per cent in 2007.