Deals and IPOs

TNT Express Cuts 6 Percent of Jobs to Face Future Alone

A TNT delivery truck near Amsterdam, Netherlands
Peter Dejong

Dutch package delivery firm TNT Express said on Monday it will cut 4,000 jobs and focus on Europe after a failed $7 billion takeover by United Parcel Service.

TNT Express, facing overcapacity and rapidly eroding prices in Europe, had focused on a strategy in which UPS would help it cope with difficult markets. It will now have to face the future alone.

The cuts, which equate to 6 percent of its workforce, are aimed at saving 220 million euros ($286 million) by 2015, and will result in a restructuring charge of 150 million euros, it said.

Roughly two-thirds of the job cuts will be in Europe, where economic conditions are tough and TNT Express generates the bulk of sales, said interim chief executive Bernard Bot. About 4.6 billion, or 63 percent, of 7.3 billion euros in 2012 revenue came from Europe, the Middle East and Africa.

If the restructuring is successful, TNT Express will have an adjusted operating income margin of around 8 percent and sales growth of roughly 2 percent by 2015, it said.

That forecast assumes a return to a normal economic climate in crisis-hit Europe, Bot said, where markets remain highly uncertain.

"The business we have is the business we have, in terms of its geographic scope, and that's where we are going to focus, improve, and try to get the best possible margins," Bot told journalists.

"But yes, we also have to accept that we are a cyclical stock and are to some extent dependent on the economic development."

Bot, who will soon be replaced by Tex Gunning and will return to his job of chief financial officer, said TNT Express's management is focused on moving ahead as an independent company after the unsuccessful bid by UPS.

UPS's bid for TNT Express was blocked by the European Union Commission in January due to concerns it would have too dominant a market position. TNT Express said it did not expect offers from other rivals and is not a break-up target.

Reduce Capacity

TNT Express, which had already announced a 15 percent reduction in European capacity, said on Monday it is "exploring options" to reduce its exposure to intercontinental capacity, including sharing agreements, subleases and lease terminations.

Five major aircraft could be dropped, Bot said. "If we can take out the aircraft in an attractive deal we will do so," Bot said. The company has 45 planes in its European network.

TNT Express in February announced plans to sell domestic units in Brazil and China. The job cuts announced on Monday do not include those planned disposals.

The sales process for domestic China is under way and preparations have begun for the sale in Brazil. The company provided no other detains.

"It would have been nice to see progress on the sales," said Rabobank analyst Philip Scholte.

"They are counting on a recovery in Europe, but that's a pretty big condition. Continued margin erosion means they have to make profit in other ways and that meant job cuts were unavoidable."

The firm's shares were virtually flat in Amsterdam trading, lagging the broader market.

Analyst Andre Mulder at Kepler & Cheuvreux said in a trading note he was disappointed TNT had not provided details about the disposals in Brazil and China, noting the U.S. business did not generate a margin, while the China business only made a small profit.