TNT to split into two divisions

[POSTMAN]

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TNT came a step closer to a break-up of its postal and express delivery businesses on Monday, with the Dutch group saying it had decided on a full separation of the two divisions as it reported a slump in profit due to the reorganisation of its mail business.

The diverging circumstances of the two units – a mail business restructuring in a shrinking, mostly domestic market and a global express delivery business growing in emerging markets – had prompted the group to opt for a full separation of the two, Peter Bakker, chief executive, said.

The group had already said it wanted to spin off the mail operations, though Mr Bakker said that scenario had included the possibility of a partial, rather than full, separation of the two units.

TNT will split the businesses internally by January and had engaged advisers to consider “different forms of capital market transactions”, to separate the equity of the two divisions, he said.

“What we want to show today is we’re not going for half solutions, we’re going for a full separation,” he added.

Mr Bakker would not be drawn on who would lead the new companies. He presented the second-quarter results alongside a new chief financial officer, Bernard Bot, a former management consultant who has been at TNT since 2005. He replaces Henk van Dalen who suddenly resigned to join Vimpelcom, the Russian telecoms group, as chief financial officer.

As recently as December, Mr Bakker had described calls from investors to break up the group as “disruptive”, while simultaneously acknowledging that the group’s strategy of becoming a leading European postal operator would have to be dropped given the “distorted” way European mail markets were being opened up to competition.

While facing fierce competition in a liberalised home market, TNT had found it hard to enter other European markets, some of which have yet to liberalise their postal markets.

“If you shrink [the European mail ambitions], you also reduce the synergy potential between the Express network and the postal network in all the European countries,” Mr Bakker said on Monday.

TNT’s second-quarter net profit fell 96 per cent to €3m or 28 cents a share because it made a €168m ($219.5m) provision for restructuring the Dutch postal operation. Postal volumes are shrinking 7-9 per cent per year and TNT is shifting its work force from full-time delivery staff to part-time and cutting 11,000 jobs.

The group said it expected to make further provisions of €150m for the restructuring.

In the express delivery business, the group reported volumes and revenues back at 2007 levels but said yields fell, both compared with 2007 and year on year.

Shares in TNT fell 3.9 per cent to €22.

[Lounge Lizard]

Following the example of Royal Mail who split off Parcel Force as a separate division some time ago.