TNT Moves Ahead With Investments Despite The Q2 Losses

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While on the one hand the news of FedEx taking over the Dutch express operator TNT is rife, TNT is still positive about their overall gross profit. TNT recently disclosed the report about the Q2 loss the company incurred. Although the operating profits have attained a beating, the overall revenue has increased a good 6.2%. The operating profits have mostly fell due to the investments TNT has been making on developing and revamping with its Outlook transformation strategy.

TNT’s rival company FedEx is slated close the deal with the company somewhere around the first quarter of 2016. The intended takeover is placed around $5 billion. Based on TNT’s Q2 report, the revenue stands around €1.76bn but the operating profits which is about €41m,have incurred a hit of 41% decline from 2014’s Q2 profits of €70m. Although the drop infuel surcharges has affected the profits, the gross revenue has attained a boost thanks to the local currencies steadily increasing in comparison to the euro. According to the chief financial officer of TNT, Mr. Maarten de Vries the 41% drop in the overall revenue is due to the investments made on Outlook programme which cost around €15m. From investments in opening new centers to the reduced revenue issues in the domestic business arena, the revenue growth was affected.

According to Tex Gunning who is the chief executive of TNT, the overall expenditure of TNT was part of a comprehensive strategy that would promote the growth of the company and increase operational excellence. The overall growth in revenue is 5.5% compared to the mere 2.2% in Q2 of 2014. Based on the Q2 2015 report, investments were made in IT,vehicles as well as machinery. Investments in airfreight in Liege are made along with a setting up sorting facilities in places like Madrid, Brisbane Swindon, Melbourne etc. which will be operational soon.

TNT is in the process of replacing outdated depots and hubs and making a steady investment in automation. The company is estimating about €25-30m that would go in further alteration and improvements around the third quarter.

In the Asia, Middle East and American zone the revenue has attained a growth of about16.3% and even the operating profits are somewhere around 17.3%, about €20m. But in the European sector the growth is low with operating income down at 10% and overall revenue growth at 5.1% to arrive at around €719m. This can be attributed mostly to the higher value of the currencies compared to the value of the euro. But the overall growth level is positive according to Mr. de Vries. With total operational loss experiencing a decline of 60% which arrives at around €7m, the stats look promising. But nevertheless the risk factor still needsto be considered by the company.

With rising inflation, a decline in exports of China and other bothersome incidents thatcould seriously affect the company’s growth, the executives are playing it safe. With a healthy boost in growth in the south and east Europe sectors and other areas, the company is steadily moving forward. The FedEx acquisition is still in the pipeline and the company is expecting a formal offer from FedEx around Q3 2015.

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