TNT operating profit down

Dutch mail company TNT NV disappointed investors on Monday with a decline in second-quarter operating profit but analysts welcomed its plan to buy back an extra 500 million euros ($680 million) of shares. The former Dutch mail monopoly reported earnings before interest and tax (EBIT) of 330 million euros, down from 337 million in the previous year and below an average forecast of 351 million in a Reuters poll of 13 analysts.
Operating income fell because of some one-off gains in the second quarter of last year, TNT said in a statement. "TNT reported disappointing results, with EBIT of 330 million euros falling well short of our 358 million euros forecast ... Both Mail and Express contributed to this shortfall," Rabo Securities analyst Philip Scholte said.
TNT shares touched a low at 30.71 euros and traded down 1.5 percent by 1126 GMT compared to a 0.1 percent decline of the DJ Stoxx European industrials index. Second quarter revenues grew by 10 percent to 2.67 billion euros, in line with analysts estimates, driven by a 14.1 percent revenue growth in TNT's express division, which accounted for about two thirds of TNT's revenues and half its EBIT.
Organic revenue growth in the second quarter was 7 percent at TNT's express unit, which competes with UPS, FedEx and Deutsche Post's DHL, and indicated a slowdown, Petercam analyst Thijs Berkelder said in a note.
"The organic growth slowdown is of negative impact on our valuation. As we anticipate to somewhat reduce our forecasts on Express, we now already lower our 12 month price target on TNT to 39 euros from 40 euros," Berkelder said.
Revenues at TNT's mail unit increased by 3.8 percent, as continuing revenue declines in its Dutch home market were offset by a rise in its foreign mail operations, TNT said.
It raised its full-year operating margin target for its mail division to 17.5 percent. TNT declared an interim dividend of 0.30 euros per share. TNT said it would buy back an additional 500 million euros of shares to optimise its capital structure. It expected the share buy-back to be completed by mid-next year.
Almost 60 percent of its current 400 million euros buy-back programme had been completed, TNT said. Kempen analyst Oskar Tijs said in a note it was positive TNT would buy back additional shares, while Bear Stearns analyst Andrew Beh said shares were trading cheaply at 11.6 times 2008 earnings per share.