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TNT's weak profits make higher UPS bid less likely

TNT's weak profits make higher UPS bid less likely
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TNT Express has posted weaker-than-expected results, which will not help it get a higher price from takeover bidder United Parcel Service.

The Dutch freight and delivery group’s quarterly operating loss was 104 million euros, from a 24 million profit in the same period a year earlier.

It took a big hit from its troubled Brazilian business and warned the bleak economic outlook will continue to hit profits.

TNT, which confirmed on Friday it was still in talks with UPS after rejecting a 4.9 billion euro ($6.5 billion) bid, said it would look for buyers or partners for both Brazil and its Chinese unit in order to focus on Europe.

TNT chief executive Marie-Christine Lombard has staked her reputation on turning round the troubled operations in Brazil, where TNT has struggled to integrate Expresso Mercurio, which it bought in 2007, and its delivery partner Expresso Aracatuba, acquired in 2009.

But on Tuesday, Lombard said TNT was now looking for “commercial partnerships, joint ventures, or a sale” for both Brazil and China.

“It’s a complete volte face,” Gert Steens, analyst at SNS Securities, said.

“The only reason to buy TNT is the European business. They’ve been diluting the value of the European business by spending so much time and money elsewhere. This just confirms no one is going to pay” for Brazil and China, he added.

On a conference call with journalists, Lombard declined to comment on the talks with UPS, and would not say whether TNT had been approached by any other potential buyers, including FedEx.

She warned the economic environment remained very uncertain, with a risk of a recession in Europe and a slowdown in Asia, and said TNT would continue to reduce costly fixed capacity on intercontinental routes in favour of more flexible arrangements like subleasing planes and sharing capacity.

TNT said it planned to cut 150 million euros in costs by the end of 2013, while taking 150 million euros of restructuring expenses and writeoffs.

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