Dutch express and logistics group TNT has confirmed it will follow through with earlier stated intentions to fully split its Mail and Express units into separate companies. TNT said it would start running the two as separate businesses by next year. A decision, which could include a sale or flotation would then follow, “subject to further exploration”.

TNT made the announcement as it reported a second-quarter profit of €3 million, a significant drop from the €81 million profit it made a year ago, on revenues of €150 million. TNT said it was hit by “significant one-offs”, including a charge of €168 million related to job cuts among its full-time mail workers. The news that the businesses will be split is likely to re-ignite speculation that the express operations could become a takeover target for US rivals FedEx and UPS.

Looking ahead TNT said it sees a modest improvement in the European economy, “however, given that the global economic recovery remains fragile, caution remains warranted. The focus on costs and cash will therefore continue.”

In Express, volumes and revenues are expected to be well above 2009 levels, with operating margin improvement for the year clearly tempered by yield pressure and cost inflation offsetting some efficiency gains, the company said. “Specific yield management and cost actions, once phased in, aim to improve the margins coming from the higher volumes,” it added.

CEO Peter Bakker commented: “In Q2 2010, TNT experienced generally improving business conditions. Express volumes were up significantly and Mail performed well. However, integration costs and certain temporary cost pressures in emerging markets and intercontinental linehaul, along with continuing yield pressure in our core markets, are holding back Express’ margin expansion. All of TNT’s Express management is focused on improving the yield and margin to reflect the now more positive volumes we are carrying.”

“As announced earlier this year, we have explored the best structure to secure the continued success of our Express and Mail divisions. Based on this review, we have concluded that a full separation will best serve both units,” Bakker said.