TUI Q1 net loss widens as 'difficult' UK market hits tourism operations UPDATE

TUI Q1 net loss widens as 'difficult' UK market hits tourism operations UPDATE

	Published : Fri, 11 May 2007 10:41 By : Agencies Print this Story

(updates to add net loss consensus, details on freight rates in Q1)

HANOVER, Germany (Thomson Financial) - TUI AG said its first-quarter net loss widened to 117.2 mln eur from 93.7 mln in the same period last year as its tourism division was hit by a 'difficult market environment' in the UK, and with the year-earlier period benefiting from a gain from the sale of a business travel unit.

Analysts polled by Thomson Financial News expected the net loss to widen to 219 mln eur.

The tourism operator further stated that 'due to the announced merger of TUI AG's tourism division (...) with the British First Choice Holidays PLC, an assessment of the earnings trend cannot be provided at this point in time.'

In mid-March, the two companies announced a merger -- excluding certain hotel assets -- to create TUI Travel PLC, which will be 51 pct-owned by TUI and 49 pct by First Choice.

TUI Travel PLC, which will have 27 mln customers in 20 source markets, will be headquartered in the UK and listed on the London Stock Exchange.

The merger was initially planned for the third quarter of 2007, but is currently experiencing delays, as the European Commission examines the issue of potential dominance in the Irish market following the merger.

Meanwhile, TUI reiterated that it expects 'slight turnover growth for its continuing operations'.

First-quarter sales declined to 4.09 bln eur from 4.20 bln last year, below the consensus of 4.15 bln.

The loss before interest, tax and amortization in the tourism division widened to 237 mln eur from 83 mln as Northern Europe operations reported a sharp decline to an EBITA loss of 119 mln eur from 92 mln.

Analysts said the widening loss was partly due to one-off effects booked in the year-earlier period such as the sale of business travel company TQ3 last year, which supported earnings with 144 mln eur gain at the time.

Overall tourism sales improved to 2.59 bln eur from 2.51 bln, ahead of the consensus of 2.56 bln, while the shipping division reported a decline in sales to 1.50 bln eur from 1.64 bln as freight rates declined.

Analysts polled by Thomson Financial News had expected sales in the shipping division to come to 1.56 bln eur.

The shipping unit reported an improvement in EBITA to 141 mln eur from a loss of 25 mln eur, thanks to the sale of 80 pct of its holding in Montreal Gateway Terminals for 181 mln eur, more than expected by analysts.

Analysts expected the company to record a book gain of between 80-150 mln eur from the divestment.

One analyst, who declined to be named, said the 181 mln eur were 'significantly higher than anticipated'.

The tourism giant said in February that it agreed to sell 80 pct of Canadian container terminal Montreal Gateway Terminal to Morgan Stanley's infrastructure investment group.

The company also said freight rates declined in almost all trade lanes, dropping 8.2 pct on average.

While freight rates declined, transport volume rose significantly as its Hapag-Lloyds generated 9.9 pct more volume in the first quarter.

Volume in the Far East increased by 25.1 pct and the company's trans-pacific trade lane recorded volume growth of 9.8 pct thanks to economic growth in China.

TUI added, however, that competitive pressures on the route from Asia to North America intensified, which resulted in a decline in freight rates in the region of 9.3 pct on average.

Looking ahead, the company said it expects an 'initial recovery trend' in freight rates in the second quarter, with rates improving in the second half of this year.

patrizia.kokot@thomson.com

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