First in class

The Middle East is the TNT Group's fastest-growing region. Bryan Moulds, TNT Express' country manager, explains why.
First in class
By Administrator
Mon 12 Jan 2009 04:00 AM

The Middle East is the TNT Group's fastest-growing region. Bryan Moulds, TNT Express' country manager, explains why.

Overlooking the northern end of the Dubai International Airport runway, TNT Express' UAE headquarters has the perfect view of the ever-increasing volumes of airfreight that are being transshipped through the Middle East's most established hub.

Although the Dutch courier and express giant's largest markets are elsewhere, in Europe and Asia, the visit of TNT's most senior executives to the region only a few months ago speaks volumes about the company's intentions for the region, especially given the difficulties associated with the current environment.

The Middle East and Africa region is growing faster than any of our other markets and is certainly identified as such by the TNT Group.

"The Middle East and Africa region is growing faster than any of our other markets, and is certainly identified as such by the TNT Group as a whole," explains Bryan Moulds, UAE country manager, TNT Express.

"As far as size within the group is concerned, we are of course small, but this is a very strategic area geographically due to its growth perspective. Over the last eight years, UAE revenue as a whole has had a compound annual growth rate of 32.2%, so my position is an extremely interesting one to be in."

As a TNT veteran, having been with the company for 19 years, with over eight of those years spent in Dubai, Moulds is aware that his position in the UAE is key to the revenues of the Middle East region as a whole, an area that he sees as continuing to provide exceptional growth over the next five years, at the very least.

From a strategic point of view, air connectivity plays a central role in this region, as there are no reliable road networks that link the GCC to other continents.

As a result, the road network remains intra-GCC, with connections to a lesser degree to the Levant. Regardless of a predicted downturn, therefore, the volumes that come through Dubai by air will remain a huge component.

"Suffice to say, we‘re talking about upwards of 400 kilotonnes by air just from our European leg," explains Moulds.

"Now, while this figure may be declining by a little, we are still talking about big numbers; from a strategic importance perspective, connectivity by air is absolutely imperative. Dubai is our Middle East hub and material is brought  through here before being redistributed around the region."

Of course, express companies the world over are currently seeing the same signals in as a result of the slump; clients are tending to move for the cost-effective option, which means consolidation via either road or sea freight, rather than air.

"We are seeing little movements in our results suggesting a slight tendency towards road away from air; our road growth in this region is expanding by an impressive 40% year-on-year," continues Moulds.

"This isn't to say that our air volumes aren't growing as well, but they're not increasing to that extent. This year, TNT's UAE branch will post a 28.5% growth over 2007, which means that we haven't seen the full effects of the global slowdown yet. We have noticed a little less business in certain accounts and certain industries but the reality of what we are facing is yet to become truly apparent."One of the mainstays of the TNT airfreight position in the region was the decision taken two years ago to buy four B747 freighters.

As Moulds points out, from an environmental perspective this was a strong move as these aircraft are the most efficient cargo jets in the sky.

Furthermore, the capacity on these aircraft links the company's volumes from China directly into Europe, which is a huge growth area, as is evidenced by TNT Express' decision to add more capacity to its Shanghai-Singapore leg in the earlier part of 2008.

For the Middle East region, we're still posting 28.5% growth in 2008, and for 2009, I'll be disappointed if we don't post double-digit figures.

Of the four purchased aircraft, two have been wet-leased to Emirates, an arrangement that seems to have worked out very well.

"In the current circumstances, I don't think we would need to add the extra capacity that the two other 747s would bring us into the mix," says Moulds.

"But when there is a recovery and it's prudent, then that's always an option."

From an international viewpoint, TNT has recently been remarkable for its tendency to gain growth in overseas markets via the acquisition of local companies.

This is a policy that the company has followed with the purchase of Mercurio in Brazil, Speedage in India and Hoau Logistics Group in China, all emerging markets that will be crucial to the healthy expansion of the operator's worldwide footprint in the future.

So is TNT looking to pursue a similar policy here? "As far as acquisition targets are concerned, of course we always have our eyes open to see what's available," says Moulds.

"There are some interesting ideas, but that's as far as we are at the moment; we certainly don't have any announcements in the pipeline for the time being. However, it would be wrong to say that this is because of the difficulties relating to the current environment. It's my opinion that what's happening at the moment does not provide a barrier to acquistion; in fact, sometimes the opposite is often the case. At times like these you might be able to pick up companies at a better rate than you could have done when the economy was booming. But no, we have no announcements and I don't foresee any in the near future."

As for the company's worldwide overview, the UAE executive believes that the slowdown and the shape it is taking will not stop acquisitons; if there are targets that will help build on and strengthen TNT's network and growth strategies, then these will be considered in the same way as before.

But as far as running the company goes, the recent announcement by the TNT Group executive board highlights the difficulties the company has been facing, like so many others in this sector.

"As far as the global picture is concerned we've taken action to cut costs, as has everyone else," continues Moulds. "The global economy has affected TNT, which is why we've made the recent and very transparent announcements. However, I do believe that we are extremely robust, that we have a company that is well-managed from a cost point of view, and I see our competitors hurting more than we will."

"For the Middle East region, we're still posting 28.5% growth this year, but for 2009, I think anything over double digits will be an achievement," Moulds adds.

"Having said that, if we don't post double-digit growth in the UAE, I'd be very disappointed. This overarching sentiment is generally the same for most Middle Eastern companies."So what does TNT have in store for the region during 2009? The operator is certainly keen to highlight the benefits of its network capabilities, with particular reference to its road network.

Moulds argues that TNT can deliver shipments more quickly than its competitors to Saudi Arabia and Kuwait - two regional bear markets - and to Qatar, a market where it has sustained a 40% growth in revenue.

"I think that when people consider their supply chain network and cost efficiencies, customers will look to slowing freight down in the supply chain - where possible - in an attempt to save some money," says Moulds.

And our Middle East road network model is definitely best-placed to pick up on the future difficulties that people are envisaging, because we are in a great position to provide a strong service that is very cost-effective.

As with the rest of the company, the regional division of TNT is looking closely at its outlays at a time when fiscal prudence is of key importance. "Every line is being looked at," Moulds observes.

"Sometimes you can get away with expenditures in bullish markets because you are concentrating on growth and on the requirement to grab as much of market share as you can. Now we are looking to see whether we are getting value from cost and where we are not, that cost is being kicked out."

From a macroeconomic point of view, the UAE country manager does not believe that the worst of the economic slowdown has manifested itself.

"My personal view is that it has yet to filter down to the people's lives; by that I mean, it takes time between credit pressures and then people actually defaulting on loans," Moulds states.

"From a world perspective, Europe is just about to go through that. The next three months will see lots of defaults and job losses, while banks may take another hit as people fail to make good on their loans. But all of the government action has to seep through as well."

Moulds' best guess about the length of the current difficulties is that the end of the first quarter of 2009 will hopefully reveal how long the slowdown will last.

It's his opinion that Dubai will feel the difficulties more strongly than other areas in the region, but certainly that it's a better place to be from a business perspective than the US or Europe.

"It's a little too early to speculate accurately - but the best-case scenario is that it will be shallow and will start to stabilise by the end of the first quarter," he explains.

"If not, then it's likely to be sustained, but I really hope that we eventually see positive figures in 2010, which would mean that it's an 18-month cycle."

"From a TNT standpoint, I think we are wonderfully well-placed to help customers that need to find alternatives in their supply chains from a road network perspective, and we are there to pick up on opportunities because of the way our company is set up," concludes Moulds.

"We're not set up to be all things to all men; we do supply sea freight opportunities but it isn't our main strength. We concentrate on our networks and I think that by offering value and by differentiating services the future is extremely bright for us."

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