Bloomberg News

TUI Stock Jumps on Travel Forecast in ‘Challenging’ Economy

December 14, 2011

(Updates with net debt in eighth paragraph.)

Dec. 14 (Bloomberg) -- TUI AG, the German owner of Europe’s largest travel company, jumped the most in two weeks in Frankfurt trading after saying it expects “moderate growth” next year, even as the European economy remains difficult.

Pretax profit in the 12 months through September rose to 206.8 million euros ($269 million) from 177.8 million euros a year earlier, the Hanover-based company said today in a statement. TUI said it aims to post moderate growth in revenue and operating earnings in fiscal 2012.

“The environment will remain challenging in the light of weaker economic growth in Europe and persistently high energy costs,” Chief Executive Officer Michael Frenzel said. “Nevertheless, we are entering the new year stronger and will consistently continue to pursue our successful strategy of differentiated products.”

TUI’s forecast and stock advance contrasted with competitor Thomas Cook Group Plc, which reported an annual net loss of 521 million pounds ($807 million) today. The London-based tour operator said it will close about 200 shops in the U.K. and scale back its plane fleet.

TUI shares gained as much as 9 percent to 4.24 euros, the biggest intraday jump since Nov. 30, and were up 7.3 percent at 12:28 p.m. in Frankfurt. Thomas Cook fell 6 percent in London, extending the stock’s decline this year to 93 percent, compared with TUI’s 60 percent drop.

Sales Beat Estimates

Full-year sales at TUI rose 6.9 percent from a year earlier to 17.5 billion euros, beating the average analyst estimate of 16.9 billion euros. Operating earnings rose to 600 million euros from 589 million euros.

The company delivered “solid full-year figures and a satisfying outlook,” Raimon Kaufeld and Hartmut Moers, analysts at WestLB AG, wrote in a report. The analysts maintained their “buy” recommendation on the stock.

TUI reduced net debt to 816.7 million euros from 2.3 billion euros a year earlier. Analysts were expecting 1.9 billion euros in net debt.

Earnings before interest, taxes, depreciation, and amortization rose 31 percent to 850.1 million euros, the company said. That missed the 944.2 million-euro average analyst estimate.

TUI Travel Plc, which accounts for more than 95 percent of TUI’s revenue, said this month that underlying operating profit advanced 18 percent to 471 million pounds in the year through September, beating a 467 million-pound average estimate.

Hapag-Lloyd Earnings

TUI owns a stake in Hapag-Lloyd AG, Germany’s largest container-shipping line, which said last month that third- quarter profit slumped 96 percent to 9.6 million euros because of overcapacity in the industry.

The travel company said yesterday that its executive board resolved to sell most of the Hapag-Lloyd stake to the shipping company’s majority owner Albert Ballin. TUI said today that container-shipping operations hurt fiscal-year earnings by 2 million euros because of higher fuel costs and currency effects.

TUI wants to pull out of the shipping industry “completely,” Frenzel said. Chief Financial Officer Horst Baier said TUI will be “debt free” after selling the Hapag- Lloyd holding.

“We expect ongoing positive news flow regarding the disposal of its Hapag-Lloyd stake,” WestLB’s Kaufeld and Moers wrote.

--Editors: Tom Lavell, Paul Jarvis

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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