By Hilde Messer
FRANKFURT—TUI /zigman2/quotes/206714402/delayed DE:TUI1 +2.58% AG, a holding company with assets in tourism and shipping, Tuesday said its full-year net profit fell 40% to €101.8 million ($136.3 million), but added strong growth in its TUI Travel PLC unit should boost earnings in 2011.
The Hanover, Germany-based company said the marked decline in profits was largely due to the sale in the previous year of a majority stake in its container-shipping unit Hapag-Lloyd, as well as air-traffic disruptions caused by the volcanic ash cloud in Iceland earlier this year.
Group sales contracted 1.5% to €16.35 billion. Sales at U.K.-based TUI Travel, which accounts for the bulk of TUI's earnings, fell to €15.7 billion from €15.9 billion a year earlier. TUI's fiscal year runs from October to September.
Chief Executive Michael Frenzel said in a statement the company expects to report a positive group result for its fiscal year 2011 on strong earnings from TUI Travel and continued cost control, but said it won't pay a dividend for fiscal 2010. The company said it will resume divided payments depending on the further development of the company.
Mr. Frenzel said the winter season is coming along well with an increase in bookings in Europe, and substantial growth in some markets. TUI Travel, Europe's biggest travel company, and majority-owned by TUI AG, is expected to show a slight increase in earnings before interest, taxes and amortization, or Ebita, excluding gains on disposals and restructuring expenses in fiscal 2011.
TUI AG said aims to further cut its net debt level, which reduced to €2.29 billion in fiscal 2010 from €2.33 billion a year earlier. The company also plans to fully divest its stake in Hapag-Lloyd. After a planned capital increase, TUI will hold 49.8% in the company and the Albert Ballin GmbH & Co. KG consortium will hold the remaining 50.2%. It is considering a stock listing of the unit, or a sale to strategic or financial investors.
The company said it will book €325 million in inflows from the sale of the administrative building of container shipping business Hapag-Lloyd to that company, as well as income from other real estate divestments and sale and lease back deals. Most of the total cash inflows will be booked this year.
The company also expects some cash inflow from repayments of remunerations paid to board members after a restatement of its 2009 shortened financial year earnings. The company was forced to restate its 2009 earnings after TUI Travel discovered an accounting error.
TUI AG changed its fiscal year to bring it in line with that of TUI Travel and, after a short financial year for 2009, the company's financial year now runs from October to September.
Kirsten Bienk in Hamburg contributed to this article.