TUI Net Falls as Larger Share Goes to Minority Owners

TUI AG, the German owner of Europe's largest travel company, reported a 42 percent drop in third- quarter profit after paying a larger share of income to minority investors and spending money to combine tourism brands.

Net income attributable to TUI stockholders dropped to 256.1 million euros ($326 million), or 88 cents a share, from 462 million euros, or 1.50 euros, a year earlier, the Hanover, Germany-based company said today in a statement. Sales rose 16 percent to 8.54 billion euros. TUI maintained annual forecasts.

Profit would have slipped just 2.9 percent without the higher payment to investors who control 49 percent of TUI Travel Plc, the tourism unit created by a merger in September of last year. TUI, owner of the Thomson travel brand, plans to expand the division with the proceeds from last month's sale of control of its Hapag-Lloyd shipping unit.

"This effect hadn't existed one year earlier," TUI spokesman Robin Zimmermann said by telephone. "It wasn't as strong in the last quarters, as the tourism business makes most of the profit in the third quarter.'"

Earnings at the travel unit fell 3.4 percent from a year earlier to 616 million euros before interest, taxes and amortization. Shipping profit dropped 31 percent to 66 million euros on the same basis.

"A Lot of Adjustments"

"The reported figures have a limited significance,'' Martina Noss, an analyst at Norddeutsche Landesbank in Hanover, said by telephone. "There are a lot of adjustments and one-time effects,'' said Noss, who has a "hold'" rating on the stock.

TUI fell 33 cents, or 3.7 percent, to 8.44 euros today in Frankfurt trading. The stock has dropped 56 percent this year, more than competitor Thomas Cook Group Plc, which like TUI Travel was formed last year by a merger.

Net income would have totaled 448 million euros without the larger payment to the travel company's minority owners.

Net debt fell to 2.8 billion euros as of Sept. 30 from 3 billion euros a year earlier. It probably will reach 3.9 billion euros by the year's end, the same as at 2007's close, and then fall to 600 million euros after the Hapag sale closes, likely in January, Chief Financial Officer Rainer Feuerhake said.

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