WRAPUP 1-TUI Q2 profits beat expectations

By Matthew Scuffham and Sylvia Westall

LONDON/FRANKFURT, Aug 14 (Reuters) - German travel and shipping group TUI reported better-than-expected second-quarter profits on Thursday, as its container shipping business benefited from increased freight rates and consumers continued to book holidays despite an economic downturn.

TUI said underlying group earnings before interest, tax and amortisation (EBITA) were up sixfold to 216 million euros ($323.5 million). Sales rose 20 percent to 6.25 billion euros.

Ten analysts polled by Reuters had expected on average underlying EBITA of 158 million euros and sales of 6.26 billion.

"TUI...continues to expect a significant increase in underlying earnings by each of the two divisions, tourism and container shipping, for the year as a whole," the company said in a statement.

TUI said the separation process for its Hapag-Lloyd shipping unit was on track and the bidding process was expected to close by autumn at the earliest.

Neptune Orient Lines and a group of Hamburg investors have made the short list in the bidding for Hapag-Lloyd, a sale which could fetch over $7 billion.

TUI said on Wednesday it intends to withdraw completely from the shipping business and plans to sell 100 percent of the unit, denying a newspaper report that it was planning to sell only 75 percent of the world's fifth-biggest container shipping line.

SUMMER HOLIDAYS

The company's TUI Travel division, Europe's biggest travel company, reported a 39 percent rise in third-quarter underlying operating profit on Thursday to 65.4 million pounds ($124.5 million).

TUI Travel said consumer demand for package holidays remains strong and is confident its expectations for 2008 and 2009 can be achieved. Tourism made up roughly 75 percent of TUI's revenue in the second quarter.

The average forecasts for TUI Travel's 2008 and 2009 pretax profit are 317 million pounds and 403 million pounds respectively, according to Reuters Estimates.

The group and its rival, Thomas Cook , have been cutting capacity, leaving them with fewer holidays to sell and enabling them to avoid deep discounting on late bookings.

Thomas Cook said on Wednesday that current trading has been strong in the summer 2008 season, and trading for winter 2008/9 and summer 2009 is ahead of last year.

Earnings at TUI's Hapag-Lloyd unit, which it now books as a discontinued operation, rose almost seven fold with EBITA of 89 million euros and sales of 1.51 billion. Underlying EBITA for the unit was 115 million euros.

West LB reiterated its 'buy' recommendation on TUI AG, with a 20.4 euro price target.

"Despite the expected downturn in H2 2008 in the container shipping segment we stick to our positive outlook for 2008," it said in a research note.

Shares in TUI AG had risen by 0.6 percent to 14.6 euros by 0940 GMT.

Shares in TUI Travel were down 1.3 percent at 225 pence, having risen by over 30 percent over the past month due to the weakening oil price.

"Shares in the sector are inexpensive but remain exposed to profit taking following a strong recent bounce," said Investec Securities analyst Joe Thomas. (Editing by David Cowell)