TUI second-quarter profits up sixfold

By Matthew Scuffham and Sylvia Westall

LONDON/FRANKFURT (Reuters) - Germany's TUI (TUIGn.DE) beat expectations with a sixfold rise in earnings in the second quarter as margins rose in its container shipping business, which it is selling, while consumer demand for holidays held up in the face of an economic downturn.

TUI said underlying group earnings before interest, tax and amortisation (EBITA) rose to 216 million euros (171 million pounds), above the highest forecast of 189 million euros in a Reuters poll and nearly 40 percent above the poll average.

Sales rose 20 percent to 6.25 billion euros, just short of the 6.26 billion average of 10 forecasts in the Reuters poll.

"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.

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.

Chief Executive Officer Rainer Feuerhake told investors that TUI would not sell Hapag-Lloyd unless the price was right and that it has a strong preference for a trade sale.

The group hopes to reduce its net debt with the sale and compensation would also be available to shareholders, Feuerhake said. Neptune Orient Lines (NEPS.SI) and a group of Hamburg investors have made the bidders' short list in a sale which analysts say could fetch over $7 billion (3.7 billion pounds).

However, analysts worry bids might be too low due to the gloomy outlook for the shipping market.