Down-trading by some customers and continuing losses in Japan drove down half-year expressprofits at Australia’s Toll Group but a sale of the Japanese express business has been ruled out
“at this stage” due to improving figures.The leading Australian transport and logistics group said today its overall revenue increased2.5% to A$4.5 billion (€3.5 billion) in the six months to 31 December 2012. Operating profits wereup 3.3% at A$256.4 million (€197 million) and net profit improved by 7.6% to A$174 million (€134million), thanks to higher profits from its Toll Global Resources, Toll Domestic Forwarding andToll Specialised & Domestic Freight divisions.
Toll Global Express, the largest division, increased revenues by more than 3% to $1,169 million(€899 million) on growth from lower-yielding customers but operating profits (EBITA) slipped 6.3%to $73.4 million (€56.4 million).
Japanese subsidiary Footwork Express saw revenues decline 8.1% to $346.5 million, resulting in a$1.5 million loss. But this was only half the previous year’s $3 million loss and the underlyingperformance was starting to improve, with a positive EBITA in October, November and December, Tollstated.
However, economic conditions in Japan remained very challenging. “Activities to offset thismacro decline, including initiatives targeting operational efficiencies, continue to improve thebusiness,” Toll said. But it underlined: “The strategic review of the business is on-going. Howeverthe sale of Toll Express Japan has been ruled out as an option at this stage.”
In Australia, Toll Global Express sales revenue grew 8.4% to $822 million, although profits weredown 7.9% at $74.9 million. The EBITA margin fell to 9% from the previous year’s 10.5%.
The domestic operations increased revenue, after excluding the impact of fuel surcharges, “despite a continuation of difficult operating conditions”. The company said margins declined as “growth from new or existing customers and up-rates were not sufficient to offset cost increases anddown-trading by some smaller customers”.
The company’s Toll IPEC express business saw revenue growth, year on year, particularly in theQueensland and Western Australian markets with revenue growth from the mining and resource sector.This offset flat conditions in the consumer discretionary sector, the company said. However,margins were affected by depot capacity constraints in New South Wales and Victoria thatcontributed to increased handling costs, although the company claimed these effects were offset bypick-up and delivery efficiencies, including ongoing fleet replacement programmes.
The Toll Priority express parcel and document business saw revenue growth from its larger, loweryielding customers. However, growth from existing customers and new business was not sufficient tooffset the impact of cost increases.
The metropolitan courier and express business Toll Fast “produced earnings largely in line withthe prior corresponding period as volume growth largely offset pick-up and delivery cost increases”.
Meanwhile, Toll continued with the development of its B2C product, Toll Consumer Delivery. Itsalternative drop point solution with Nparcel (Australian Newsagents Federation) has expanded and issuccessfully operating in Victoria, with New South Wales and Queensland currently beingimplemented. The company said it was on track to have a comprehensive national coverage ofalternative drop points by the end of 2013.
“Consumer feedback has been positive regarding the range of flexible delivery options, whichalso includes ‘customisable’ track and trace and notified delivery windows,” the company said. “Newcustomer revenue is increasing as the end-to-end supply chain solution that the Toll deliverynetwork and technology provides is trialled by traditional retailers and online companies.”
Speaking at today’s announcement of the company’s interim financial results, Toll Group MD BrianKruger claimed the group had “shown the benefits of its strong and diversified business”. He added:“We recognise that all parts of the business will need to retain a strong focus on productivityimprovements and increased efficiency to ensure we maintain our leading position in what remains ahighly competitive marketplace.
“I’m pleased that we’re starting to see the benefit of the recent investments we’ve made infleet, IT and property both in Australia and in our developing international businesses, and wewill continue to target our capital expenditure to grow our returns.”
Looking ahead, Kruger said he was not assuming the external economic environment would get anybetter in the short term, and that Toll’s focus would, therefore, be on “continuing to win businessand improve the things it can control”. But he expected the company’s results for the first sixmonths of 2013 – the second half of its 2012-2013 financial year – to be better than for the sameperiod last year.
