Toll to keep its Japanese freight unit

TOLL Holdings has decided to retain its Japanese freight unit but will pursue strategic alliances with retailers there to help turn around the troubled business.

The transport and logistics company posted a 21 per cent rise in net profit to $192 million for the first half, which met market expectations. Toll is forecasting stronger earnings in the second half but remains cautious about the fortunes of the Australian economy.

The half-year result included a $22 million boost from the sale of Toll's vehicle distribution business and a line-haul and warehousing businesses.

Toll also booked a $30 million impairment on its marine logistics business in Asia following a strategic review.

Stripping out one-off items, profit rose almost 8 per cent to $174 million for the half.

The underperforming Asian marine logistics business and the Japanese venture, formerly known as Footwork Express, have been a focus for management over the past year.

Shares in Toll rose 4 per cent to a nine-month high of $5.85.

Toll's chief executive, Brian Kruger, said he would not pursue a sale of the Japanese business but believed it could seek strategic alliances with other companies that "may help improve returns".

"We do have the time to make sure we implement the right option," Mr Kruger said.

Toll has also decided to sell more than half of its marine logistics business in Asia. So far it has sold eight out of 38 vessels that are mostly loss makers. It will retain 33 vessels it deems profitable.

The company expected earnings in the second half to be stronger than the same period last financial year. But it cautioned it was "not assuming any improvement in the external economic environment", which meant it would rely on "organic growth and internal productivity".

Mr Kruger said Toll faced a "few challenges" in the second half including renegotiating agreements with the Transport Workers Union covering about half of its Australian workforce. Toll also has to find new contracts for its remote logistics business to offset the end to its work providing services for Australian troops in East Timor.

The company will pay an interim dividend of 12.5¢ a share on April 2, up 1¢ on the prior period.

Under Mr Kruger, Toll has put a brake on the aggressive acquisition strategy of his predecessor, Paul Little.