Toll gets profits growth back on track
TOLL HOLDINGS has decided to retain its Japanese freight unit but will pursue strategic alliances with retailers there to help turn the troubled business around.
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 its vehicle distribution business and line-haul and warehousing businesses. Toll also booked a $30 million impairment on its marine logistics business in Asia after a strategic review. Stripping out one-off items, profit rose almost 8 per cent to $1.74 billion for the half.
The under-performing 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.
The chief executive of Toll, Brian Kruger, said he would not pursue a sale of the Japanese business but believed alliances with other companies "may help improve returns".
Toll has also decided to sell more than half of its marine logistics business in Asia. So far it has sold eight of 38 vessels, which 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 warned 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 its Australian workforce.
It also has to find new contracts for its remote logistics business to offset the end to its provision of 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 previous period.
Under Mr Kruger, Toll has put a brake on the aggressive acquisition strategy of his predecessor, Paul Little. While it did not have any significant purchases in the past year, Mr Kruger said "we do continue to investigate opportunities" for bolt-on acquisitions for the global forwarding division.
"[But] we are not relying on acquisitions to improve earnings," he said.