Toll to wield axe on global division
Toll Holdings will cut jobs from its international freight division as part of an effort to shed $50 million in annual costs from the business.
The transport and logistics company has booked a $200 million write-down on its underperforming global forwarding business, which handles sea and air freight, amid a further deterioration in market conditions. It has also stopped pursuing acquisitions for the division.
Toll chief executive Brian Kruger would not say how many jobs would go from the division, which employs 5000 workers worldwide. "We're not shying away from the fact that there will be labour reduction," he said.
Despite the poor performance of that business, Toll has stuck with its guidance for this financial year of between $420 million and $430 million in operating earnings. Shares in Toll closed 10¢ higher at $5.35.
Toll said the $200 million goodwill write-down reflected the combination of weak market conditions for global forwarding and uncertainty over the timing of any recovery.
Conditions had deteriorated over the past six months, resulting in reduced growth and margin assumptions for the division. Toll expects its global forwarding business to post an operating loss of between $4 million and $8 million in the second half.
The company intends to reduce the division's costs by up to $20 million next financial year, and is targeting longer-term reductions of $40 million to $50 million a year.
Mr Kruger said the company was focused on the areas under its control and would drive "cost reductions and productivity improvements even harder".
"For the foreseeable future, our focus will be on driving costs out of the business and we will not look at further acquisitions in the global forwarding market until we are able to demonstrate improved operating performance in this division," he said.
Toll said the non-cash write-down would increase its debt levels by about 2 percentage points, but would not have an impact on its spending program or its ability to pay dividends.
Under Mr Kruger, Toll has put a brake on the aggressive acquisition strategy of his predecessor, Paul Little. Its underperforming Asian marine logistics business and the Japanese venture, formerly known as Footwork Express, have been a focus for management over the past year.