Japanese express write-down dents Toll Group’s profits

Australian logistics and express company Toll Group saw its profits slump 76% in 2011 as a result of writing down the value of its Japanese express company. The 12 months up to the end of June saw Toll Group’s overall revenue increase 6% compared to the same period a year ago, to A$8.7bn.

But with the problems at Footwork Express, and the write-down of some Australian assets, net profit after tax fell 75.9% to A$71m.

Ignoring the one-off items, the company’s profit would still have fallen, by 6% to $274m.

The company said today it is continuing to review the operations in its Japanese business, which was hit hard by the affects of last year’s earthquake and tsunami.

Commenting on the company’s results, Toll Group managing director Brian Kruger said he was pleased with the performance considering the “difficult market conditions”.

He said the company was now “well placed” to pursue growth.

“While we don’t expect any short-term improvement in external conditions, recent new contract wins combined with our ongoing investment in fleet, property and IT will help us support future earnings growth,” said Kruger.

Express

The year saw Toll Group’s Australian express business performing well in a “challenging” market, with new business countering cost increases. Toll Global Express as a whole saw its revenues up 4% year-on-year to A$2.23bn, but earnings were down 23% to A$131.2m.

Excluding the impact of Japan, Toll’s express division would have seen sales increase 7.1%.

The company said a “subdued” 2012 had seen cost increases and some lower volumes from existing customers offset by contract wins with new customers, such as in the Toll Priority express and parcels segment.

During the year, Toll Group launched a new B2C service for the ecommerce market, through which the company expects to expand its market share with retailers.

Kruger said of the express division: “Toll Global Express continued to deliver strong returns from its Australian businesses despite soft markets in some areas, and also launched its new B2C parcel delivery service to help capitalise on the growing ‘e-tail’ purchases market. A strategic review of the Japan express business continues.”

Logistics and forwarding

Elsewhere, Toll Group achieved a 4.6% growth in its Global Logistics revenues, to A$1.4bn for the year, with a “solid” 12 months for contract logistics despite a weak manufacturing sector, thanks to productivity improvements and some key contract wins in Asia including with Tesco, Coca-Cola and Lego.

Toll Global Forwarding saw its sales down 11.3% compared to last year, to A$1.45bn, with customer volumes shifting from air freight to less premium ocean freight options. However, with carriers reducing their process, the forwarding unit saw its profit margin up a percentage point to 20.4%.

The company’s domestic forwarding business increased its revenue 4.9% to A$1.5bn, benefiting from an acquisition in New Zealand, while its specialised and domestic freight division increased its sales by 10.1% to A$1.3bn thanks to customer wins and cost-cutting measures.