Toll Group considering sale for Footwork Express

Australian firm Toll Group is considering the possibility of selling its loss-making Japanese express delivery company, Footwork Express. The company, one of Japan’s 10 largest logistics companies, has been facing “extremely difficult” market conditions, not least from last year’s earthquake and tsunami devastation.

Toll Group issued a profit warning on Wednesday about “soft” retail market conditions, in which it said it was writing down the value of its Footwork Express business by between AUD $146m and $166m ($144m – $164m USD).

It said despite efforts to improve productivity at the company, Footwork Express is still projected to lose between AUD $5m and $10m in 2012.

“We have seen a deterioration in the performance of Footwork Express,” said Brian Kruger, the Toll managing director who took over from the retiring Paul Little at the start of this year.

Toll Group is now expecting pre-tax earnings to be around AUD $400m to $420m this year, down on last year’s $436m, though this does not include potential write-downs like Footwork Express and some group properties in Australia.

Toll took overall control of Footwork Express in 2009, with the company currently possessing a workforce of around 5,500.

Challenging

The rethink on Footwork Express comes as Toll Group as a whole suffers from a weak retail sector in Australia, particularly with the clothing industry impacting on volumes in Toll Global Forwarding and both linehaul and warehousing operations within the Toll Refrigerated business, part of Toll Domestic Forwarding.

Poor financial performance has also been seen in the Toll Marine Logistics unit, especially in Asian markets.

“We are taking a close look at underperforming businesses and are already undertaking strategic reviews of Footwork Express, Toll Marine Logistics Asia and Toll Refrigerated,” said Kruger.

Kruger added that while progress had slowed because of the “very challenging and volatile market”, the company still saw its global forwarding business as operating in an “attractive sector”.

Toll Group has agreed a sale for its Automotive Australia vehicle distribution business to a 50-50 joint venture between Toll and K-Line Automotive, for around AUD $47m. It said the combed venture would create more of an integrated end-to-end supply chain offering for the automotive sector.