International business and the resources sector bolster pleasing result
By Rob McKay | February 24, 2011
Toll Group’s first-half net profits soared 53 percent to $164 million, carried by its international business and exposure to the domestic resources sector, the company revealed today.
Revenues for the period were up 28 percent to $4.24 billion.
Toll has $1.5 billion in debt maturing in the next three years but holds $539 million in cash and has access to $849 million in existing financial facilities.
Managing Director Paul Little put organic growth at 7 percent.
“We have delivered growth both organically and through acquisition in a period of economic and environmental challenges,” Little says.
“Our Australian businesses demonstrated again why they are leaders in their segments with strong results in a difficult market.
“The Australian FMCG [fast moving consumer goods] and industrial segments remain impacted by the global downturn and reduced consumer confidence, while some businesses had earnings affected by natural disasters.
“After another year of growth, Toll’s Global Forwarding division is now just outside the world’s top 10 generating revenue for the half of $901 million.
“As we predicted, it is achieving improved margins with both air and sea volumes growing strongly over this period.
“Toll Global Resources has been an excellent performer with revenue rising 7 per cent to $371 million and first half earnings topping $50 million for the first time.
“The strength of Toll’s presence in the resources sector has proven to be a real advantage for the company through the global financial crisis.”
Toll Specialised and Domestic Freight
This local arm saw a rebound in volumes in some market segments such as the resource sector in Western Australia and Queensland, whilst the retail and manufacturing sectors were quite flat.
Toll Transitions gained from the expanded scope of a contract with the Australian Department of Defence.
Gross revenues were up 8 percent to $45.1 million.
NQX had a strong half with increased earnings as a result of improved volumes from the Queensland resource sector and customers that are themselves suppliers to the resource sector.
Toll Express has focused on integrating volumes from the Concord Park acquisition.
“While the half saw margins slow to benefit from integration synergies, margins are expected to improve in the second half of the financial year,” Toll says.
“Both NQX and Toll Express continue to invest in information technology, fleet and depot redevelopment.”
Toll Domestic Forwarding
There was improved trading in most businesses here, partly offset by the impact of natural disasters in Christchurch and Queensland and the loss of the Coles business in Managed Transport Services in the previous corresponding half.
Earnings fell 15 percent to $37.2 million on weather-related issues including lower produce volumes, site relocation costs, and the closure of the PaperlinX plants in Tasmania.
Against that, Toll SPD and QRX both increased revenues and improved earnings. QRX had a strong six months, despite the pre-Christmas Queensland floods.
Site relocation costs and poor produce volumes from far north Queensland hit Toll Refrigerated earnings.
Significant contract renewals for QRX and Toll Refrigerated included Woolworths and Coles.
Toll Shipping and Toll Tasmania suffered from customer closures and market impacts reducing northbound volumes but there were contract renewals for Fosters, Cadbury, OneSteel, Unilever and Nyrstar-Glencore.
Toll Global Logistics
Earnings internationally fell 4 percent to $43.7 million due in part to the sale of Italian outfit Pacorini.
The re-branding of ST-Anda Logistics China as Toll Global Logistics was completed during October while, in November, the China business was awarded “Best 3PL Supply Chain Provider in Asia” by the Global Supply Chain Council for its innovative work.
“The acquisition Truck Gleam (Australia) was starting to deliver significant cost synergies across asset and back office infrastructure within the Australian Automotive business,” Toll says.
Significant long term contract wins and renewals were concluded during the period, including with Coles, Woolworths, Ford Motor Co, GM-Holden Vehicle Distribution, Nike (Australia), Johnson & Johnson, SC Johnson (China), Unilever (Singapore) and Proctor and Gamble (India, Vietnam and Indonesia).
Toll Global Forwarding
The international forwarding arm repaid the faith the company put in this sector, with earnings up 232 percent to $24.6 million.
Ocean freight volumes had grown about 150 percent to around 260,000 teu for the six months to December 2010 compared with the prior corresponding period.
“While this has mainly been driven by the significant trans-Pacific volumes of Summit, a pleasing growth of over 10 percent in Toll Global Forwarding’s underlying volumes was also achieved,” Toll says.
“In recent months new volumes from Asia to UK have also been delivered from WT Sea Air, albeit activity in Europe saw significant weather disruptions late in the period.
Airfreight volumes had grown by around 40 percent to more than 75,000 tonnes for the six months to December.
Genesis and WT Sea Air in UK have contributed the majority of this increase.
Contracts secured or retained during the period include Caterpillar, New Balance, Levi, Bendon, Rebel Sports and Bradken.