A modest profit, but Toll's ready when economy recovers

Toll scores in Asia, as Paul Little discusses the economic outlook, domestic operations, trading conditions and succession planning

A modest profit, but Toll's  ready when economy recovers
Toll reports modest profit, but ready to strike when economy recovers
By Rob McKay | August 26, 2010

Mirroring the national economic experience, Toll Holdings expects to deal with a two-speed group business - with acceleration likely to come from its Asian operations.

Unveiling a three percent annual net profit rise to $278.9 million, Managing Director Paul Little emphasised the prospective performances of Toll’s Global Logistics, Global Forwarding, Global Express and Global Resources arms in contrast to less exciting domestic outlook.

"We are already enjoying more significant growth rates in Asia that what we are seeing here in Australia," Little says.

Locally, he cast the like of Toll SPD and Toll Express as having "structured themselves to be ready for what will be a reasonably stable environment" to the end of the year.

For the year, the Toll Specialised and Domestic Freight arm recorded earnings before interest and tax of $65.3 million, down from $88.9 million.

However, Little believes Toll is "well positioned" to take advantage of any recovery, though he is careful not to portray it in the retail context as a "rebound", which he described as "a very strong word".

"Conditions now are much more stable than where we were six to eight months ago," Little says.

"The current conditions will prevail between now and the end of this calendar year, putting seasonal peaks to one side. And I think real underlying improvements we will see from early next calendar year."

But even that will be "modest".

Little says many retailers – such as those owned by customers including Woolworths and Wesfarmers – now have inventory levels they are comfortable with and the present situation for Toll is predictable, manageable and stable.

"Whilst Australian businesses were challenged by reduced volumes, economic conditions are expected to show a modest uplift in volumes during the current year," Little says.

One domestic success has been in the resources sector, which Little says the group will look to expand in during the coming year, along with Global Express and Global Forwarding.

For the company, new contract wins with Cadbury, Parmalat, Kmart, Unilever and Rio Tinto have added more than $400 million in revenue.

Some helped mitigate the low vehicle sales volumes that hurt Toll’s Automotive Vehicle Distribution business.

Little played a straight bat to talk of succession planning, saying it is in place among senior management but see no change in the horizon for his position.

"The situation is the same as it has been for any time in the last 20 years for me," he says.

On the Bass Strait trade, Little says the link with ANL "was the right move to make", not least due to a reduction in northbound cargo from Paperlinx, Simplot and others.

He believes that, aside from government-owned ferry operations, the market can support two shipping firms and that any new entrant using Bell Bay, as Agility proposes, is likely to fail.

"Over the years we have seen three come and that has rationalised back to two," he says, pointing out that ANL had tried for many years to make Bell Bay work.

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