Toll reports 3.7 percent drop in net profit, but diverse interests help offset declines in retail and manufacturing sectors
By Brad Gardner | February 23, 2012
Toll has taken a hit to its bottom line, but has credited its diverse interests for shielding the company from tough economic conditions.
The company today reported a 3.7 percent fall in its net half-yearly profit to $157.9 million.
Toll Managing Director Brian Kruger blamed the firm’s global forwarding division’s drop in earnings on an over-reliance on fashion apparel during what has been poor period for the sector.
“Our exposure to the resources sector as well as the fast growing markets in Asia has helped offset the difficult conditions in discretionary retail and in the manufacturing sector in Australia,” Kruger says.
Toll reported a strong return from its global resources division, citing the Gorgon project, Queensland’s liquefied natural gas industry and the acquisition of Mitchell Corp among a list of positives.
The company says it now has 250 employees working on the Gorgon contract, along with 190 pieces of equipment.
Toll last year forked out around $110 million to buy Mitchell Corp as part of its plan to gain a stronger foothold in the resources sector. The company believes the takeover is paying off.
“Toll Mining Services benefitted from the successful acquisition of Mitchell Corp, boosting its bulk mining footprint in Western Australia, where haulage demand for iron ore is a key driver of performance. The business also benefited from strong performances from existing contracts,” Toll says.
Toll reported growth in almost all businesses under its global logistics banner due to increases in volumes from new and existing customers and growth in its operations in China and India.
It says weak economic conditions continue to affect its domestic forwarding business, while “aggressive competition and lingering weather effects in Queensland led to margin pressure in some businesses”.
Although unable to provide a clear picture on how Toll will perform in the second half of the financial year, Kruger expressed confidence the business is on the right track.
“While the volatility we are all seeing in the macro environment makes it very difficult to have a firm view on the outlook for the remainder of the year, we are confident that Toll is following a strategic path that will provide superior, sustainable returns for our shareholders over the longer term,” he says.
“Our challenge going forward will be to focus on maximising returns from recent capital and acquisition expenditure, and to take advantage of the many organic growth opportunities that we have in Australia and in our chosen overseas markets.”