Domestic businesses hold line for Toll

Specialised and Domestic Freight division performs strongly, backed by resources sector

Domestic businesses hold line for Toll
Domestic businesses hold line for Toll

By Ruza Zivkusic-Aftasi | August 27, 2012

Toll’s domestic operations helped keep the company in the black, despite a plunge in overall net profits for the 2012 financial year.

Its Specialised and Domestic Freight division saw organic growth, new customer wins and the implementation of cost improvement programs and yield management initiatives, the company says.

Gross earnings for the division were up 21.6 percent at $87.7 million on revenues that grew 10.1 percent to $1.3 billion.

The division had been helped by investments in IT and cost management initiatives.

Exposure to the Queensland resources sector had allowed NQX to perform well, renewing several contracts, including with Caterpillar, during the year.

Continued margin pressure within the interstate linehaul and warehousing segments has seen the sale of Toll Refrigerated.

The sale, along with warehousing business and the launch of Toll’s new B2C parcel delivery service, delivered positive results for the Global Express division, resulting in new traditional and online retail customers.

Toll’s market share is expected to increase in this division through its delivery network and innovative solutions, Toll Group Managing Director Brian Kruger (pictured) says.

"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," Kruger says.

Toll Domestic Forwarding has produced a solid underlying result despite "flat industry-wide volumes", he adds.

"Recovery in its Tasmanian shipping business was largely offset by losses in its Australian refrigerated interstate linehaul and warehousing operations, which were sold in July.

"We saw a strong result for our Toll Specialised and Domestic Freight Division, with growth in revenue, earnings and returns generated by increased resource sector activity, contract wins and cost improvement programs."

The Domestic Forwarding Division delivered a slight negative return, with revenue up 4.9 percent to $1.15 billion but gross earnings down 7.5 percent to $56.7 million.

Highlights included new customer contracts such as Fosters, Retail Adventures and Mars, including the acquisition of New Zealand transport company Northern Southland and improved earnings from Toll Shipping.

Toll plans to pursue organic growth and productivity improvements in the coming year, including bolt-on acquisitions, Kruger says.

Toll’s mining services have performed well, especially due to the acquisition of Mitchell Corp and the investment in new equipment and technology, which has seen its operations grow at the Wesfarmers’ Curragh Mine and Orica operations in New South Wales.

Toll Contract Logistics has also recorded a solid year despite margin pressures in the weak manufacturing sector due to reduced industrial activity.

It has successfully renewed its contracts with Coles and National Foods.

It has been a positive year for the Automotive Logistics Services which has seen a strong recovery in both revenue and earnings growth due to new customer wins and a recovery in earnings.

Toll IPEC has delivered growth, driven by expansion into non-traditional markets and attracting resources in the IT and agriculture sectors.

The company’s NQX has also seen a positive year, performing well due Queensland’s strong resources sector, with Queensland LNG developments expected to provide further opportunities.

Toll Express volumes have dropped due to shedding lower yielding freight.

This had resulted in improved margins bolstered by cost saving initiatives and synergy benefits from the Concord Park acquisition.

The implementation of IT systems in both Toll NQX and Express "will result in a differentiated service offering for customers within the less than full load freight sector", the firm says.

Toll Liquids has also seen a positive year due to a continued focus on improving individual performance and winning the Woolworths fuel distribution work in Victoria, which commenced last year.

Contract renewals have also been secured for United and Origin.

Toll does not expect the carbon pricing to impact its finances but will continue to introduce measures to reduce the intensity of greenhouse gas emissions.

"All of Toll’s Australian business units have adopted the Smarter Green Program and have developed plans to improve energy efficiency and reduce emissions," the company says.

With 160 improvement projects on the way, the program will be rolled out across overseas operations, it adds.

"Reductions will be achieved through a combination of fleet upgrades, better fleet utilisation, improvements in driver behaviour and gains in the energy efficiency of facilities along with a range of business unit specific abatement initiatives."

Describing the 2012 financial year as "a little mixed", Kruger says a number of businesses have struggled due to challenging markets.

"However, many of our businesses continue to perform extremely well and have some exciting opportunities in front of them and with balance still in great shape we are very well positioned to take advantage of those opportunities as their arise."

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