Challenging conditions take bite out of Toll’s profit

By: Brad Gardner


Toll’s first-half net profit falls by 10 per cent.

Challenging conditions take bite out of Toll’s profit
Toll Managing Director Brian Kruger.

 

Tough trading conditions have chipped away at Toll’s half-yearly profits, but the transport and logistics titan stands to benefit from new investments and contracts.

Toll Managing Director Brian Kruger today unveiled the company’s results for the six months to December 31, 2013, announcing a 10 per cent drop in net profits to $176 million.

Kruger says Toll has continued to invest in its businesses despite grappling with challenging economic conditions domestically and overseas, particularly in the resources sector.

"While we have continued to do well retaining key customers and winning new contracts, the competitive environment has maintained pressure on margins," he says.

"Overall, assuming no material change in the external environment we continue to expect underlying earnings before interest and tax for the 2014 financial year to be ahead of the prior year."

Toll’s domestic road freight operations experienced lower volumes due to a drop in discretionary spending and weaker demand in the mining services sector in Western Australia, while its Global Forwarding division is still dealing with difficult market conditions.

But while Toll Express and NQX will suffer a hit with the loss of an Australian Defence Force contract in May this year, the firms managed to renew a number of major contracts with Glencore Xstrata and Rio Tinto.

Likewise, Toll Energy has picked up new contracts, signing long-term deals with Inpex in Darwin and a five-year contract in the Cooper Basin with Santos.

Furthermore, Toll is banking on the soon-to-be-built Toll Ipec facility in Western Australia to deliver efficiency gains.

"This facility will lead to significant handling cost efficiencies when fully operational in October 2014. Planning is well advanced for the development of a similar facility in Melbourne in 2015," the company says.

Toll invested $205 million in capital expenditure during the reporting period, with much of the funds going toward fleet upgrades and depots.

Toll’s decision to launch a new safety campaign in February last year is reaping dividends, with the company announcing a 19 per cent drop in its lost time injury frequency rate for the 12 months to December 2013.

Its total recordable injury frequency rate – the number of lost time injuries plus the number of medically-treated injuries per million hours worked – fell 15 per cent to 16.07 during the same period.

"There were no Toll employee or contractor fatalities in the period," it says.

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