Resources, energy and specialised freight businesses lead the way for Toll Group, Brian Kruger tells his first AGM as Managing Director
By Anna Game-Lopata | October 26, 2012
Resources, energy and specialised freight businesses lead the way for Toll Group, Brian Kruger tells his first AGM as Managing Director
Kruger today announced a 6 percent increase in revenue for the Group, from $8,225 million last year to $8,707 in 2012.
However earnings before interest and tax fell 6 percent from $436 million to $ 411 million and net profit after tax fell a disasterous 76 percent from $295 million to $71 million this year.
In part, the company blames
write-downs of investments in the Japanese business and some property assets for the weaker result as well as overall challenging conditions that prevail.
Kruger today admitted to shareholders former Managing Director and industry icon Paul Little, who retired early this year,
is a hard act to follow.
However he says customers have aided the transition and praises exciting new business opportunities left by Little and along with a
strong balance sheet capable of pursuing them.
Little, who has been taking a break from responsibilites at Toll is expected to take up a position on the board from mid next year.
Kruger
points to the success of Toll Global Resources and Toll Energy which both had a strong year. Toll Global Resources achieved a 41 percent increase
to revene to $1,107 million and a 16 percent increase to profit to $103 million.
“The acquisition of Mitchells, and integration into the Toll Mining Services business has gone very well,” Kruger says. “As we’d expected, the acquisition has also driven some new contract wins in the iron ore sector in Western Australia.”
Toll Energy’s growth was mainly driven by the increasing activity for Chevron’s Gorgon project on Barrow Island and by new contract wins associated with a number of gas processing construction projects in Queensland.
“We’re thrilled with how the redevelopment of our oil and gas supply base in Singapore progressed this year,” Kruger adds.
“We’ll complete this project early next year and it will be a consistent contributor to the Group’s earnings in the future.”
Meanwhile, as flagged to the market in May,
the Toll
Marine business in Asia has not performed up to expectations. Kruger says the company
is currently undertaking a review of options for restructuring that business.
Revenues in the Toll Specialised and Domestic Freight division rose more than 10 percent to $1,322 million while operating earnings were up 22 percent to $88 million.
Kruger says strong volumes from the resources sector, together with a number of cost savings and yield improvement initiatives drove very strong results for both Toll NQX and Toll Express.
“We have continued to invest in this division in terms of IT, fleet and new, larger depots,” he says. “We expect these investments to drive further growth in this part of the business.”
With a 5 percent increase to revenue to $1,420 million and a 2 percent profit increase to
$93 Kruger describes Toll Global Logistics’ result as solid, especially given the tough market environment in which its businesses operate.
“This division continues to generate new customers both in Asia and Australia,” Kruger says.
“That has certainly helped offset the impact of lower volumes from some of our manufacturing customers and the impact of increasing costs in some of our Asian markets.”
Toll’s Automotive business generated an improved result driven by both higher finished vehicle volumes and new components contracts.
During the year the company sold its finished vehicle logistics business into Toll’s 50 percent owned Joint Venture – PrixCar.
“This will enable the JV to offer an end-to-end service to vehicle importers while reducing our exposure somewhat to the local vehicle manufacturers. So we think this really is a great outcome both for Toll and PrixCar,” Kruger says.
Toll Global Forwarding suffered an an 11 percent drop to revenue
to $1,451 million and a 39 percent dip in profit to $21 million.
Kruger says despite the weaker results there has been good progress in a number of areas.
“These include successful completion of upgrades of facilities on the west coast of the US, the completion of the integration of UK businesses, the finalisation of the establishment of our sales teams and the continued rollout of a uniform freight management system,” he says.
“While we’re hopeful of a recovery in end markets, all of those things will be contributors to improving earnings.
“And while not reflected in Toll Global Forwarding’s results, our ability to provide an international forwarding service was a key factor in some new customer wins where the customer is also using the services of other parts of Toll.”
Kruger confirms the Toll Group’s commitment to its long term strategy of building a successful Global Forwarding business.
“We are convinced that, as global trade continues to grow, particularly in and out of Asia, this is the critical part of Toll’s overall service offering.
“We are working extremely hard on the things within our control and making sure we are well positioned when the market eventually turns.
“This is an opportunity of great importance to Toll and one we are determined to make work.”
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OUTLOOK
Kruger promises increased underlying earnings in the coming year despite continuing challenging conditions.
“While some of our manufacturing and discretionary retail customers in Australia are doing OK, it’s fair to say that those two sectors remain pretty tough and, that is creating some margin pressure for some of our businesses,” he says.
“The sluggish discretionary retail sectors in the UK and the US are also continuing to make things challenging for our Global Forwarding business.
At the moment, apart from the normal build-up as we head towards Christmas, we’re not seeing any material rebound in the discretionary retail sector either here in Australia, or in our key offshore markets.”
Kruger says the slowdown in mining activity in Australia will have some impact on those parts of our business exposed to that sector but does not expect
it to have a material impact on the Group.
On a positive note, Kruger says Toll is continuing to see strong results from those parts of its business exposed to the oil and gas project construction activity around Australia.
“We’re also confident that some of our new business opportunities and the benefits from our capital investment program will deliver improvements this year and beyond.”