Toll relies heavily on Australian businesses

Its Australian earnings through FY2012-13 may have been ‘solid’, but Toll has not been immune from the general inertia in global logistics markets.

Toll’s total revenue was more or less flat at A$8,719m. However, EBITDA was up 3% at A$703m, although exceptional items, the largest of which was goodwill impairment on Toll Global Forwarding, depressed net profit after tax to A$92m.

The contract logistics business, Toll Global Logistics, saw results complicated by the divestment of its Australian finished vehicle logistics business leading to a fall of A$200m to A$1.267bn, yet the fall in profits was modest with EBITDA falling by around 4% to A$89m. Existing customers have seen weak volumes and markets in South East Asia have been weak generally, but Toll Global Logistics managed to balance this by winning new business.

Toll Global Forwarding bid not fare so well. Revenue was up 4% year-on-year to A$1.5m, but EBITDA crashed to A$6m from A$21m. Volumes declined, whilst the company said “Gross profit margin decline reflects an extremely competitive environment”. In contrast, the domestic forwarding business saw EBITA up over 10% on slightly falling revenue.

Toll Global Express saw a rise of just a few percent in revenue, but margins were squeezed with EBITA down by 4% at A$131m. The Express business in Australia was not immune from the global trend of customers trading-down to lower cost services, although Toll management were excited by the growth of its B2C e-commerce business.

Toll Specialised & Domestic Freight did well with EBITA up over 10% at A$101m on slightly higher revenue, whilst the mining logistics business, Toll Global Resources edged higher to A$108m EBITA.

The concerning aspect of these results is the continuing problems at the global freight forwarding business which threatens an important aspect of Toll Group’s ambitions outside Australia. Contract logistics appears to be getting a grip on profitability, but Toll still relies on its Australian stalwarts to deliver both profits and growth.