Reports are emerging of losses at Japan Post Holdings driven by large write-downs at the Toll Holdings division. Although the Japanese mail provider has not yet published accounts in English, news from Tokyo states that the Japanese company is looking to reduce its estimation of the value of Toll Group by ¥400bn (US$3.6bn).
Further reports suggest that the effect of this write-down will be a loss of ¥40bn for the whole Japan Post Group in financial year 2016.
The problem at Toll is rumoured to be reflective of problems in the Australian raw materials economy. Toll has considerable exposure to the handling of coal, iron ore, oil and gas as well as other types of mining operation, sectors that are under intense pricing and volume pressure. Similarly, agriculture has experienced a major downturn. The impact on the Australian road freight sector is substantial as raw materials play an outsized role in driving demand. However, Toll’s other businesses are also affected by the downturn in commodity prices as capacity shifts into neighbouring sectors of the logistics economy.
It is also quite possible that Toll’s freight forwarding operation across South East Asia has been affected by the hostile climate in the sector, although the underlying demand for other logistics services across the region is generally respectable.
Although Toll has exposure to global markets, its core business are in Australia and South East Asia. These regions have good economic prospects and Toll’s position in the market is frequently impressive.
The underlying problem that Japan Post may be facing is the price that it paid for Toll. Paying AUS$6.5bn (US$4.9bn) was generous for a company that often experienced volatility in its earnings. There is also a possibility that a very large, formerly state-owned Japanese mail and banking conglomerate has struggled to integrate and manage a Toll Group, which itself is a complex animal.
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Source: Transport Intelligence, April 25, 2017
Author: Thomas Cullen
