TOLL TO WIELD AXE ON INTERNATIONAL (IMPORT / EXPORT) ARM
Thursday, June 27, 2013
Toll Holdings says there will be job losses within its international import export freight division as part of an effort to shed $50 million in costs from the business annually. Chief executive Brian Kruger would not say how many jobs would go but acknowledged the division, which employs 5,000 workers worldwide, was a ''significant employer''. ''We're not shying away from the fact that there will be labour reduction,'' he said. The company will book a $200 million write-down on its under-performing global forwarding business which handles sea and air freight, amid a further deterioration in market conditions over the last six months. Despite the poor performance of that business, the transport and logistics company has stuck with its guidance for this financial year of between $420 million and $430 million in operating earnings. Toll shares opened 2.5 per cent higher at $5.38. Toll said the $200 million write-down in the goodwill of the division reflected the combination of weak market conditions for global forwarding and uncertainty over the timing of any recovery. Market conditions had deteriorated over the past six months, resulting in reduced growth and margin assumptions for the division. Toll expects its global forwarding business to post an operating loss of between $4 million and $8 million in the second half. The company intends to reduce the division's costs by up to $20 million next financial year, and is targeting longer term reductions of $40 million to $50 million annually. Mr Kruger said a large part of those costs were labour. In a shift from its previous mantra of pursuing ''bolt-on'' acquisitions, Toll will not make any further purchases in the global forwarding industry until the division improves its performance. Toll chief executive Brian Kruger said the company was focused on the areas under its control, and would drive ''cost reductions and productivity improvements even harder''. ''For the foreseeable future, our focus will be on driving costs out of the business and we will not look at further acquisitions in the global forwarding market until we are able to demonstrate improved operating performance in this division,'' he said in a statement to the ASX today. Toll said the non-cash write-down would increase its debt levels by about 2 percentage points, but would not impact its spending program or its ability to pay dividends. Under Mr Kruger, Toll has put a brake on the aggressive acquisition strategy of his predecessor, Paul Little. Its under-performing Asian marine logistics business and the Japanese venture, formerly known as Footwork Express, have been a focus for management over the past year. Toll decided early this year to retain its Japanese freight unit but revealed that it will pursue strategic alliances with retailers there to help turn the troubled business around.
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