Toll says conditions remain challenging

23 Feb 2012, 4:41 pm   -   Source: AAP
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Toll says strength in resources activity and Toll's ability to win new contracts have offset weakness in the retail and industrial sectors.

Transport and logistics group Toll Holdings expects economic conditions in the Australian retail and industrial sectors to remain challenging.

Toll, which in past years has been highly acquisitive, also said it would spend about another $200 million on small acquisitions to continue to add scale to its global forwarding division, then "hit the pause button".

The company on Thursday posted a net profit of $157.9 million for the six months to December 31, 2011, down 3.7 per cent on the prior corresponding period's $163.9 million.

Toll managing director Brian Kruger said earnings in the prior corresponding period were skewed by a one-off $15 million gain in Toll's Footwork Express business in Japan.

He said that excluding this gain, Toll's underlying result for the period had risen.

Toll's exposure to the strong resources sector and fast-growing markets in Asia had helped offset difficult conditions in the retail and manufacturing sectors in Australia.

Mr Kruger said the near-term outlook was clouded by economic volatility.

"We're seeing nothing to suggest the Australian retail and industrial sectors will not remain challenging," he said.

"However, as was evidenced by today's results, the strength in resources activity and our ability to win new contracts have more than offset those two sectors of the market."

Toll would maintain its strategy of focusing on growth in target markets, with the key goal of lifting returns on capital employed.

Mr Kruger said Toll was still committed to building the size of its global forwarding division.

"However, once we achieve our short-term scale goals through additional bolt-on acquisitions that will see our total invested capital in this business at about $1 billion, there will be a pause in further acquisitions until we are delivering acceptable returns," he said.

In the first half of the 2011/12 financial year, Toll's revenue rose in all of its six divisions except for global forwarding, where activity was affected by weak global markets and revenue pulled back by falling freight rates.

Toll said the global forwarding division's result was disappointing.

The division's performance had been hurt by its high exposure to apparel markets in Australia, the United States and Europe.

Mr Kruger said that tough conditions in the global forwarding division were expected to persist in the second half of the 2012 financial year.

"But we should see the benefits of actions taken to improve the cost base reflected in the bottom line," he said.

Shares in Toll were 14 cents higher at $5.33 on Thursday.

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