Toll eyes Aust Post parcel market

26 Oct 2012, 4:36 pm   -   Source: AAP
Toll is looking to take on Australia Post for a greater share of the parcel delivery business. (AAP)

Toll is looking to take on Australia Post for a greater share of the parcel delivery business. (AAP)

Toll Holdings wants a much greater share of the parcel post market, which is dominated by Australia Post.

Transport and logistics firm Toll Holdings is looking to take on Australia Post in a bid to grab a greater share of the fast-growing parcel delivery business.

Toll managing director Brian Kruger said on Friday that the company would be increasing the size of its Toll Consumer Delivery business, which at the moment has relatively small operations.

Mr Kruger said the size of the parcel delivery market in Australia was worth around $550 million this year.

"That's the spend on the logistics task," Mr Kruger told reporters after the company's annual general meeting in Melbourne.

"At the moment, we've probably got about six or seven per cent of that market.

"Australia Post has the lion's share of that.

"Our goal is to grow that very quickly. The nice thing about it is that it's a rapidly growing market."

He said the market had grown by around 25 to 30 per cent over the past few years as consumers bought more goods over the internet.

Mr Kruger said Toll hoped to differentiate its service from that of Australia Post's by emphasising Toll's rate of successful delivery, which he said was over 90 per cent.

Upscaling the parcel delivery service would not require a large investment given that Toll already had an extensive network of depots and a pick-up-and-delivery fleet that handled business-to-business freight.

The biggest investment - around $10 million - would be required for the technology, such as hand-held information devices for drivers, to run the business.

Mr Kruger said the margins that Toll would get on every extra piece of freight were very good.

Toll says the service will deliver goods door-to-door, or alternatively, to a local newsagent.

"Ultimately, what we're working on with the newsagents' groups is to end up with about 3,000 alternate delivery points or alternate pick-up points that we an use for Toll freight."

Toll told shareholders that it still expects to increase earnings this financial year despite weaker economic conditions affecting some of its businesses.

Mr Kruger said conditions in the manufacturing and retail sectors remained tough, creating some margin pressure for parts of Toll's operations.

Toll's global forwarding business was also challenged by sluggish discretionary retail sales in Britain and the United States.

Mr Kruger said there was no sign of any rebound in the domestic or overseas retail sectors, and the slowdown in mining activity in Australia would also have some impact on Toll.

However, the parts of Toll's businesses that were exposed to oil and gas project construction activity in Australia were doing well, and benefits were flowing from the group's capital investment program.

"So, at this stage, we still expect to deliver an improved underlying earnings result in the current financial year, compared with last year," he told shareholders.

In August, Toll booked a 77 per cent fall in full-year profit to $64.6 million, due to writedowns on some assets in Australia and to its Footwork Express delivery service in Japan.

Mr Kruger said Toll was still reviewing Footwork Express and its underperforming Marine Asia shipping business and it was too early to say if more writedowns would follow.

Mr Kruger said Toll may be able to provide an update on the reviews early in 2013.

Toll also said on Friday that former Toll managing director Paul Little, who was Mr Kruger's predecessor, may join the Toll board some time next year.

Mr Kruger said he would be more than happy to see Mr Little on the board.

"We've got a very good relationship, and we still talk reasonably regularly," he said.

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