Toll cost cutting success sees profits soar

Toll Group’s savings and efficiency effort have paid off, its annual results show.

The company reported a sharp rise in net profit after tax attributable to shareholders, which leapt 239 per cent and more than $200 million to $286 million, despite sales revenue barely rising more than 1 per cent to $8.8 billion.

"Restructuring and cost improvement initiatives together with new contract wins more than offset the generally challenging market conditions experienced during the year," the company says.

Given the continuing challenging business environment and the success of its moves so far, the company pledges to continue down the same path with a view to an additional $40-$50 million in savings.

"Cost reduction programs across the Group started to deliver a lower cost base," managing director Brian Kruger states.

"Our ability to implement these types of programs has been facilitated by a realignment of our core operating divisions, improved labour productivity, lower handling and linehaul costs and a Group focus on driving continuous improvement and innovation.

"While we have seen the benefits of recent investments in our core Australian businesses in improving our cost base, we recognise that a continued focus on productivity and efficiency is necessary in the current environment to drive earnings growth.

"A highlight of this result was the strong free cash flow of $355.1 million generated by the Group, a $126.1 million increase on the prior year.

"The balance sheet remains strong, with gearing (net debt to net debt plus equity) at 31 per cent ensuring sufficient balance sheet capacity to fund a range of growth initiatives."

Kruger highlighted recent investment is fleet and depots with a view to what Toll expects  to be  "a strong demand for logistics services in Australia in the medium and long term".

Amongst the divisions, Toll Global Logistics performed well, with revenues up nearly 7 per cent, the company noting that Nationwide Transport Logistics buy had strengthened the Contact Logistics Australia arm’s position in over dimensional and heavy haulage services "over multiple industry sectors".

Also on the road, Toll Ipec took a hit from Victorian retail softness and a decline in resources-related Western Australian time-sensitive freight, while Melbourne and Sydney depots suffered capacity issues.

While the domestic forwarding arm was in the black, it was also busy with contract gains, including Big W, Fisher & Paykel, Best & Less and Mars Petcare, along with the Linfox Trans Bass acquisition, and losses such as Coles far north Queensland.

Specialised and domestic freight revenues were down marginally as it looks for gains from new fleet, the expanded Sydney depot and new work for Compass in Queensland and Westrac in NSW.

Meanwhile, Toll Liquids had the new Shell national contract and the Origin Energy gas contract to crow about.

On its energy use, the company says it is "increasing the use of alternative fuels, such as natural gas electricity and biofuel, across our operations, where possible" and "assessing vehicle aerodynamics fluid dynamics, lightweight materials for our fleet" along with the application of environmentally sustainable designs in existing and new facilities.

Despite that, fuel, oil and electricity costs continue to rinse, from $375 million to $392 million.


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