Transport and logistics firm Toll group does not expect the economy to improve in the short term but still expects to lift earnings.
Transport and logistics firm Toll Group is not expecting a short term improvement in the economy, so says winning new business, improving productivity and cutting costs will be its focus.
Managing director Brian Kruger said there were positive signs in some of Toll’s major markets but, overall, the group’s volumes remained pretty consistent with levels of a year ago.
“We do remain hopeful that with the lower Australian dollar and a supportive monetary policy here in Australia we will see business and consumer confidence improve,” Mr Kruger said.
“But while we need to be ready to service higher volumes, we can’t rely on the market to drive improved earnings in the short term.”
Mr Kruger said stagnant demand had made the market very competitive and had put margins under pressure.
Toll made a net profit of $172 million in the six months to December 31, down 10 per cent on $191 million in the same period a year earlier.
Excluding a $22 million gain from one-off items in the prior corresponding period, its half year profit rose by 1.4 per cent.
Toll expects its underlying earnings before interest and tax (EBIT) for the 2013/14 financial year to be higher than in the prior year.
Mr Kruger said Toll’s revenue in the first half of the financial year was flat, reflecting the end of some major contracts, challenging market conditions and tough competition.
Toll had been unable to fully compensate for the completion of a major contract with the Australian Defence Force in East Timor in February 2013, plus the loss of a major contract with Coles in Queensland.
But Toll had recently secured new contracts with Coca-Cola Amatil, Santos, Inpex, Shell, Mars, General Mills and others, and these would support future growth, Mr Kruger said.
Toll was also seeking to capture more of the growing online retail logistics market, he said.
It was also investing in new freight terminals and depots that would improve productivity and increase capacity for years to come.
Shares in Toll dropped 28 cents to $5.35.