Toll rumours intensify

Toll group

Rumours around Japan Post and Toll are increasing. News sources in both Japan and in the West are now making clear statements that Japan Post is preparing to sell its Australian subsidiary.

The Nikkei Asian Review, which is Japan’s leading business publisher, quotes a “Japan Post executive” saying, “the sale must be considered separately for each business”. The report implies that Toll Group is likely to be broken-up quoting what it calls “a financial expert” who speculates “whether the troubled Australian company can find buyers, and there is some unease that a reorganization can proceed as expected”.

Japan Post’s experience with Toll Group has not been a happy one. Purchased in 2015 for AUD6.5bn, Japan Post wrote down much of the value of the former Toll Holdings in 2017. Financial transparency at Japan Post or Toll Group is not perfect, with the Toll Group now consolidated into the ‘Japan Post International Logistics’ division. However, for the last quarter reported, the division saw falls in revenue of 17% and operating profit was negative by ¥2.5bn, a situation that more or less reflected its experience over the year.

It appears that Toll has been hit hard by the crisis, however, its Australian businesses are said to have been stressed with its express business possibly losing money. Its freight forwarding business is also said not to be prospering, however, firming up any of this is difficult due to the paucity of numbers.

Bearing in mind the potential for growth in both Australia, but more so in the South East Asian region, Toll Group ought to be attractive. However, one of the problems it faces is that some of its businesses lack economies of scale at the regional level. The express business could be attractive to both the larger global and regional players but more likely to Chinese express companies, although this could be politically controversial. Other Australian businesses also should be attractive, although the home-delivery business is said not to be profitable. In present conditions, however, pricing a sale will be challenging.

Source: Transport Intelligence, August 13, 2020

Author: Thomas Cullen