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URL: http://www.cargonewsasia.com/secured/article.aspx?article=18812 |
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March 23, 2009 |
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Toll gears up to expand market share
By Saul Symonds and Ian Jarrrett
Hong Kong, Sydney
Toll Global Forwarding (TGF), a major logistics player in Asia with US$6 billion worth of activity, is ramping up its expansion plans across the region, specifically in China, with a view to grabbing an even greater market share.
"China is absolutely central to our plans. Our strategy is to have an Asian business, and that's about Asian outbound and intra-Asia. China is the lynchpin," Hugh Cushing, TGF's chief executive officer, told Cargonews Asia in Hong Kong.
"We will grow significantly in China. However, it's not so much about opening in more locations, but having a bigger share of the market," he added.
Paul Little, managing director of Toll Holdings, explained in Sydney the services provided by its global forwarding unit. "There isn't a global forwarder of scale based in Asia that can deliver the sorts of services that we are providing with our global forwarding business.''
Toll has been expanding in the region through acquisition, the latest being the takeover of Hong Kong-based BALtrans Logistics Worldwide last year. Toll completed its intergration with BALtrans last month.
Toll will make some marked changes to BALtrans. Cushing said. He explained that BALtrans had been struggling to grow because the company's service offerings did not cover many aspects of the supply chain. "BALtrans was very much in the core traditional freight forwarding services, less in logistics and less in value-added services. So we're using the BALtrans platform to grow and most importantly to grow our range of products and services because that's where you can find market share.
"BALtrans was a bit too Hong Kong and South China centric, so North China will need to be stronger. All the other Asian locations are relatively small at the moment, so we have to grow them as well," Cushing said.
He stressed the importance of technology for the modern logistics market. "We are at a point of some very significant developments in the technology platform, something which BALtrans hadn't gotten around to.
"We started developing this before we integrated with BALtrans. We knew we were going into the space and we knew we had to have the technology. This is building very much on the sort of capabilities we have in the Australian business."
He added that the development is done in-house, and that Toll has a strong capability in that area in Australia through its Toll Solutions business, which specialises in the development of web-based IT platforms.
"In international trade today everything is web-based and all about customers being able to go on to the web," Cushing said.
Toll has not escaped unscathed from the global downturn and still has strong support from investors in Australia. Toll Holdings posted a 33 percent fall in net profit to $104.4 million in the first six months of its fiscal year ended December 31, compared with $156.6 million in the same period the previous year. Underlying net profit was up 11 per cent at $117 million during the period, compared to $105.1 million in the previous year. The first-half result included writedowns of $9.9 million relating to pallet supplier Brambles and $3.3 million relating to Virgin Blue, with Toll disposing its controlling stake in the carrier.
The company expects operations in the second half to exceed those of the first half, "subject to no further material deterioration in key markets'', according to broker Intersuisse.
Toll's Asian-centric focus means that the fortunes of the company have a far greater dependence on the Asian export market than some of its competitors. "Toll won't make acquisitions in the freight forwarding industry in China but we will make acquisitions in the logistics business in the domestic Chinese market," said Cushing.
Cushing said that TGF would love to make an acquisition in India, but it was finding it hard to find a company that controls the freight and has the contacts with the customers.
"Most of the businesses in India are performing on behalf of freight forwarders in Europe or North America and they are the ones who have the relationship with the customers. So we want to make our acquisitions in the destination market more so than in Asia," said Cushing.
Asked about the economic downturn, Cushing said: "It's not giving away trade secrets to say that January and February has been very hard. March will be interesting to see if things stabilise. There's some smart money on the end of the year, but Warren Buffet doesn't think so. I think it's going to be different in different places. I think for Australia that would be an accurate prediction, it's hard to say how resilient the US market will be, and it's hard to see what state China is in."
Little felt that although freight volumes would be impacted by slowing economic growth and conditions would be challenging, the company was well positioned to cope. He said the diversity of the Toll business, combined with a high variable cost base was expected to soften the impact of any global economic downturn.
Cushing said: "I think it would be a difficult time to be a small freight forwarder and most at risk are those who have reached the mid-size who are big enough to be exposed but don't have enough scale to see their way through." |
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