Singapore-headquartered Toll Group is ready for acquisitions, most of all in Asia, CEO Thomas Knudsen tells WPO. Owner Japan Post seeks accelerated expansion and plans may materialize over the next 12 months.
Toll Group, the Australian logistics company with growth ambitions in Asia, is ready to acquire new assets within the next 12 months, reveals company CEO Thomas Knudsen in an interview with WPO.
Knudsen joined the Toll group in 2018 with a clear mandate from its Japanese owner, Japan Post, to restructure the company organizationally and financially, and in relation to that, boost the Asian part of the business.
The company, which was mentioned as a potential acquisition candidate for DSV a couple of years ago, has traditionally had around 80 percent of its business in Australia, especially on the far-reaching highways.
We would like Asia to make up more than 50 percent within 3-4 years
THOMAS KNUDSEN, CEO, TOLL GROUP
But this has already changed, for instance due to Toll selling off subsidiary Global Express, which had activities in Australia and New Zealand, in particular. Today, Australia takes up half of the business. And as the finances after a couple of struggling years appear more solid, Knudsen can – with approval from the Japanese owner – begin looking at acquisition options.
Here, Asia is of particular interest, and the focus will be directed toward assets within logistics as a starting point, explains the top exec, who sits in the new headquarters, Toll City, in Singapore.
Asia to make up 50 percent
”We would like to grow in order to get a more balanced geographical coverage in our business. We would like Asia to make up more than 50 percent within 3-4 years,” says Knudsen, who points to Vietnam, India and Indonesia as possible areas for expansion.
Growth in recent years has most of all occurred organically as the company finances were brought back on track, however, with the most recent development, in which Toll has benefited from the red-hot container market as well, the options have changed.
Turnaround allows acquisitions
Japan Post bought the Australian logistics firm Toll Group in 2015, and the past two years have provided a financial turnaround, making acquisitions an option.
For the first months of the financial year, which ran until April 1 this year, Toll had a revenue of AUD 6.4bn. EBIT landed at AUD 277m against a minus in December 2020 of AUD 10m and a deficit in December 2019 of AUD 78m.
Both the Australian and Asian activities have shown progress in the first nine months of the financial year.
”We need to find out whether we have to start looking at actual acquisitions in order to reach our goal. It will happen within the next 12 months,” he says, adding:
”“While our focus is on organic growth, and we’re investing the region to achieve this, we’ll consider strategic acquisitions that expand our opportunity to grow. Any acquisition will need to tick all the right boxes – it needs to complement our core business, improve our service offering to customers, and align with our goal of creating long-term, sustainable growth in Asia.”
Toll Group’s deficit grows to almost half a billion dollars
Within freight forwarding, the sea freight business has especial weight with transportation of 550,000 teu annually, however, if it was up to Knudsen personally, Toll would have to reach 1 million teu in order to compete with the big players. It is first and foremost on the Pacific Ocean and Asia-Australia – and, to a slightly smaller degree, intra-Asia – that Toll has its market.
Big interest in logistics
With the potential acquisitions statement, Toll prepares to enter a market already characterized by a large interest in growing, not just for expansionist logistics firms like DSV, but also for major container carriers such as Maersk and CMA CGM, which in recent years have made it a specific target to grow within logistics.
According to Knudsen, it is especially Maersk’s more aggressive approach that is felt on the market than it is the French carrier CMA CGM making a difference. No matter what, most agree that the big appetite for logistics activities only push prices upward.
We will consider strategic acquirements providing us additional option to grow
THOMAS KNUDSEN, CEO, TOLL GROUP
To begin with, Toll will probably go after chosen national companies and assets, meaning the company doesn’t have a current ambition to land an acquisition with a similar size as Maersk’s most recent, namely the Hong Kong-based LF Logistics.
Looking at Toll’s financial development since Japan Post bought the company for AUD 6.5bn in 2015, black figures didn’t arrive until 2018, the same year as Knudsen came onboard, followed by red numbers the two following years. In the whole year alone, which ran until March 2020, Toll booked a deficit in the range of AUD 685m.
Toll Group will present its annual figures for /2022 in the near future, and the three first quarters have provided an indication of the development as the operating result landed at AUD 277m.
