Japan Post takes axe to Toll Holdings jobs

Toll Holdings will reduce its operational business units and slash 1700 jobs in the wake of Japan Post’s writedown.

Japan Post president Toru Takahashi. Picture: Jeremy Piper

Toll Holdings is moving quickly to implement the findings of an ­urgent 100-day strategy review by its new management team that will reduce its operational ­business units and slash 1700 jobs, most in Australia.

In the wake of Tuesday’s announcement by parent company Japan Post that it would book a $US3.6 billion ($4.8bn) writedown on Toll, the Australian group confirmed yesterday that a review had identified target markets for growth opportunities and areas to reduce complexity and overheads.

“We are now focused on ­executing a turnaround in our performance with speed and ­intensity, working closely with our customers and leveraging Toll’s outstanding people and resources,’’ a company statement said.

This week’s revelations add to the history of Japanese companies paying excessive prices for ­Australian assets and being subsequently forced to write down ­values, as occurred with Kirin’s ­acquisitions of the Lion and ­National Foods businesses.

In January, Japan Post appointed ex-Linfox executive Michael Byrne as Toll’s managing director and Telstra chairman and former Asciano CEO John Mullen as executive chairman.

They will now pursue a “One Toll’’ vision for the operations after Japan Post revealed that estimated earnings before interest and tax would be only $69 million in 2017 compared to a budgeted $408m, following EBIT of $266m in 2016.

Toll is believed to have about 25,000 staff in Australia and 15,000 offshore in 50 countries.

Most of the 1700 job cuts are expected to come from the reduced local operations over the next 12 months — 300 head office jobs have been cut this year.

Under a new reporting and governance structure, approval will now be required from Japan Post for Toll to undertake “mat­erial matters’’, while some key group executives will relocate to Australia.

It is understood Japan Post’s global logistics strategy chief, ­Hiroshi Shiraishi, one of the architects of the $6.5bn Toll purchase in 2015, will relocate to Melbourne mid-year to assist with running the company.

Toll has also appointed former Asciano executive and Harvard Business School graduate Saul Cannon as group director, transformation, strategy and M&A and a global search is under way for a chief financial officer.

As foreshadowed by The ­Australian, Toll is cutting its operational business units from five to three. Toll’s businesses will now be grouped as: Australian and New Zealand Domestic Network, ­Global Forwarding and Contract Logistics.

The estimated EBIT for the contract logistics business in the year to March 31, 2017 was $184m, but the global forwarding business booked a loss of $23m. The domestic network business booked a loss of $56m, while ­corporate costs were $36m.

The Toll write-off forced Japan Post into the red last year by ¥4bn ($480m), the group’s first loss since its privatisation a decade ago.

As a result, Japan Post president Masatsugu Nagato and postal unit president Kunio Yoko­yama agreed to return 20 per cent of their six months’ director salaries. Chairman Toru Takahashi, who was president at the time of the Toll deal, will return 30 per cent of his pay packet and be stripped of his representative rights.

Despite the problems, Mr ­Nagato said this week that Toll would remain a core unit for the Japanese group, which was “constantly looking out for other ­acquisitions, including those beyond the logistics sector”.

“The price we paid for Toll was high,” Mr Nagato said. He took over as president in April last year, a year after the Toll deal was ­completed.

“The writedown is intended to wipe the slate clean,” Mr Nagato added.

After the Toll deal, part of Japan Post was floated on the Tokyo Stock Exchange at the end of 2015.

Over the past two years, Toll’s performance has been significantly affected by the sharp fall in commodity prices, a slowdown in the Australian and ­Chinese economies and ­decreased demand and over­capacity in the global freight ­forwarding ­business.

But Japan Post noted this week that the business had also been hampered by Toll’s “inefficient way of managing ­businesses such as multiple (business units) competing with one another to get their own business partners while sales are declining due to the slowdown of the Australian economy”.

It also singled out back-office operations that were not integrated and a non-centralised IT system as contributing to “the high ratio of fixed costs’’.

Japan Post said Toll would invest in core technology platforms to improve customer service and operating efficiency.

The One Toll vision will focus on “customer-centricity, improvement of quality of service, differentiation, and fostering an integrated sales force.’’

The company also said it would concentrate Toll’s operations in “priority regions and businesses and withdraw from unprofitable operations’’.