Toll's gloomy view on the Japanese market, where it owns the Footwork Express trucking business, contrasted with forecasts that Japan's economy bounced back from a year-end dip to expand 0.9 percent in the first quarter.
"It's absolutely the softness in the Japanese economy," Toll Managing Director Brian Kruger said, pinpointing the source of the company's profit warning.
"It's not like we've been losing market share. It's really just been softness in our customers' markets, much above what we had expected," Kruger told reporters on a conference call.
Much of Japan's economic growth in the first quarter was driven by rebuilding of the nation's northeast, ravaged by last year's massive earthquake and tsunami. Economists expect growth to slow in the second half of the year, as business investment and consumer spending remain subdued.
Toll said Footwork had been hit by "extremely difficult market conditions" and was expected to book a loss this year. The company saw little likelihood of any near term recovery, prompting a writedown of the goodwill on the business and a review that could result in a sale of the unit.
Footwork Express provides trucking services to retailers, manufacturers and produce suppliers, a highly competitive sector with relatively low profit margins.
"Coming out of January we actually saw a relatively okay performance from a sales perspective with Footwork. But the months of February, March and April have been very soft and much softer than we had expected three or four months ago," he said.
"I know most of our competitors are seeing similar sorts of conditions," he said.
Toll expected underlying earnings before interest and tax for the company to fall to between A$400 million and A$420 million for the year to June from A$436 million ($435 million) last year.
That was as much as 12 percent below analysts' forecasts for underlying earnings of A$456 million, according to Thomson Reuters I/B/E/S.
Toll's shares tumbled 16 percent to a four-month low of A$4.67 and last traded down at A$4.75, in a broader market down 1.9 percent.
Earnings were also being affected by weak retail conditions in Australia and volatility in its Asian marine business, which mainly offers spot charters for exporting coal from Indonesia.
Kruger said the Indonesian business had been suffering for more than a year.
The company is considering selling Footwork Express, the Asian marine business and its refrigerated business, among other options, Kruger said.
Toll decided to write down the carrying value of Footwork Express by around 43 percent to between A$200 million and A$220 million.
The company has also been hit by the loss of a key customer,
Australian steelmaker BlueScope Steel, which has stopped exports, affecting the value of Toll's freight hub in Sydney and prompting a A$56 million writedown on the carrying value of Toll's property assets. (Reuters)
