FedEx first quarter profit more than double

FedEx Corp fiscal first-quarter profit more than doubled and raised its full-year financial guidance, though international volume fell slightly short of expectations and the company announced a charge to restructure its domestic trucking business, reported Dow Jones Newswires.

The US-based shipping giant also forecast "a phase of somewhat slower economic growth going forward" than earlier in the calendar year, although chief executive Fred Smith stressed that he views the trend as indicative of a normal economic cycle rather than precursor to a double-dip recession.

Smith, speaking on a conference call with analysts, said a number of factors, including solid corporate balance sheets and pent-up demand, should lead to continued global economic growth. He noted that FedEx "is seeing signs of a solid holiday shipping season".

FedEx's high-margin international priority air freight service has been strong in particular, with volumes climbing 19 percent in the fiscal first quarter compared to the year-ago period.

Still, the volume growth came in below a 23 percent clip in FedEx's fiscal fourth quarter that ended in May, as well as the company's July forecast for first-quarter growth of more than 20 percent.

Regardless, FedEx executives said the first-quarter volume growth was largely in keeping with their expectations, and they said the business has continued to boom.

The company said it's "putting all hands on deck to keep up with the demand" in international priority air freight, which has been a key driver of earnings and is viewed as a barometer of global trade.

FedEx has introduced new planes to improve services between the US and Asia, where eastbound volume has been driven by strong growth in shipments of electronics and other consumer products, and also is also bringing back planes parked in the desert to boost capacity.

But FedEx's loss-making domestic trucking unit continues to run up losses in the face of overcapacity and weak pricing. The company said that it would combine its FedEx Freight and FedEx National LTL operations at the end of January.

It expects to record US$150 million to $200 million in charges in the next two quarters as it cuts its full-time employee count by 1,700, or some five percent, and closes 100 facilities.

For the quarter ended August 31, FedEx reported a profit of $380 million, compared with a prior-year profit of $181 million.

Revenue rose 18 percent to $9.46 billion, following a 20 percent drop last year.

The express-shipping segment saw revenue climb 20 percent, with international-priority average daily volume up 19 percent, led by Asian exports. US domestic revenue per package was seven percent higher while average daily package volume increased three percent.

The ground-shipping segment revenue increased 13 percent as average daily volume climbed seven percent. Freight revenue was up 28 percent while the smaller services segment saw an eight percent drop.
(Source:www.cargonewsasia.com)