FedEx doubles profits in third quarter

Despite much of the talk in the express sector focusing on UPS’s acquisition of TNT Express and the possible effects on competition, FedEx has reaffirmed its competitive position as a key player in the market with a strong performance in its third quarter.

The headline announcement was that FedEx has more than doubled its profits from $393m to $813m in the third quarter ended February 29, 2012. The increased profits were experienced on revenue growth of 9% to $10.56bn.

"Results were driven by improving yields, record holiday package shipping and exceptional performance at FedEx Ground," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. In addition, there was a considerable reduction in the operating loss suffered by FedEx Freight.

Its core FedEx Express segment saw a 96% year-on-year increase in profits to $349m and an 8% increase in revenues to $6.54bn. The company attributed the segment’s strong performance to a 9% growth in US domestic revenue per package and a 5% increase in international priority revenue per package. In addition, higher fuel surcharges passed on to the customers had a significant impact on profitability. However, the company did also note that its performance in the previous year was impacted by severe weather.

FedEx Ground reported a 43% increase in operating income to $465m and a 14% increase in revenue from $2.18bn to $2.48bn. FedEx was particularly pleased with the performance of the Ground segment as it improved its operating margin to 18.8%, up from 14.9% in the previous year; comfortably the largest profit return of the three business segments. The segment’s strong performance was primarily due to a 5% increase in daily package volume, which was driven by increases in FedEx Home Delivery services as well as the business-to-business market.

Despite a significant improvement in both its revenue and operating performance, the FedEx Freight segment still recorded a loss; albeit $1m compared to a loss of $110m in the corresponding period of the previous year. Increased yields and volumes coupled with improvements to operating efficiencies helped to improve the profitability of the segment compared to the previous year, however the segment slipped back into the red after recording a profit of $40m in the second quarter.

FedEx expects to maintain the high level of performance moving into the fourth quarter, "capping off a strong fiscal year" concluded Smith. However, it is possible that the record holiday season shipments masked some uncertainty for the company, as FedEx announced it is considering adjustments to its Express US domestic network capacity in the fourth quarter.

Quelle: eyefortransport

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