Taking the UPS with the downs
Taking the UPS with the downs
Read MoreTag: FedEx
FedEx profit declines to USD 420 million as demand drops
FedEx Corp. said quarterly profit fell for the first time in three years and cut its earnings forecast for this quarter because of a slowing U.S. economy.
Net income for the fiscal third quarter dropped to USD420 million, or USD1.35 a share, from USD428 million, or USD1.38, a year earlier as winter storms damped shipping demand, FedEx said today in a statement. Revenue rose 7 percent to USD8.59 billion.
FedEx pared its outlook for the quarter ending May 31 by 5 cents a share and said it may miss its annual earnings growth target of 10 percent to 15 percent. The U.S. economy grew at a 2.2 percent annual rate in 2006’s final quarter, less than half the pace at the start of the year.
Slower economic growth is particularly hurting results at FedEx’s Express parcel delivery and Freight trucking units, the company said. FedEx said earnings growth this year may fall short of the company’s 10 percent to 15 percent target unless the U.S. economy accelerates.
FedEx hadn’t reported a lower year-over-year quarterly profit since November 2003.
Operating profit fell 12 percent at FedEx Express, which makes up almost two-thirds of the company’s sales, as economic weakness and bad weather curbed demand for shipping, the company said. Earnings were also pared when FedEx reduced the fuel surcharge it levies to offset higher fuel expense.
Smith is expanding FedEx’s trucking, international and retail businesses to give shippers more options than at rival United Parcel Service Inc. and smaller trucking firms.
Revenue at FedEx Ground, the company’s parcel delivery business and second-largest unit, grew 12 percent to USD1.5 billion. Operating profit rose 5 percent to USD196 million.
FedEx Freight, the third-largest unit by revenue, had a 32 percent decline in operating profit on slowing demand and costs of integrating last year’s acquisition of Watkins Motor Lines.
Read MoreExpress growth in Malaysia
Although it makes up only a small portion of cargo traffic, the express delivery service is generating substantial worldwide employment and revenue.
This industry is expected to grow faster than its counterparts in other cargo sectors – air and ocean – between now and 2010.
The International Air Transport Association (Iata) has estimated that the global air cargo will grow at an average of 5.3 per cent for the 2006-2010 period, while ocean freight is expected to increase by 7.2 percent.
But Teong said the local express delivery industry will grow at an average of 10 per cent per year, and is expected to continue to expand rapidly as the country becomes more developed.
Local courier firm City-Link Express (M) Sdn Bhd, for one, expects its 2007 revenue to grow by 10 per cent, while GD Express Carrier Bhd (GDEX) sees its revenue growing in the range of 20-30 per cent.
Revenue growth of global express firms such as DHL Express, meanwhile, is expected to outpace the industry average. Its Malaysian operation has been registering a growth of 15-20 per cent in revenue in the last few years.
Recognising the lucrativeness and potential of this industry, Malaysia Airlines’ air freight unit, Malaysia Airlines Cargo Sdn Bhd, is working on introducing an express delivery product this year.
There are currently 114 licensed express delivery players in Malaysia. The market is led by the four major foreign players – FedEx, UPS, DHL Worldwide Express and TNT, which combined capture a 60 per cent share of Malaysia’s RM1 billion express delivery business, with the rest coming from local courier players. “The top 10 players already have a 95 per cent control of the market. The other smaller players only offer despatch services,” Teong pointed out.
Read MoreFedEx announces next-business-day domestic express service in China
FedEx Express, a subsidiary of FedEx Corp. announced that it will offer next-business-day domestic express service in China beginning May 28, 2007. Combined with the company’s international express service, the new domestic offering will connect businesses both within China and around the world. FedEx connects more than 90 percent of China’s GDP to the rest of the world through its global network.
The new domestic services, expected to be fully operational in June 2007, will serve China’s burgeoning market with next-business-day, time-definite delivery service to 19 cities and a day-definite service to more than 200 cities throughout the country. Real-time package status tracking will let customers know where their shipments are every step of the way.
Like the U.S. express hub-and-spoke system which FedEx pioneered, the domestic express network includes a hub-and-spoke system centered at the Hangzhou Xiaoshan International Airport, located in East China’s Zhejiang Province. The newly established hub will initially be able to sort up to 9,000 packages per hour.
A domestic carrier, Okay Airways, will provide the domestic air transportation. Using three Boeing 737 freighters, Okay Airways will operate an air cargo domestic network within China in support of FedEx. The aircraft will operate two circular routes nightly, covering the country’s major airports.
Read MoreTNT and FedEx run business in China alone
The world’s Big Four express names gradually step into an independent running term in China – which has nodded their activities of operating wholly owned affiliates in the country according to the commitments to its WTO entry – coinciding with two acquisitions.
The Holand-headquartered company officially announced the completion of the Hoau Logistics Group acquisition on March 14. The Chinese authorities approved it days ago. However, the company declined to unveil the deal’s accounting information.
Industry analysts point out that the goal of TNT is to integrate its businesses in China on the basis of the Chinese company’s network and its 170,000 clients. TNT will build on this network and use it to further access its network worldwide.
Tianjin DTW Group Co., Ltd., another Chinese logistics service provider based in Tianjin, near Beijing, capital of China, announced that its sale of a 50% stake in Federal Express-DTW Co., Ltd. was completed on March 1.
FedEx Express reached an acquisition agreement about the deal and DTW Group’s domestic express assets valued at about USD 400 million on January 24, 2006.
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