FedEx sees profits improve despite TNT integration costs
21 / 09 / 2016
FedEx saw first quarter revenues increase by double-digit levels during its fiscal first quarter while net income also improved as its acquisition of TNT Express was included in its results for the first time.
The parcel giant saw fiscal-first quarter revenues increase by 19.5% year on year to $14.7bn, while its operating income increased 10.5% to $1.26bn and net income was up 3.3% to $715m.
During the period the company incurred integration costs, related to the purchase of TNT, of $68m, while it also wrote-off $28m for intangible asset amortization expense.
“The integration of TNT Express is proceeding smoothly, and the level of team members’ engagement is outstanding,” said Fred Smith, FedEx Corp chairman, president and chief executive officer.
“Managing our operating companies as a portfolio of customer solutions helped FedEx achieve strong financial and operating results in the quarter, especially given the global economy’s continued low growth.”
“Our team is extremely excited about the TNT Express integration, and we are discovering many possibilities for achieving high returns,” said Alan Graf, FedEx Corp executive vice president and chief financial officer.
“As we integrate these networks and take advantage of the unmatched road capabilities of TNT Express, I am confident there is going to be a tremendous opportunity to increase the earnings of FedEx Corporation.”
The company said its operating result rose compared with last year due to higher yields at FedEx Express and FedEx Ground, improved volumes at FedEx Ground and ongoing cost efficiencies at FedEx Express.
Looking at its individual business segments, FedEx Express saw first quarter revenues increase by 1% to $6.7bn, while operating income was up 14% to $624m.
“FedEx Express revenue increased slightly as improved base yields, higher package volume and increased freight pounds more than offset lower fuel surcharges and unfavourable currency exchange rates,” the company said.
Operating results improved due to higher base yields and ongoing cost efficiencies.
TNT Express contributed revenues of $1.8bn and an operating loss of $14m.
The FedEx ground segment recorded revenues of $4.3bn, up 12%, on the back of improved volumes while operating income was up 14% to $610m due to the volume increase, higher yields and lower insurance costs.
The freight division recorded a 4% improvement in revenues to $1.7bn as shipment volumes increased and operating income was up 2% to $135m as last year’s results included the closure of a facility, rents came down and volumes improved.