FedEx profits decline 31% in Q3 2013

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FedEx saw profits drop by 31% across all of its business segments in the quarter ending 28 February, down to $361 million from $521 million in the third quarter of its 2013 fiscal year.

The Memphis-based freight and logistics specialist reported revenues of $11 billion in the third quarter, up 4% year-over-year.

Operating income was $589 million, down 28% from $813 million in the same three months of 2012.

Net income totalled $361 million, down 21% from $521 million year-over year.

Profitability at the FedEx Express segment declined due to customers' shift to lower-yielding products and lower yields on international exports.

Express segment operating income dropped 66% in the quarter, down to $118 million from $349 million in the third quarter of 2012. Express revenues increased 2% to $6.7 billion on a 1.8% operating margin that declined 5.3% from the previous year.

"Our lower-than-expected results for the quarter and reduced full-year earnings outlook were driven by third quarter international revenues declining approximately $100 million versus our guidance primarily due to accelerating customer preference for lower-yielding international services, lower rate per pound and weight per shipment," says Alan Graf, FedEx executive vice-president and chief financial officer. "We expect these international revenue trends to continue."

Executives say that it will decrease capacity in its Asian networks from 1 April as part of a plan to move lower-yielding traffic into other networks to free up capacity for higher-priority shipments on its aircraft. FedEx will consider further accelerated retirements of its older aircraft as part of that plan, said executives on the analyst call.