FedEx profit soared on higher pricing and fuel surcharges despite declining shipment volume at its air package and industrial freight businesses in the quarter that ended Nov. 30.
Only its ground package unit saw an increase in traffic. The transportation giant’s net profit leaped 76 percent year-over-year to almost $500 million, while its revenue rose 10 percent to $10.6 billion. Inventory destocking in Asia hurt demand for its international air services, FedEx said.
FedEx reversed the decline in profitability at its express unit, where operating profit at dropped 19 percent in the previous quarter, despite a 12 percent revenue hike. But express traffic from Asia remained weak in the September to November period.
“Our improved performance was largely a result of effective yield management programs and strong demand for FedEx Home Delivery and FedEx SmartPost services,” said Frederick W. Smith, FedEx chairman, president and CEO.
E-commerce should drive FedEx volumes in its December to February quarter. The company expected to handle 17 million packages Dec. 12, its busiest day this year, largely thanks to successive online sales events in November and December.
Domestic shipping volume dropped 4 percent at FedEx Express, and 3 percent at FedEx Freight, though both units increased their profitability and revenue. FedEx Ground daily package volume increased 4 percent as home delivery demand rose.
On the international side, FedEx Express international priority package volumes dropped 3 percent, thanks to declining demand from Asia, FedEx said. However, international priority freight pounds increased 4 percent year-over-year.
FedEx Express operating profit rose 30 percent to $342 million, while revenue increased 10 percent to $6.6 billion. U.S. domestic package revenue increased 12 percent, while international priority revenue per package rose 11 percent.
FedEx Express will delay the roll out of 11 Boeing 777F aircraft during the next three years as it attempts to balance its capacitywith demand, said Alan B. Graf, Jr., executive vice president and CFO of Memphis-based parent company FedEx.
FedEx Ground operating profit jumped 34 percent to $398 million, on a 13 percent increase in revenue to $2.3 billion. Online commerce drove shipment volume up 17 percent for FedEx SmartPost, which increased revenue per package 4 percent.
FedEx Freight, the largest less-than-truckload carrier in the U.S. when ranked by revenue, reported an operating profit of $40 million, compared with a $91 million loss a year ago, and increased its revenue 9 percent to $1.3 billion.
The trucking operation, which implemented a 6.75 percent general rate increase in September, improved its yield 8 percent and cut less profitable shipments from its network, which FedEx said accounted for the 3percent drop in LTL shipments. The Nov. 30 quarter was the second quarter of FedEx’s 2012 fiscal year.