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FedEx wields the ax again as profit falls

FEDEX Corp yesterday said it plans to cut more jobs and trim wages again, as the company reported its fiscal third-quarter profit tumbled 75 percent on severe weakness in the global economy.

The Memphis, Tennessee-based company, often seen as a bellwether for the United States economy, said it earned US$97 million, or 31 US cents per share, compared with US$393 million, or US$1.26 a year earlier. Revenue fell 14 percent to US$8.14 billion, from US$9.44 billion. Analysts polled by Thomson Reuters expected profit of 46 cents per share on revenue of US$8.65 billion.

"Our financial performance was sharply lower during the quarter due to the global recession," Chairman, President and Chief Executive Frederick W. Smith said in a statement. "While we are gaining market share in all of our transportation segments, the downturn in our industry and the severity and expected duration of the recession require that we take additional actions."

FedEx Express segment sales fell 18 percent to US$5.05 billion in the third quarter, as weak package volume offset the benefit of higher prices. Unit operating income plunged 89 percent to US$45 million. The segment has been hit hard as consumers choose less expensive and slower shipping options.

The delivery company's ground segment, which benefited from the sharp scale back of rival DHL and a delivery deal with the US Postal Service, saw operating income rise 15 percent to US$196 million. Revenue rose 4 percent to US$1.79 billion.

To further reduce costs, FedEx plans to cut more jobs - although it didn't say how many. It also plans to scale back some workers' hours and wages and trim air and truck capacity. The firm said it will not shrink its delivery network in any area.

Three months ago, FedEx disclosed broad-based cost cuts, including a 20-percent pay cut for Smith, a 7.5 to 10-percent cut for other executives and a 5-percent cut for thousands of others.


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