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FedEx quarterly profit up 10.7pc to US$775 million as sales rise 9.4pc

FEDEX has posted a 10.7 per cent increase in fiscal second quarter net profit to US$775 million, drawn on revenues of $16.3 billion, up 9.4 per cent year on year.

The company attributed the strong results to higher base rates, volume growth and favourable fuel effects.

FedEx chief executive officer Fred Smith said the company was on track for another record holiday shipping season.

"Strategic execution by the FedEx team and a stronger global economy drove improved financial results, and we are well positioned for profitable, long-term growth," said Mr Smith.

Looking ahead, the company sounded a bullish note, with FedEx president David Bronczek saying: "We absolutely believe that short and long term, international air freight shipments will continue to grow and outpace GDP, like it always used to in the past."

Mr Bronczek also expects the company's air freight business to benefit from the US tax reforms that were just passed by the US Senate. The move will reduce corporate taxes to 21 per cent, down from the current rate of 35 per cent. There will also be lower taxes on overseas profits.

FedEx said it would use any savings from the tax reforms to grow the business and create "more upward mobility for our team members".

This will include further funding of its pension plan, increasing dividends, continuing its stock re-purchase plan and investing in acquisitions.

The company also expects US GDP growth to accelerate next year due to the tax reforms, which will result in increased volumes and the need to hire extra staff.

The company also gave more information on its recent order for 50 Cessna SkyCourier 408 twin-engine turboprop aircraft, with options for 50 more, and 30 ATR72-600 eight tonne aircraft, with options for 20 more of the aircraft.

FedEx Express chief operating officer David Cunningham said the aircraft would act as replacements for its fleet of ATR 208s, which will be approaching 30 years of age when the first new aircraft are delivered.

"We're creating a lot of efficiency but we're also creating the opportunity to handle product to markets that we haven't been able to handle in some of the smaller aircraft to this point," said chief financial officer Alan Graf.