On the evening of June 23, FedEx released its fourth quarter and full-year financial results for fiscal year 2022. According to the
financial report, FedEx’s fourth-quarter revenue was US$24.4 billion, compared with US$22.6 billion last year, a year-on-year increase of only 8%. Adjusted net profit was US$1.8 billion, compared with US$1.36 billion last year, a year-on-year increase of 32%. It is worth noting that based on the net profit before adjustment, FedEx in the fourth quarter of fiscal year 2022 was only US$558 million, a 70% decrease from the US$1.87 billion before adjustment last year.
As the global supply chain is affected by the epidemic, FedEx is not immune. Fuel costs have doubled, parcel surcharges have increased, and e-commerce companies have built their own logistics systems to share the market. FedEx's situation has become increasingly delicate.
Fuel costs have doubled, and the growth rate of the main business has slowed down.
FedEx's main business is divided into land transportation, overnight express delivery, heavy cargo transportation, logistics services and other businesses. Among them, FedEx’s fourth-quarter revenue was US$11.9 billion, accounting for 49% of total revenue, with a year-on-year growth of only 6%. This business includes package revenue, freight revenue and other revenue. The
package revenue includes U.S. overnight performance and international and domestic package revenue. Revenue reached 9.318 billion U.S. dollars, accounting for 38% of total revenue. It is the main business of FedEx. In addition, its total freight revenue was US$2.27 billion and other business income was US$350 million.
The main costs of this business are labor, transportation and fuel. Salaries and employee benefits expenses were US$4.028 billion. The cost of purchasing transportation reached US$1.582 billion. It is worth noting that its fuel expenses have nearly doubled. Fuel expenditure in this quarter was US$1.521 billion, an increase of 93% from US$789 million in the same period last year. However, its maintenance fees and company restructuring costs were significantly reduced, and the combined operating profit was 7.4%, a year-on-year increase of 0.9 percentage points.
federal land operation revenue was US$8.4 billion, accounting for 34% of total revenue, with a year-on-year growth of only 4%. The express freight department’s revenue was US$2.7 billion, accounting for 11% of total revenue. FedEx Freight's operating performance increased significantly, with operating profit margin increasing 570 basis points to 21.8%. The improvement was driven primarily by a 28% increase in revenue per shipment due to continued focus on revenue quality and earnings growth.
The express delivery service sector only has US$76 million, accounting for only 0.3%. In addition, FedEx's operating departments such as FedEx Office, FedEx Logistics and FedEx Dataworks are gradually being eliminated from FedEx, with revenue reaching US$110 million, accounting for only about 0.4% of total revenue.
It is understood that transportation demand has declined due to slower economic growth and supply chain disruptions, as well as higher transportation and wage rates for purchase. The improvement in FedEx's fourth-quarter operating income was primarily due to revenue management actions, including the impact of fuel in each transportation segment and lower variable compensation expense.
In fiscal year 2022 data, FedEx’s annual revenue was US$93.5 billion, and its adjusted net profit increased from US$1.433 billion to US$2.061 billion, an increase of 11% compared to the US$84 billion revenue in the same period last year. Net profit increased by 13% year-on-year. Before adjustments, net profit decreased by 26% year-on-year to nearly 500 million yuan. In terms of business revenue,
still accounts for the largest share of the performance of the express delivery department, accounting for 49% of the total revenue for the year. The federal land transportation and express freight departments accounted for 36% and 10% respectively. The express delivery service sector has the fastest growth rate. Revenue increased by 691% year-on-year. This figure reached an astonishing 850% in the fourth quarter.
Among operating expenses in fiscal year 2022, fuel costs and business restructuring costs doubled. Fuel increased by 77% year-on-year, while business restructuring costs increased by as much as 140% year-on-year.
The pressure has doubled, and FedEx has many challenges
It is understood that due to the continued disruption of the global supply chain and limited air cargo capacity, FedEx continues to adjust its international network and operate in a restricted environment, resulting in a significant increase in costs.
Not only is it affected by the global supply chain, but now that the geopolitical crisis has become more prominent, flying around the world has become the norm in the aviation field, and fuel consumption has soared. Under various influences, air freight prices have increased 3-4 times. Uncertainty factors in the market outlook are still high.
In response to soaring costs, FedEx is raising "peak" surcharges on some packages and shipments between Europe and the rest of the world, and from Asia Pacific to destinations in Europe, the Middle East, Africa and Latin America. Among them, the surcharge for and packages in Central Europe will increase from US$1.2/kg to US$1.5, and the surcharge for packages from Europe to the United States will increase from 0.2 euros/kg to 0.3 euros/kg.
The increase in some surcharges offset the doubling of some fuel costs by FedEx, which improved FedEx's financial performance to a certain extent.
And the pressure faced by FedEx goes beyond that. According to statistics from data analysis company Spire Aviation, Amazon has not only transported its own packages, but also delivered packages for third-party companies, which will undoubtedly bring greater competition to FedEx. Amazon Air increased its number of destination airports by 21% last year, saw a 25% increase in the number of aircraft operating in its fleet and a 34% increase in cargo flights.
The rise of overseas e-commerce has brought far less benefits to logistics companies than expected. FedEx's number of destination airports increased by only 1%, its fleet decreased by 1%, and cargo flights increased by only 3% while competing with Amazon. The old competitor UPS is also catching up, ranking first and second respectively with FedEx in the 2020 global air cargo volume rankings.
According to FedEx’s financial report, FedEx Capital is expected to spend US$6.8 billion in 2023, with priority being spent on improving efficiency, including fleet and facility modernization and increasing automation.
“Our continued focus on revenue quality drove significant improvement in our fourth quarter results,” said Michael C. Lenz, executive vice president and chief financial officer of FedEx Corp. “As we execute on initiatives to improve profitability and returns, We expect further momentum in fiscal 2023 and beyond.”
But will the future be as optimistic as FedEx thinks? The ability to meet labor and procurement transportation needs while controlling related costs, as well as changes in fuel prices or currency exchange rates caused by global market fluctuations; how to deal with the persistent impact of the COVID-19 epidemic; how to fight against the wolves in front and pursuers behind. In the face of competition, FedEx continues to transform and optimize its delivery business capabilities to consolidate market share. In the uncertain economic environment, FedEx still faces many challenges.
(This article was first published on Titanium Media APP, author | Yang Xiujuan)
