In a statement issued yesterday (19 September), Frederick W. Smith, FedEx Corp. chairman and chief executive officer, said: “The first quarter posed significant operational challenges due to the TNT Express cyberattack and Hurricane Harvey, and I want to thank our team members for their extraordinary dedication and performance”.
“The worldwide operations of TNT Express were significantly affected during the first quarter by the June 27 NotPetya cyberattack”.
The FedEx Express segment saw its adjusted operating income drop from $652m to $521m.
After adjusting for one-off items, the company’s earnings per share were US$2.51, down from US$2.82 a share a year ago, and below the consensus forecast for US$3.09.
FedEx said higher shipping rates across its operating units were more than offset by the cyber attack, costs related to the integration of its TNT unit, which it acquired previous year for $4.8 billion, higher costs at its FedEx Ground unit, and a higher tax rate. Much of this can be attributed to Hurricane Harvey which impacted FedEx operations during the quarter as airports cancelled flights, bringing logistics operationsto a temporary halt.
Fedex’s first quarter revenue rose to US$15.3bn, up from US$14.7bn a year earlier, but was a shade below the consensus forecast for US$15.35bn. Ahead of the storms the company prepared contingency plans which according to FedEx, aided recovery. Subsequently, FedEx reported lower operating margin of 13.5 percent, down 0.7 points from the same quarter during the 2017 fiscal year.
Turning now to other segments, there were also some bright spots in the quarter. Results for the company’s Freight segment were strong, as operating income increased 30 percent, with most of the increase coming from higher less-than-truckload (LTL) revenue per shipment, higher base rates for shipments, increased weight per shipment and higher surcharges for fuel.
As usual for this time of year, FedEx announced rate changes to begin with the next calendar year.
FedEx said on Monday it would increase its Express, Ground and Home Delivery shipping rates by an average of 4.9 percent on January 1.
FedEx did not have insurance protections in place that covered the cyber attack’s impact and said the attack had caused the company to re-examine the cyber insurance market.