FedEx expands in Mexico as profit drops
FedEx said Thursday it has reached agreement to acquire MultiPack, a Mexican domestic express package delivery company, to enhance its service offerings in Mexico.
MultiPack has an established pickup-and-delivery network across the country, along with 48 distribution centers, 13 warehouses and more than 500 retail outlets. It also offers a range of logistics services.
'The addition of MultiPack will significantly expand our domestic service portfolio in Mexico and underscores our commitment to expand the FedEx business in this dynamic growth market,' said Michael L. Ducker, chief operating officer, FedEx Express.
The move will allow FedEx to more deeply penetrate the growing Mexican market and link it to the FedEx international network.
The transaction is expected to close in the second quarter of 2011, with integration of the companies achieved in phases, FedEx said.
The news came as FedEx reported an 18 percent drop in second-quarter net income to $263 million compared to last year, which the company attributed to costs associated with combining FedEx Freight and FedEx National LTL into a single heavy-freight trucking operation and creation of a reserve associated with a legal matter at FedEx Express. Last year's second quarter result was boosted by changes to an insurance program at FedEx Express. The reinstatement of certain employee compensation programs curtailed during the recession and higher pension and aircraft maintenance expenses also impacted earnings. Growth also dipped back to more normal levels in International Priority shipments and fuel prices were higher than originally assumed.
The $66 million reserve was created in response to a negative jury decision in a lawsuit involving defunct ATA Airlines. The airline lost a major subcontract with FedEx to provide passenger charter business for the U.S. military. ATA claimed that the contract termination was abrupt and forced it to go out of business.
FedEx said it experienced a 12 percent increase in revenue as shipments and yields in all transport segments grew.
It projects net income to increase in the third quarter and for fiscal year 2011.