FedEx CFO: FY09 capex likely similar to FY08

MEMPHIS (Reuters) - Package delivery company FedEx Corp's (FDX.N) capital expenditures for its next fiscal year will likely be similar to the roughly $3 billion allocated for the current year, a top executive said on Friday.

"We will continue reasonably aggressive investments in our international business as we feel that provides the best value for our shareholders," Chief Financial Officer Alan Graf told Reuters in an interview at the company's Memphis headquarters.

FedEx's fiscal 2008 fourth-quarter ends May 31. Graf stressed that the company has room to cut capital expenditures further if the U.S. economy continues to deteriorate, as only some 35 percent to 40 percent of its expenses are fixed.

"I'm thrilled about the long-term outlook. I'm less than thrilled about the current economic environment," Graf added.

Like its main rival United Parcel Service Inc (UPS.N), FedEx is considered a bellwether of the U.S. economy.

One of FedEx's goals over the next 12 months will be to remain cash flow positive, Graf said, with volatile fuel prices remaining a significant concern for cash flow.

Like many other U.S. transport companies, FedEx recoups fuel costs through surcharges, but with a time lag that creates short-term pressures on cash flow.

FedEx's CFO said that slowing U.S. economic growth had led to some customers shifting packages from its express delivery service FedEx Express to FedEx Ground -- a lower cost option, which meant lower yields for the company.

"This dilutes us, but at least we have FedEx Ground," Graf said. "It means we're diluting ourselves rather than losing business to our competitors."

Graf said that FedEx's domestic China service, which was launched last year, will "lose money in fiscal 2008, but significantly less in fiscal 2009."

He said that FedEx will significantly cut back its capital expenditures in its copy and print unit FedEx Kinko's, which has suffered from declining revenue in recent quarters, although it has contributed $1 billion annually in packages for FedEx Express and FedEx Ground.

"In that respect FedEx Kinko's has been a success," Graf said. "But it has not been so successful in its core copy, print business."

FedEx aims to work on "improving the customer experience" at FedEx Kinko's before investing in expansion, he added.

FedEx has a number of potential acquisitions it is looking at, but is in no rush to buy at the moment, Graf said.

"We have lots of blips on the radar screen," he said. "But at the same time we don't have to do anything right now."

Graf said FedEx is also monitoring the problems of the U.S. operations of Deutsche Post (DPWGn.DE) unit DHL, with a view to picking up customers if those problems worsen.

"There may be business opportunities for us there," Graf said.

DHL said in February it was cutting 600 jobs out of its U.S. work force of about 20,000. In late January Deutsche Post said it would write down around 600 million euros on the value of the U.S. business after abandoning a target to break even in the U.S. market in 2009.

(Reporting by Nick Carey, Editing by Richard Chang, Gary Hill)