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UPDATE 3-FedEx opens first India freight forwarding offices
February 11, 2010 / 12:52 PM / 8 years ago

UPDATE 3-FedEx opens first India freight forwarding offices

* Opens 6 new freight forwarding offices

* Opens first two freight forwarding offices in India

* India offices located in Mumbai, Chennai

* Shares up 0.2 pct (Adds Deutsche Post comparison, EU detail, updates shares)

By Helen Chernikoff

NEW YORK, Feb 11 (Reuters) - Package delivery company FedEx Corp (FDX.N) opened six new freight forwarding offices, including its first two in India, as part of an “aggressive” expansion of its Trade Networks segment.

Since 2008, the company has opened 22 new international freight forwarding offices, which provide services and consulting including customs brokerage, export documentation, cargo insurance and a web-based set of shipping management tools.

The Trade Networks unit could become an important growth engine for the company, which is battling for market share with United Parcel Service Inc (UPS.N).

The six new offices are located in Brussels; Manchester and London, United Kingdom; Mumbai and Chennai, India; and Mexico City, Trade Networks Chief Executive Officer Fred Schardt told Reuters in an interview.

Schardt would not disclose a target for future openings but said FedEx plans to build the business organically through a series of similar office openings, Schardt said. He would not comment on whether the company might also build it by acquiring other freight forwarders.

The latest expansion follows a year in which FedEx emphasized the role of China in building its freight forwarding network. In 2009, the company opened facilities across China including Xiamen, Tianjin, Beijing, Guangzhou and Shenzhen.

Trade Networks’ results are included in the company’s “Express” segment, which accounted for 63 percent, or $22.36 billion, of its revenue in 2009.

Schardt would not break out Trade Networks’ revenue but said freight forwarding is a $160 billion business that has doubled over the last ten years.

A fully expanded Trade Networks business could make as much as between $8 billion and $10 billion annually, said Morningstar analyst Keith Schoonmaker.

But that would necessitate about a decade of growth to the point that the business could rival that of Deutsche Post (DPWGn.DE), Europe’s biggest mail and express delivery company, which reported 2008 revenue of 10.59 billion euros ($14.45 billion) in its global forwarding business.

The forwarding industry is highly fragmented, but such a major expansion would not be easy, although FedEx’ established brand and balance sheet could help it grow faster than others, Schoonmaker said.

Schoonmaker likes Trade Networks for its ability to earn a higher return on invested capital than some of the company’s other businesses that depend on its very asset-intensive shipping network, such as its airline.

“Expanding Trade Networks as fast as FedEx can do it well would be helpful to its business,” Schoonmaker said. “It would help deepen FedEx’ ability to serve all of a client’s shipping needs, from envelopes to containers.”

FedEx’ announcement comes a day after UPS received a statement of objections from the European Commission alleging anti-competitive behavior in the freight-forwarding industry. The commission also charged other companies, including Deutsche Post, with illegally fixing prices for air freight forwarding.

FedEx said it had not been contacted by the European Commission in connection with the investigation.

FedEx’ shares were roughly flat at $78.25 during morning trading on the New York Stock Exchange.

Reporting by Helen Chernikoff, editing by Gerald E. McCormick and Derek Caney

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