FedEx has announced an increase in shipping rates from the beginning of next year ahead of its first quarter results which are released later today and likely to reflect the financial impact of the cyberattack on subsidiary TNT Express earlier this summer.
At the end of June, it announced that the worldwide operations of TNT had been significantly affected by the cyber attack known as Petya, which involved the spread of an information technology virus through a Ukrainian tax software product.
In a filing to the US Securities and Exchange Commission on 17 July, the US package delivery giant underlined that given the recent timing and magnitude of the attack, in addition to its initial focus on restoring TNT operations and customer service functions, it was still evaluating the financial impact of the attack, but it was likely that it would be material.
“We do not have cyber or other insurance in place that covers this attack. Although we cannot currently quantify the amounts, we have experienced loss of revenue due to decreased volumes at TNT and incremental costs associated with the implementation of contingency plans and the remediation of affected systems.”
It went on to warn of “additional consequences and risks associated with the cyber attack that could negatively impact our results of operations and financial condition.”
Market analysts at Baird, quoted in US media, said that "near-term (but temporary) headwinds from the late June cyber-attack" would weigh on FedEx's (FDX) earnings.
“While difficult to attempt to size the impact from the cyber-attack, we believe (ocean shipping line) Maersk's recent commentary provides a reference point for FDX. Also affected by the same attack, Maersk quantified the impact to its operations in mid-August to be $200-300 million,” they explained.
“Acknowledging challenges comparing the scope of the impact across companies, we believe FDX's realized impact could be twice as large ($400-600 million) given the duration of the disruption appears to have been greater at FDX,” they added.
Also quoted in media reports was UBS analyst, Thomas Wadewitz, who in a note to clients said: "We expect a combination of additional expense and lost revenue at TNT resulting from the cyber-attack to weigh on results throughout F2018.
"In addition, we do not yet have visibility to significant improvement in FDX's Ground margin which could provide an offset to the challenges at TNT."
He highlighted how TNT had disruptions in their European service operations from 28 June to 18 August, underlining that the company "lost meaningful volumes in the Express/Overnight area in particular" to other shipping competitors, according to his industry contacts.
"The TNT issues could indicate FDX may come in at the lower end of their [cost cutting] target or perhaps even below the low end (our F2020E now reflects about $1.0 billion of improvement)."
Ahead of the release of its first quarter results later today, FedEx Corp. has announced that its subsidiaries FedEx Express, FedEx Ground and FedEx Freight, will increase shipping rates effective 1 January, 2018.
FedEx Express will up shipping rates by an average of 4.9% for US domestic, US export and US import services. FedEx One Rate pricing will increase by an average of 3.5%.
FedEx Ground and FedEx Home Delivery shipping rates will rise by an average of 4.9%. FedEx SmartPost rates will also change.
FedEx Freight shipping rates will increase by an average of 4.9%. This rate change applies to eligible FedEx Freight shipments within the US (including Alaska, Hawaii, Puerto Rico and the US Virgin Islands), between the contiguous US and Canada, within Canada and between the contiguous US and Mexico. FedEx Freight rates within Mexico will also change, the company added.
In addition, a Third Party Billing Surcharge will apply to FedEx Express and FedEx Ground shipments that are billed to a third party. Applicable criteria and pricing for packages that require additional handling, are oversized, or are unauthorized, will also change.
FedEx SmartPost will apply dimensional weight pricing, and the Non-Machinable Surcharge will change while FedEx Freight will implement an Over Length Surcharge of $85 per shipment levied on shipments with dimensions of 8 feet or greater and less than 12 feet.
Each of these changes will take effect from 22 January 22, 2018.
