FedEx to cut costs, raise profitability of Express unit

FedEx Corp , the world's second-largest package delivery company, plans to cut costs at its Fedex Express business to boost profitability amid slow growth in major economies, its chief executive said on Tuesday.

FedEx CEO Fred Smith, speaking at a dinner with investors and analysts in Memphis, Tennessee, said the benefits of those efforts would start to show next year.

FedEx, which last month cut its 2013 profit forecast citing a weaker economy and customers' shift toward lower-priced shipping options, is targeting $1.7 billion in profit improvements by the end of fiscal 2016, with a significant portion of that coming the year before.

"We intend to improve annual profitability substantially in our Fedex Express segment," said Smith.

Smith, whose comments were broadcast over the Internet, also told investors he intended to raise dividends in years to come.

The Memphis, Tennessee-based company, which competes with larger rival United Parcel Service Inc , saw its profit in the latest quarter take a hit from the performance of FedEx's express segment, which handles overnight package delivery by aircraft.

The segment's operating earnings fell 28 percent, and U.S. package deliveries were down 5 percent in that quarter. FedEx is more reliant on air freight than UPS.

(Reporting by Nick Zieminski, Additional writing by Phil Wahba; Editing by Edwina Gibbs)