Fuel costs eat into Fedex profit

US courier giant Fedex has warned that future profit growth will be lower than previously thought due to high fuel prices and the slowing US economy.

The warning came as the firm posted net income of $393m (£198m) between December and February, down 6% from last year's $420m.

Predicting further tough trading conditions, Fedex said it expected only "limited earnings growth" in 2009.

Firms worldwide are struggling to cope with rising costs and slowing demand.

"Fedex faces a challenging economic environment that includes persistently high oil prices, sluggish US growth and continued concerns in the credit markets," said Frederick W. Smith, Fedex chairman and chief executive officer.

He said high fuel prices have driven up costs and driven away some of its customers to lower cost competitors.

But it still did not manage to avoid a squeeze on operating margins, which were 6.8%, down from 7.5% the previous year.

On a brighter note, demand for its services remained robust, with the average number of packages delivered growing by 5% in the period compared to a year earlier.

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