UPS in position to buy

UPS, the world’s largest package delivery company, is in a position to make an “extremely large” acquisition if it finds a deal that makes strategic sense, said Scott Davis, chief financial officer.

The comments revived long-standing speculation that UPS could bid for TNT, the Dutch post group, which has large package delivery operations in Europe and Asia.

UPS is considered a potential buyer of TNT’s logistics division, which the group plans to auction this year, but some analysts believe the parcel business could also be sold.

Mr Davis gave no clues about possible targets but cited the company’s Dollars 1.9bn of free cash flow in the first quarter as evidence that UPS had the financial strength to make a big deal.

The comments came as UPS announced a 10.5 per cent increase in first-quarter net profits to Dollars 975m, driven by surging international shipments.

The results showed how express delivery companies are benefiting from growth in global trade, particularly between the US and Asia.

Domestic shipments were also strong, underlining UPS’s resurgence in its home market following efforts to cut costs and focus on lucrative small and medium-sized business customers in the US after a period of sluggish growth.

Domestic shipments account for nearly 65 per cent of UPS revenues, but the proportion has been falling as international business expands.

Much of the overseas growth is coming from China, where UPS is building a new hub in Shanghai to cope with rising exports.

The global shift by manufacturers and retailers towards efficient just-in-time supply chains is also lifting demand for express delivery services.

UPS said its 9 per cent increase in small package volume outpaced global market growth.

International volume was up 29 per cent, while domestic volume rose 6.8 per cent.

Total revenues grew 16.5 per cent to Dollars 11.5bn.