UPS struggles with economic slowdown, profits fall 9%
Earnings fell 9% at United Parcel Service + Inc., the world’s biggest package delivery company, as cost-conscious U.S. customers shipped fewer parcels in the second quarter.
The company is weathering the economic slowdown by controlling costs; it plans to reduce capital expenditures by $300 million in 2001. Still, UPS is expanding its supply-chain management business, which helps companies handle the flow of goods, through acquisitions.
“We said three months ago that we would take the steps necessary to effectively manage our business through these tough times,” said Jim Kelly, chairman and chief executive officer. “Our expense controls are working and we continue to grow in some of our key businesses, particularly international export and logistics.” Atlanta-based UPS posted net income of $630 million, or 55 cents per share, compared with $695 million, or 60 cents, a year earlier. Analysts surveyed by Thomson Financial/First Call were forecasting earnings of 54 cents per share.
Revenue during the period rose 4% from a year earlier to $7.6 billion.
The volume of packages that UPS shipped in the second quarter rose in every division except at its U.S. ground delivery unit, which accounts for about three-quarters of UPS’s total revenue. The volume of U.S. ground shipments fell 1.3%. Including ground and air deliveries, revenue from the domestic package business rose 1.5% to $6 billion.
Internationally, export volume grew 10.8%, led by a 21% increase in Europe.
Revenue from the international group increased 4.2% to $1 billion. UPS also launched direct air service to China during the quarter.
The company’s non-package segment posted the biggest gain in the quarter.
Revenue increased 39% to reach $535 million. UPS has been expanding its non-package businesses, which provide services such as supply chain management, logistics, freight forwarding and e-commerce support.
During the second quarter, UPS completed the purchase of freight forwarder Fritz Companies, and it also bought Mail Boxes Etc., which provides mail boxes, packaging services and office supplies to consumers.
UPS will continue to struggle with the economic downturn in the last half of 2001. Earlier this year, the company said that it would try to match year-earlier results for the third quarter. However, UPS now expects to earn between 52 and 55 cents in the period, which is below the 60 cents that it earned in the third quarter of 2000. Analysts have been forecasting earnings of 57 cents.
On Thursday, shares of UPS rose 16 cents to close at $58.19. End [slug: UPS-EARNS-UPDATE1]
BRIDGENEWS GLOBAL MARKETS, 19th July 2001
