UPS profits remain flat amid slowing Asian trade
UPS has achieved 8% growth in its third quarter revenues, but profits remained the same as last year’s third quarter amid decelerating exports from Asia to the US. The integrator reported its latest results this morning, showing a $13.2bn revenue for the three months that was in line with analysts’ expectations.
Operating profits were flat at $1.62bn, while margins tightened one percentage point to 12.3% compared to Q3 2010.
The company managed to improve its earnings per share by 14% to $1.06 largely thanks to its domestic US operations, supply chain and freight divisions. International package operations were affected by a slow response to slowing Asian trade, leaving excess capacity in the UPS fleet.
UPS delivered 965m packages during the quarter, up 0.7% year-on-year. In the US, domestic package volumes remained fairly flat, with average daily volumes up about 10,000 to 12.74m for the three months.
Commenting on the results, UPS chairman and chief executive Scott Davis insisted it had been “another solid quarter” against the backdrop of slowing exports from Asia and a “challenging” global economy.
“The resilience of our global model was evident during the quarter and we remain confident in our ability to perform in both good and bad economies,” he said.
During the quarter, UPS bought back $1.1bn worth of its shares, bringing year-to-date buy-back spending to $2.2bn. Dividends paid out so far this year have reached $1.5bn, up 10.6% per share.
US package
Adjusting last year’s results for its domestic package segment saw UPS boosting revenues by 6.5% and operating profit by 11% in is quarter, respectively to $7.7bn and $1.02bn.
Margins on a comparable basis widened from 12.5% to 13.1%, with better network efficiencies and because although domestic volumes only nudged upwards, premium Next Day Air saw a 1.3% increase in volume.
With a slow US economy, the results on a reported basis showed flat profits and operating margins that shrank by just less than a percentage point.
UPS is now expecting great things for a new service it launched earlier this month – UPS My Choice – which allows consumers to select more accurate delivery windows for packages. Since launch, it has already attracted 100,000 subscribers, the company said today.
International package
UPS did report growth in revenues for its international segment, though higher fuel surcharges and base rate increases contributed. A 14% growth, to $3.06bn for the quarter, was driven by an export volume growth of 6.5%.
However, the company was caught with excess capacity fron the cooling Asia-to-US trade lane, prompting a 2.4% decline in profit to $409m for the quarter, while margins narrowed 2.3 percentage points to 13.4%.
Elsewhere, UPS Supply Chain and Freight saw operating profit climb 10% to $195m on a $2.34bn revenue, itself up 5.3%. Improvement came in shipping weight, tempered by excess air freight capacity.
