UPS has warned it may not achieve its Q1 profit forecasts after six weeks of falling domesticvolumes due to the slowing US economy. But it is confident of international growth, and has
acquired its Romanian agent to step up its presence in Europe.Speaking at yesterday’s investor conference, CFO Kurt Kuehn said the U.S. package segmentexperienced a solid January, but volume declined in February across virtually the entire customerbase. “If these trends continue through March, our earnings guidance for the first quarter will bedifficult to achieve,” he said. Air deliveries had declined faster than ground shipments, he noted.
But other areas of the business are performing well, Kuehn said. For example, internationalaverage daily volume, including U.S. export volume, continues to show strong growth and theinternational and supply chain segments remain on target for the quarter.
UPS has forecast profit per share of $0.94 – $0.98 for the quarter ending March 31, 2008. Itsannual earnings guidance for 2008 remains $4.30-to-$4.50 per share.
Looking further ahead, UPS CEO Scott Davis told Wall Street analysts and investors thecompany is poised for long-term growth, driven by globalisation. “We are excited about where UPS istoday despite any short-term economic challenges,” he commented. “Today, only 20-30% of tradeactually crosses a country’s borders. By 2025, that statistic is expected to be 80%. This meansthere’s a lot of opportunity going forward,” he pointed out.
Reviewing the 2010 goals announced in November 2006, CFO Kuehn said UPS remains on target toachieve its 2005-2010 targets. These include revenue growth of 6-8% per year, compound annualearnings per share growth of 9-14%, and return on invested capital of 23-25%.
UPS executives told investors that major initiatives in 2008 included the launch of a new airfreight product portfolio, the delivery of seven 747-400 jet freighters, the opening of a new airhub in Shanghai, expansion of UPS-owned operations in China, addition of Express morning deliveryto five more countries, and acceleration of delivery times on thousands of UPS Freight lanes in theUnited States.
Meanwhile, UPS announced today it will acquire its authorized service contractor in Romania,Trans Courier Service (TCS) SRL, and will take 100% ownership of the company, which has been itsagent there since 2000. UPS expects to complete the transaction in the second quarter of 2008,subject to customary closing conditions. Terms of the deal were not disclosed.
UPS said it has enjoyed solid growth in Romania over the years and in 2007 recorded a 10%gain in export volume growth compared to the prior year. More precise figures were not disclosed.TCS, with over 100 employees, operates facilities in Bucharest, Timisoara and Constanta andconnects to UPS’s global network with a flight operating between Bucharest and Cologne everyweekday.
“This acquisition is an ideal strategic and operational fit for UPS,” said Wolfgang Flick,president, UPS Europe. “Romania is clearly one of the most dynamic economies in Europe, especiallysince joining the EU last year, and we are delighted with the progression of our business in thiskey south-eastern European nation.”
