UPS today announced a sharp rise in net profits for the fourth quarter of 2009 following stronginternational volumes driven by a boom in Asia exports, and gave a cautiously optimistic outlook
for better results this year on the back of an improving world economy.In Q4, UPS improved its net profit to $757 million from $254 million one year earlier. Theoperating profit rose by 56.8% to $1,259 million, although this was lower than the adjusted Q4,2008, figure of $1.38 billion. Revenues declined 2.5% to $12,377 million, leaving the Q4 operatingmargin at 10.2%. Consolidated average daily volumes were flat at 17.3 million but total packagevolumes over the three months rose 1.4% to 1.1 billion pieces.
During the holiday shipping season, global volume exceeded 22 million packages on eight days,including two on which it exceeded 24 million packages. UPS said it experienced more deliveryvolume than in 2008 on each of the seven days before Christmas. A well-executed peak seasonoperating plan and significant growth in online retail sales contributed to thestronger-than-expected results for the quarter, the company pointed out.
For the full year, UPS reported net profits of $2,152 million, down 28.3%, while itsoperating profit dropped 29.4% to $3,801 million. Revenues declined 12% to $45,297 million. Thecompany delivered 3.8 billion packages, an average of 15.1 million per day, down from 15.5 millionin 2008.
“UPS ended 2009 on a high note by leveraging network changes implemented throughout the yearand executing flawlessly during the peak holiday shipping period, which was stronger than we hadanticipated,” said UPS chairman and CEO Scott Davis. “The company demonstrated its ability tomanage effectively in changing market conditions. UPS has emerged from the worst recession indecades leaner, more focused and better positioned to take advantage of increased global trade.”
UPS increased international package revenues by 5.8% to $2,791 million in the fourth quarterand improved the international operating profit by 27.6% to $467 million thanks to higher volumesand cost management. The operating margin rose to 16.7% from 13.9%, the highest since the fourthquarter of 2007.
Average daily volume growth of 11.8% was driven by increases of 3.1% in export and 17.8% innon-US domestic. All regions experienced export volume growth, led by Asia and the UnitedStates. Domestic volume improvement was driven by a third-quarter acquisition in Turkey alongwith strong performance in Europe and Canada. Asian export volumes increased as customers upgradedfrom air freight to express in response to unexpected higher demand and tight capacity, CFO KurtKuehn told analysts in a conference call.
The US domestic package business saw revenues fall 5.5% to $7,552 million in the fourthquarter, and the operating profit fell 18% to $764 million. The operating margin dropped to 10.1%from 11.7% one year earlier, although this was the highest level in 2009.
Q4 US air volume increased with Next Day Air up 2.8% and deferred up 4.3%. However,ground volume per day was down 2.9%. Total US average daily volume decreased 1.9%. The 5.2% declinein revenue per piece was driven primarily by lower fuel surcharges and weight declines.
The Supply Chain and Freight division saw revenue drop 1.8% to $2,034 million and theadjusted operating profit dropped to $28 million due to declines in global forwarding and UPSFreight. Forwarding’s operating margin was challenged by rapidly escalating transportationcosts stemming from a surge in demand in a capacity-constrained environment out of Asia. TheLogistics business recorded an increase in revenue, driven by growth in the healthcaresector. Improved operating efficiencies and contract management produced strong results.
UPS Freight experienced a difficult fourth quarter. Revenue per hundredweight increased,but shipments were flat and tonnage declined. The unit posted an operating loss for thequarter due to the extremely competitive pricing environment in the LTLbusiness. Year-over-year, UPS Freight gained market share.
Looking ahead on an optimistic note, CEO Scott Davis told analysts: “It looks like therecession is finally over.” UPS had seen firm demand in January and believed there would be agradual economic recovery over the course of the year, he commented.
Kuehn said US volumes had been flat in January and he expected “firm” domestic volumes in thefirst quarter together with “solid” international growth. The international package business shouldgenerate higher operating profits this year, he predicted.
“Economic forecasts indicate gradual improvement as 2010 unfolds,” Kuehn stated. “The firstquarter will be the most challenging of the year for UPS with profitability only slightly betterthan last year. For 2010, UPS will substantially improve performance by leveraging our extensiveproduct portfolio and global network,” he continued. “As a result, we anticipate that dilutedearnings per share should be within a range of $2.70 to $3.05, an increase of 17% to 32% over 2009results.”
