UPS today unveiled a 44% rise in operating profits in the final quarter of 2010 and confidentlypredicted record profits this year driven by higher margins and international growth.
The company will stay alert for international acquisition opportunities and will expand its airfleet with two more B747-400s and five additional B767s, executives said in a Q4 conference call. “We are always keeping our eyes open,” CEO Scott Davis told analysts. The company would maintain itskey focus on Asia and Central Europe as growth markets, he said.
Internationally, UPS would continue to focus on growth, supported by its very high profitmargins, and would invest around the world in the network and market sectors such as healthcare,CFO Kurt Kuehn added. The company had gained international market share in 2010, he claimed.
The domestic package business should grow at or about 3%, which would be at the same rate as USGDP, and its margins should improve further in 2011, Kuehn said. The domestic next-day air serviceshould be helped in 2011 by the “pretty low” inventory-to-sales ratios and the expected industrialproduction growth of 4%, Davis pointed out.
In the October-December fourth quarter of 2010, UPS increased global revenue by 8.4% to $13.4billion, held the rise in operating expenses to 4.4% and improved its operating profit by 44% to$1.8 billion. The reported operating margin improved to 13.5%. Package volumes rose 3.9% to total1.1 billion pieces and by 2.1% on an average daily basis. Net income rose 47.8% to $1.1billion.
For the full year 2010, the company’s revenues grew 9.4% to $49.5 billion and the operatingprofit improved by 54.5% to $5.9 billion. Net profits went up 62% to $3.5 billion. Volumes went up3.4% in total and also on an average daily basis.
“UPS again demonstrated exceptional earnings growth by leveraging the strength of its network toprovide solutions for customers,” Davis stated. “I’m encouraged by the opportunities we see in 2011as UPS continues to expand into emerging markets while demonstrating the power of the logisticscapabilities we’ve built worldwide.”
Based on expectations for 2011, UPS is providing annual guidance for diluted earnings per shareto a range of $4.12-to-$4.35, an increase of 16-22% over 2010 adjusted results. This would exceedthe peak earnings level recorded in 2007.
In Q4, 2010, the US Domestic Package business increased revenues by 7% to $8.1 billion and theoperating profit increased 37% to $1.04 billion. The operating profit margin rose to 12.9% from10.1% due to higher yields, operational efficiencies and volume growth.
Average daily package volume was up 1.7% during the quarter due to growth in UPS Next Day Airand Ground. Revenue per piece improved 3.5%, primarily through increases in base pricing andhigher fuel surcharges. B2C shipments accounted for about 35% of the domestic package business inQ4, and grew at high, single-digit rates during the year as a whole, Kuehn pointed out.
The International Package business increased Q4 revenue by 9% to $3.05 billion and improved itsoperating profit by 15% to $537 million. The operating margin expanded to 17.6% as a result ofvolume growth, yield improvement and excellent cost management. Export average daily volumeincreased 8.7%.
UPS said it experienced strong growth from key export countries, with China up more than30%. European exports continued to show solid performance, led by double-digit gains inGermany.
The Supply Chain and Freight division increased Q4 revenue by 12.8% to $2.3 billion and theadjusted operating profit improved more than sixfold to $176 million. The adjusted operating marginfor the segment increased 630 basis points to 7.7%.
Forwarding and Logistics revenue increased 10.1% to $1.6 billion, driven primarily by revenuemanagement initiatives in the Forwarding business unit. UPS Freight outpaced the market withrevenue up 23% due to double-digit growth in shipments per day, an increase in gross weight hauledand significant yield improvement.
