A recovery in export volumes from Asia contributed to record third-quarter international profitfigures for UPS, while its domestic package volumes and revenues also rose thanks to growth in
e-commerce traffic, although overall revenues and profits were slightly down, year on year.UPS’s international package segment produced an operating profit of $449 million (€345 million),up 7.7% over the prior-year period, with operating margin increasing 170 basis points over theprior-year period to 15.3%, due to export package growth, network changes and currency conversionchanges. For the first time in several quarters, Asia exhibited growth in export package volume, “benefitting from product launches and easier comparisons”, UPS said. Although the rate ofgrowth in Europe has slowed, it remained positive.
International package revenue declined 3.7%, as the impact from lower fuel surcharges andcurrency exceeded the benefit from the 1.2% growth in daily export volume.
US Domestic revenue increased $94 million over the prior-year period, driven by a 3.7% gain indaily package volume. Adjusted operating profit declined $21 million, impacted negatively byone less operating day and the timing of the fuel surcharge. On a reported basis, operatingprofit was $129 million as a result of pension restructuring.
Rapid e-commerce growth drove gains in daily volumes, with Ground and Deferred up 3.0% and 9.3%,respectively. Next Day Air volume expanded 5.7% over the prior-year period, as retailerscontinued to use the UPS Next Day Air Saver product to differentiate their offerings.
Base rate improvements were more than offset by lower fuel surcharges, and changes in productand customer mix. Consequently, revenue per package declined 0.8% from the same quarter lastyear.
Operating margin for the company’s Supply Chain and Freight segment remained strong at8.3%. Operating profit was down $15 million, as declines in freight forwarding were partiallyoffset by improvement in UPS Freight. The Freight Forwarding unit was pressured byovercapacity in the market, especially out of Asia. Revenue decreased as lower yields offsetmodest tonnage gains.
Although the company’s Distribution unit experienced strong revenue growth, investments inhealthcare capabilities and infrastructure weighed on margin expansion. Recently, UPS openedthree new healthcare distribution facilities in Sydney, Australia and in Shanghai and Hangzhou,China.
UPS Freight revenue increased 3.6% as shipments per day were up slightly. LTL revenue pergross weight hauled improved over the prior year period, resulting in operating marginexpansion.
Overall group revenue declined from $13.17 billion to $13.07 billion, while adjusted operatingprofit also declined fractionally, from $1.67 billion to $1.66 billion.
Scott Davis, UPS chairman and CEO, expressed satisfaction with the results overall. “Our resultswere achieved in an environment of slowing global trade and changing market dynamics,” he said. “This not only highlights the flexibility of our business model; it illustrates the breadth of theUPS product portfolio in meeting the needs of customers.”
The company updated its full-year 2012 guidance for adjusted diluted earnings per share to arange of $4.55 to $4.65, reflecting greater confidence in fourth-quarter execution.
“UPS performance this quarter reflects the ability of our global network to adapt to soft macroconditions,” said Kurt Kuehn, UPS chief financial officer.
“While there is some uncertainty around the magnitude of the holiday shopping season, we areconfident in UPS’s ability to deliver,” Kuehn continued. “As a result, we enhanced our guidance bynarrowing the range, maintaining our previous midpoint. We anticipate 2012 adjusted dilutedearnings per share to be within a range of $4.55 to $4.65, an increase of 5%-to-7% over 2011adjusted results.”
