UPS today announced a 21% rise in Q1 adjusted operating profits after a strong start to the yearthanks to higher prices and raised its profits guidance for the full year.
The company increased its global revenue by 7.3% to $12.58 billion between January and March2011 and the average daily volume rose slightly to 15 million packages from 14.9 million.
Its operating profit rose to $1.43 billion, which was 21.1% higher than the adjusted previousyear figure of $1.18 billion and 37% higher than last year’s reported figure of $1.04 billion. Theoperating margin increased to 11.3% from last year’s 10.0% (adjusted) and 8.9% (reported). Netprofit grew to $885 million, which was 25% higher on an adjusted basis and 66% higher on a reportedbasis.
Based on the company’s performance, UPS has increased its guidance for 2011 diluted earnings pershare to a range of $4.15-to-$4.40, an increase of 17-to-24% over 2010 adjusted results.
“UPS produced strong first quarter results despite rapidly rising fuel costs and challengingweather conditions,” said Scott Davis, UPS chairman and CEO. “Once again we demonstrated thestrength of our global portfolio and ability of our integrated operating model to further expandmargins.”
In the first quarter of 2010, UPS incurred $175 million in charges that reduced diluted earningsper share by $0.18. Those charges related to the US domestic segment reorganisation, a loss onthe sale of a supply chain unit and a change in the tax filing status of a Germansubsidiary.
The US domestic package operation grew well thanks to higher prices and surcharges and increasedsales of premium products. The unit increased revenue by 6.2% to $7.54 billion even though averagedaily volume dropped back to 12.67 million packages from 12.73 million in Q1, 2010.
“Premium product growth outpaced ground as UPS Next Day Air package volume grew at a mid-singledigit rate. Revenue per piece for the segment improved 5%, primarily driven by increases in baserates and higher fuel surcharges,” the company said. Next Day Air revenues were 8.2% higher.
As a result, US domestic operating profit jumped 29% to $849 million on an adjusted basis, andwas 51% higher on a reported basis. The operating margin of 11.3% was two percentage points higherthan last year on an adjusted basis due to higher yields and operational efficiencies, and 340basis points higher on a reported basis.
UPS’ international business continued to grow well in the first quarter of 2011. Revenues were10% higher at $2.9 billion and average daily volume rose 4% to 2.29 million pieces from 2.2 millionone year ago. Operating profit improved 4.4% to $446 million, but the operating margin dropped backto 15.4% from 16.2% in Q1, 2010.
“Europe led the way with strong export volume growth that was balanced to all regions of theworld,” the company declared. “Revenue per piece climbed 3.8% as the gains from rate increases,higher fuel surcharges and product mix were offset somewhat by currency.” Export volumes rose 7.2%while non-US domestic volumes were 2.1% higher.
The Supply Chain and Freight division improved profits significantly. Operating profit soared44% on an adjusted basis to $131 million and was up 147% on a reported basis. The division’srevenues were 7.6% higher at $2.14 billion, and the operating margin rose to 6.1% from 4.6%. TheUPS Forwarding & Logistics business increased revenues 2.7% to $1.43 billion and improved itsprofit margin, while UPS Freight, the US trucking business, increased revenues by 23% to $604million and generated higher volumes.
Looking ahead, the company increased its guidance for 2011 diluted earnings per share to a rangeof $4.15-to-$4.40, an increase of 17-to-24% over adjusted 2010 results. “The strategies are inplace for UPS to achieve record results in 2011,” CFO Kurt Kuehn added.
