International Profit Up 45%; UPS China Records 15% Export Volume Growth YOY
SHANGHAI, April 29, 2010 -UPS (NYSE:UPS) today reported
adjusted diluted earnings per share of $0.71 for the first quarter of 2010, a
37% gain over the adjusted $0.52 for the prior-year period. Revenue increased 7%
to $11.7 billion. Growth in the international package and supply chain
businesses, yield improvement and increased operating leverage resulted in
margin expansion in all business segments.
On a reported basis, diluted earnings per share for the first quarter of 2010
were $0.53 compared to $0.40 the prior year, a 33% improvement.
UPS reported export volume growth of more than 15% for China for the quarter
compared to the same period last year, while Asia Pacific region saw an export
volume growth of 20% this same period.
"As one of the economies leading the world out of the global recession, we
are glad our long-term investments in China have put us in the best position to
support businesses here. China has always been a top international priority for
UPS," said Richard Loi, Head of China & Senior Vice President of UPS Asia
Pacific Region. "Our investments in China over the past few years has expanded
our global network and portfolio of services, it is also a solid indicator of
our confidence in the growth potential of the Chinese market and our readiness
to help our Chinese customers increase their competitiveness within the global
marketplace."
"All major regions of the world experienced export volume improvements, and
Asia led the way with over 20% gains when compared with the same period
last year," said Derek Woodward, President, UPS Asia Pacific. "During the
quarter we also saw a promising volume jump of nearly 40% in our Asia-to-Europe
trade lanes. This is an indication that economic recovery is well under way. The
rest of 2010 will be exciting for UPS as global business picks up and we expect
increasing momentum in intra-Asian trade."
"UPS's global strategy clearly proved beneficial in the first quarter," said
Scott Davis, UPS's chairman and CEO. "Our broad product portfolio and
solutions-based approach to customers' logistics needs enabled the company to
capture new business. In addition, our worldwide integrated network generated
significant margin expansion. With global economies showing signs of recovery
and UPS's strong start to 2010, we are optimistic about this year and the
future."
| |
|
Adjusted |
|
Adjusted |
| Consolidated Results |
1Q 2010 |
1Q 2010 |
1Q 2009 |
1Q 2009 |
| Revenue |
$11.7 B |
|
$10.9 B |
|
| Operating profit |
$1.0 B |
$1.2 B |
$718 M |
$899 M |
| Operating margin |
8.9% |
10.0% |
6.6% |
8.2% |
| Average volume per day |
14.93 M |
|
14.54 M |
|
| Diluted earnings per share |
$0.53 |
$0.71 |
$0.40 |
$0.52 |
For the three months ended March 31, 2010, consolidated volume totaled
940 million packages, a 3% increase. Average revenue per piece also
increased 3%, reflecting general rate increases and higher fuel surcharges.
In the quarter, UPS incurred a $98 million pre-tax restructuring charge
related to the reorganization of the U.S. Domestic Package segment; a $38
million pre-tax loss on the sale of a specialized transportation business in its
supply chain unit in Germany, as well as a $76 million non-cash charge to income
tax expense resulting from a change in the tax filing status of a German
subsidiary. The impact of these charges reduced net income by $175 million
and diluted earnings per share by $0.18.
In the prior-year quarter, UPS took a $181 million non-cash impairment charge
on its DC-8 fleet, which reduced net income by $116 million, or $0.12 per
share.
Cash Position
In the quarter UPS generated $1.3 billion
in free cash flow. The company also:
- Paid dividends totaling $470 million.
- Invested $280 million in capital expenditures.
- Repurchased more than 4 million shares at a cost of $260 million.
- Ended the quarter with $3.1 billion in cash and marketable
securities.
| |
|
Adjusted |
|
Adjusted |
| U.S. Domestic Package |
1Q 2010 |
1Q 2010 |
1Q 2009 |
1Q 2009 |
| Revenue |
$7.10 B |
|
$6.95 B |
|
| Operating profit |
$562 M |
$660 M |
$384 M |
$565 M |
| Operating margin |
7.9 % |
9.3% |
5.5% |
8.1% |
| Average volume per day |
12.73 M |
|
12.68 M |
|
Adjusted operating profit increased 17% on revenue improvement of 2% due
to yield gains and network efficiencies, resulting in a margin expansion of 120
basis points. On a reported basis, operating profit increased 46%.
Average volume per day was up slightly during the quarter, the first
year-over-year growth in two years. Revenue per piece improved 2% due to
increases in base pricing and higher fuel surcharges, partially offset by
changes in product mix between ground and air services.
During the quarter, UPS opened the second phase of its Worldportsm
air hub expansion, improving sort capacity from 350,000 to 416,000 packages per
hour. The expansion helps further optimize the UPS air network, enabling
the use of larger, more fuel efficient aircraft.
In addition, the company introduced UPS Smart Pickupsm, an
industry-first application that combines customer and operational systems to
ensure a driver stops to pick up a package only when a customer has prepared a
package for shipment. The process is easy, automated and transparent to the
customer and will allow UPS to eliminate an estimated 8 million miles of driving
annually.
| International Package |
1Q 2010 |
1Q 2009 |
| Revenue |
$2.64 B |
$2.24 B |
| Operating profit |
$427 M |
$294 M |
| Operating margin |
16.2 % |
13.1 % |
| Average volume per day |
2.20 M |
1.86 M |
The International Package segment posted an 18% jump in revenue with
operating profit increasing 45%. Average daily volume also increased 18% during
the quarter, outpacing market growth once again with all regions contributing.
Export volume increased more than 9% due to strong growth in all major trade
lanes.
Non-U.S. domestic volume increased 24%, driven by an acquisition in Turkey in
the third quarter of last year, as well as 13% organic growth, powered by
strength in core European countries.
In the quarter, UPS began operating its new intra-Asia air hub in Shenzhen,
China, slashing at least a day off shipment time-in-transit. The company
also opened a state-of-the-art facility at the Calgary International Airport to
expedite international shipments.
| |
|
Adjusted |
|
| Supply Chain and Freight |
1Q 2010 |
1Q 2010 |
1Q 2009 |
| Revenue |
$1.99 B |
|
$1.75 B |
| Operating profit |
$53 M |
$91 M |
$40 M |
| Operating margin |
2.7% |
4.6% |
2.3% |
Each business unit in the segment recorded revenue gains, with Forwarding
and Logistics up 16%. Adjusted operating profit for the segment more than
doubled led by gains in Logistics, which continued to benefit from strength in
the high-tech and healthcare sectors. Reported operating profit improved
33%.
During the quarter, the Logistics business unit expanded its service parts
logistics (SPL) network to 89 cities in China. These facilities provide
same-day or next-business-day delivery of critical parts, particularly for
high-tech, medical equipment and aerospace customers. UPS's SPL network is
the world's largest with service in 120 countries.
In a difficult market environment, UPS Freight posted a 6% LTL revenue gain
driven by a 10% increase in revenue per hundredweight.
Outlook
"UPS achieved significant operating leverage in
an improving global economic environment," said Kurt Kuehn, UPS's chief
financial officer. "In the first quarter we realized the benefits from the
hard work we have been doing to streamline our operations. First quarter
results exceeded our expectations and set a strong foundation for the rest of
2010.
"We expect first quarter trends to continue through the year, producing
revenue growth and additional operating leverage," he added. "Therefore,
UPS recently raised adjusted earnings guidance for the year to a range of $3.05
to $3.30 per diluted share, an increase of 32% to 43% over adjusted 2009
results.
"Going forward, we're determined to sustain the enhancements we've made to
our cost structure," Kuehn continued. "We'll continue to invest for the
future while remaining focused on disciplined, profitable growth. We're
very confident that our diversified, global product portfolio will help us
capitalize on the growth opportunities ahead."
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