UPS: Continued slow growth for 2011

United Parcel Service (UPS) posted a third-quarter consolidated net income of US$1.04 billion, up five per cent from $991 million year-over-year. UPS chairman and CEO Scott Davis attributed the results to a “deceleration in exports from Asia and a challenging global economic environment.” Operating revenue rose eight per cent to $13.2 billion from $12.2 billion while operating expenses increased 9.2 per cent to $11.55 billion, producing an operating profit of $1.62 billion, up 0.2 per cent from the year-ago quarter. “There is increasing uncertainty in the global economic environment, most notably exports from Asia, which slowed considerably during the quarter. On the other hand, it appears as if the US economy has stabilised and continues to show modest growth. Despite all the concerns of the European economy, our business there continues to perform well, with exports up nine per cent,” Davis said. In the domestic segment, UPS CFO Kurt Kuehn said the company’s operating margin is the “highest we’ve experienced in three years, improving 13.1 per cent due to higher yields.” On the international side, operating profit was $409 million, down 2.4 per cent, which Kuehn attributed to “excess capacity, higher fuel prices and the slight drag from currency fluctuations.” As volumes declined on the Asia to US link, Kuehn said UPS “acted swiftly to take down aircraft and pull capacity out of the market, but not quickly enough as margins were negatively impacted.” Despite this slowdown, Kuehn said UPS International revenue jumped more than 14 per cent, to $3.06 billion, “driven by solid volume growth in other theaters.” Looking ahead, Davis said the outlook for the remainder of the year is for “continued slow growth.”