UPS nearly triples fourth quarter profit to US$757 million

UNITED Parcel Service (UPS) has nearly tripled its fourth quarter net income which soared to US$757 million, compared with net income of $254 million for the same quarter last year.

The company attributed the improvement "in large measure to strong performance by its international segment. That segment saw volume growth, a substantial gain in operating profit and improvement to a 16.7 per cent operating margin."

The strong result also comes on the back of cost and capacity reductions that helped lower expenses by 6.5 per cent, while revenue in the last three months of 2009 declined by 2.5 per cent compared with the fourth quarter a year earlier to $12.38 billion.

Fourth quarter 2009 operating profit amounted to $1.26 billion, up from $803 million a year earlier. UPS' consolidated operating margin rose to 10.2 per cent, up from 6.3 per cent for the fourth quarter of 2008, a company statement said.

For the whole of 2009, UPS earned a $2.15 billion profit, 28.3 per cent lower than 2008's result. The company generated free cash flow of $4.1 billion. On a reported basis operating profit was $3.8 billion. Revenue decreased 12 per cent to $45.3 billion. UPS ended 2009 in a strong financial position with $2.1 billion in cash and short-term investments.

"UPS ended 2009 on a high note by leveraging network changes implemented throughout the year and executing flawlessly during the peak holiday shipping period, which was stronger than we had anticipated," said UPS chairman and CEO Scott Davis.

For the three months ended December 31, package volume rose 1.4 per cent to 1.1 billion pieces while average volume per day remained unchanged at 17.3 million packages, a company statement said.

For the full year, UPS delivered 3.8 billion packages, an average of 15.1 million per day, down from 15.5 million in 2008.

The company's US Domestic Package segment saw fourth quarter 2009 revenue fall 5.2 per cent to $7.55 billion, down from $7.99 billion for the same quarter the previous year driven primarily by lower fuel surcharges and weight declines. Operating profit decreased to $764 million, down from $932 million as the operating margin shrunk to 10.1 per cent, down from 11.7 per cent for the same quarter in 2008.

This comes as fourth quarter air volume increased with Next Day Air up 2.8 per cent and deferred up 4.3 per cent, however, ground volume per day was down 2.9 per cent year on year.

UPS' International Package segment posted fourth quarter 2009 revenue of $2.79 billion, up 5.8 per cent from $2.64 billion a year earlier, while operating profit rose 27.6 per cent to $467 million, up from $366 million in the fourth quarter of 2008.

Average daily volume growth of 11.8 per cent was driven by increases of 3.1 per cent in export and 17.8 per cent in domestic. All regions experienced export volume growth, led by Asia and the United States. Domestic volume improvement was driven by a third-quarter acquisition in Turkey along with strong performance in Europe and Canada.

During the quarter, UPS continued investing for the future with the opening of its expanded hub in Toronto, which more than doubled its package handling capability.

Looking ahead to 2010, "The first quarter will be the most challenging of the year for UPS with profitability only slightly better than last year," said UPS chief financial officer Kurt Kuehn. "We also expect cash generation to remain strong in 2010, with capital expenditures totalling $1.8 billion. This is well below our historical range but still supports growth opportunities."

(Source: www.schednet.com)