UPS celebrates new hubs, Q1 profit
UPS celebrates new hubs, Q1 profit
UPS on Tuesday said first quarter operating profit increased 45 percent to more than $1 billion, compared to $718 million in the prior year period.
The integrated logistics company also announced the opening of a new hub in China and more capacity at its main U.S. package hub.
Atlanta-based UPS said it enjoyed expanded profit margins in all business segments thanks to growth of its international package delivery and supply chain businesses, yield improvement and better network efficiencies. Operating margins were up 8.9 percent in the quarter.
'We expect first quarter trends to continue through the year, producing revenue growth and additional operating leverage,' said Kurt Kuehn, UPS's chief financial officer. 'Going forward, we're determined to sustain the enhancements we've made to our cost structure. We'll continue to invest for the future while remaining focused on disciplined, profitable growth.'
The optimistic outlook led UPS to recently raise its adjusted earnings guidance for the year to a range of $3.05 to $3.30 per diluted share, up 32 percent to 43 percent over adjusted 2009 results.
Earnings on an adjusted basis rose 37 percent to 71 cents per share as volume increased 3 percent to 940 million packages and revenue increased 7 percent to $11.7 billion. UPS said its average revenue per piece rose 3 percent, reflecting general rate increases and higher fuel surcharges.
The operating profit numbers exclude a one-time domestic management restructuring charge for severance benefits of $98 million, a $38 million loss on the sale of a specialized transportation business in Germany, and a $76 million tax expense associated with the sale.
Net income at UPS was up 33 percent to $533 million through March 31, with diluted earnings at 53 cents per share on a non-adjusted basis.
Average daily volume for UPS's domestic U.S. package business rose for the first time in two years to 12.73 million pieces. Unit operating profit increased 46 percent as revenue improved 2 percent to $7.1 billion.
During the quarter, UPS completed the four-year expansion of its high-tech Worldport hub in Louisville, Ky., which improves sort capacity to 416,000 packages per hour from 350,000 per hour. UPS said the larger facility increases operating efficiency by allowing it to use larger, more fuel-efficient planes. The expansion also increased to 70 the number of aircraft parking bays, allowing UPS to handle more aircraft each night.
The $1 billion expansion increased Worldport's footprint by 1.1 million square feet to 5.2 million square feet — the equivalent of more than 90 football fields — and the hub now contains 155 miles of conveyors. The original Worldport facility was completed in 2002.
UPS said it completed the project ahead of schedule and under budget.
As previously announced, UPS introduced UPS Smart PickUp during the quarter. The application notifies the driver when a customer has tendered a package for shipment so that drivers don't make unnecessary stops to check if customers have outgoing shipments. The new process is expected to save UPS 8 million miles of driving each year.
Average daily international package volume jumped 18 percent to 2.2 million per day. The international package segment enjoyed an operating margin of 16.2 percent on overall profit of $427 million, up 45 percent from the same quarter in 2009. International package revenue increased 18 percent to $2.64 billion. Sales were boosted by 13 percent growth in Europe and the acquisition of a courier in Turkey last year.
UPS said Tuesday that its intra-Asia hub at Shenzhen International Airport, is operational. The $180 million hub, almost 1 million square feet in size, will slash one day off shipment time for regional customers and provide new service levels to manufacturers in the area. The facility includes an express customs-handling unit. The Shenzhen hub replaces a UPS hub at the former Clark Air Force Base in the Philippines. It can process up to 18,000 pieces per hour compared to the 7,500 pieces per hour at the former Philippine facility.
Last year, UPS opened a new international air hub at Pudong International Airport in Shanghai for shipments moving to and from other parts of the world.
UPS reported operating profit of $53 million, up 33 percent prior to adjustments, for the Supply Chain and Freight segment. The forwarding and logistics business units posted revenue gains of 16 percent, ahead of the 13.6 percent revenue increase for the consolidated segment. Less-than-truckload revenue increased 6 percent at UPS Freight on the strength of a 10 percent increase in revenue per hundredweight despite a weak U.S. trucking market.
UPS said it expanded its service parts logistics operation to 89 cities in China during the first three months of the year.