UPS posts $791 million profit on international strength
UPS’ international package business helped the world’s largest parcel delivery company increase revenue 7.7 percent to $8.95 billion and profits 20.4 percent to $890 million (adjusted to $791 million due to $99 million in payment of disputed income taxes) during the third quarter.
During the quarter ended Sept. 30, worldwide average daily volume increased 445,000 packages per day to 13.7 million, a 3.4 percent increase. Total international export package volume grew 13.2 percent, while the primary non-package business, UPS Supply Chain Solutions, increased revenue 10 percent to $591 million.
The Atlanta-based company’s operating profit rose 9.7 percent to $1.26 billion.
During the first nine months of 2004, consolidated revenues rose 8.9 percent to $26.74 billion compared to the same 2003 period. Operating profit totaled $3.79 billion, up 19.3 percent, and net income increased $2.47 billion, up 20.8 percent.
UPS experienced strong growth in international business while domestic activity grew at a slower pace. International package revenue rose 21.6 percent to $1.67 billion on a 13.2 percent gain in export package volume and a 4.1 percent increase in domestic package volume in other countries during the third quarter. Package exports from Asia rose 29 percent as Chinese exports more than doubled. International operating profit jumped 49 percent to $262 million and margins reached 15.7 percent. In August, UPS added three additional flights to its air network to handle demand between Asia and Europe.
U.S. package operating profit moved up 3.9 percent to $857 million on the strength of a 4.4 percent increase in revenue to $6.5 billion. Results were lower than expected because of the four hurricanes that disrupted commerce and UPS operations during August and September.
Average daily ground volume grew 4.5 percent. UPS said Next Day Air volume was down due to a decline in mortgage refinancing activity from record levels in 2003. Excluding letters, Next Day package volume increased. But Next Day yield continued to post healthy gains, up 8.6 percent to $20 per package vs. a 0.5 percent increase to $6.43 per piece for ground.
Logistics, financing and other non-package units totaled $792 million in revenue, up 9.5 percent, with operating profit of $139 million.
UPS officials noted in a conference call with analysts that UPS could realize additional fourth quarter gains from the diversion by some companies of ocean freight to air to avoid congestion at West Coast ports.