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UPS posts modest Q1 growth amid challenges

By control on April 26, 2012

Sluggish freight volumes out of Asia and shifting product mixes stifled some of UPS’ first-quarter growth, despite a 10-percent, year-over-year, surge in diluted earnings. Still, double-digit increases in the integrator’s Domestic and Supply Chain and Freight segments — with operating profit rising 13 percent and 19 percent, year-over-year, respectively — helped the integrator stay profitable during the quarter.

Domestically, however, “increases in revenue per piece produced by higher base rates and fuel surcharges were mostly offset by changing product and customer mix, as e-commerce continued to drive volume growth,” according to a press release.

Even so, the global logistics provider saw revenue in its domestic segment rise 6.1 percent, year-over-year, in the first quarter, an increase driven largely by 4.5 percent, year-over-year, daily volume growth. According to the press release, UPS Next Day Air volume also surged in the first three months of 2012, increasing 5 percent, year-over-year.

“These results demonstrate that UPS is providing its customers with the solutions needed for today’s ever-changing market conditions,” UPS CEO Scott Davis said in a statement. “We will continue to invest and develop innovative services that facilitate global commerce, ensuring UPS’ long-term success.”

The integrator made a significant investment on March 19, when it bought Dutch shipper TNT Express for $6.77 billion. According to the press release, this acquisition “will further expand UPS’ portfolio of solutions and geographic footprint. The complementary strengths of both organizations will create a customer-focused global platform and a leader in the logistics industry.”

UPS’ February acquisition of Brussels-based Kiala is also expected to expand the integrator’s service portfolio. In a conference call discussing the company’s first-quarter earnings, Davis commented that Kiala’s “retail delivery network and unique technology will benefit UPS, as we continue to look for ways to serve the growing [business-to-consumer] market, especially outside the U.S.”

The integrator’s international business segment brought mixed results in the first-quarter, however. Although revenue reached $2.97 billion — a 2.3 percent, year-over-year, increase — revenue per piece declined slightly. “Continued weakness out of Asia and increased intra-regional volumes also negatively impacted yield growth,” according to the press release.

Still, UPS sees great promise in its Latin American network. According to the press release, UPS more than doubled its freight capacity to Latin America during the first quarter and introduced a route to Guadalajara, opening up markets in western Mexico.

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