UPS's third quarter profits plunge 43pc to US$549 million

UNITED Parcel Service Inc (UPS) has posted a third quarter net profit of US$549 million, a decrease of 43 per cent compared to the same quarter last year. Revenue in the quarter ended September 30 fell 14.9 per cent year-on-year to $11.15 billion, down from $13.11 billion for the third quarter of 2008.The company said in a statement that a "stabilising economic environment led to improving volume trends during the quarter, while UPS's international business continued to increase market share."

Consolidated volume for the quarter under review, totalled 927 million packages, down 2.4 per cent from the same period in 2008. Average daily volume and revenue per piece declined 3.9 per cent and 11.3 per cent respectively.
Operating profit decreased to $929 million, down from $1.63 billion a year earlier, as the benefits of substantial cost reductions and productivity gains were said to have been more than offset by the economic impact of lower volumes and changes in product mix.
"I'm encouraged by the signs of economic recovery that are becoming apparent, although we still have a long way to go," said UPS chairman and CEO Scott Davis. A breakdown of the results by segment show that third quarter US domestic package revenue was $6.87 billion, down from $7.84 billion for the corresponding prior year period. Domestic package volume declined by 3.6 per cent year-on-year to 799 million pieces. Average daily volume dropped by 5.1 per cent to 12.3 million.

International package revenue during the third quarter amounted to $2.42 billion, down from $2.95 billion for the year earlier quarter. International average daily volume rose by four per cent to 1.97 million. Domestic volume in countries other than the US grew by 9.1 per cent due to expansion of services and an acquisition in Turkey.
Supply chain and freight revenue in the third quarter amounted to $1.86 billion, down from $2.32 billion for the year earlier period. The company said "both the logistics and forwarding business units experienced moderation in the rate of revenue decline. The logistics unit again achieved significant growth from its services to the healthcare industry.
"UPS Freight performance was negatively impacted by increasingly competitive conditions in the freight environment," said the company statement.

Looking ahead the company pointed out that in spite of signs of economic recovery, analysts predict US consumers will spend conservatively this holiday season.
"Our customers have widely differing views on their outlook for the holiday season. Nevertheless, UPS is primed to handle the seasonal package surge as it materialises," said UPS chief financial officer Kurt Kuehn.