Reorganisation helps UPS boost profits

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UPS saw operating profit rise 57 per cent to $1.4 billion in the second quarter on sales up 13 per cent.

“UPS fired on all cylinders in the second quarter even in the face of a mixed global economic environment,” said chairman and chief executive Scott Davis.

“Our US domestic reorganisation is producing better than expected results. Substantial growth in our international segment continues to outpace the market. It’s clear the strategic direction we’ve set for the company is proving successful.”

For the three months to 30th June, operating margin increased by 320 basis points to 11.5 per cent and consolidated volume totalled 948 million packages – a four per cent increase. Revenue per piece improved by seven per cent, reflecting higher base rates, fuel surcharge increases and heavier average shipment weight.

In the international parcels business, operating margin rose from 13 per cent to 18.8 per cent while operating profit was up from $293m to $521m. Operating margin in the US domestic parcel business increased from seven per cent to ten per cent.

However, operating margin in the supply chain and freight division fell from seven per cent to 6.1 per cent. Operating profit was up from £126m to £133m on a rise in sales.

The group said: “Each business unit in the segment improved profitability. Forwarding led the way with tonnage growth exceeding 30 per cent. However, margin expansion was limited due to capacity constraints in the global air freight market.

Kurt Kuehn, UPS’s chief financial officer, said: “We experienced strong revenue growth across the board, with substantial margin expansion in our US and International segments. Despite the anticipated slow pace of the US recovery and a cautious outlook for Europe, we are confident in our ability to grow the business and improve profits,” Kuehn added. “Therefore we are raising our full year 2010 guidance with expected adjusted earnings growth of 45 per cent-to-50 per cent per share.”


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