UPS reported a respectable fourth quarter. Its Q4 revenue
increased just shy of 3% to $14.57bn as once again the US domestic business led
the growth increasing 3% to $8.93bn. Residential shipments, due the growth of
ecommerce, were strong and resulted in a new high for operating profit in this
segment to $1.4bn. Average daily volume increased 3.2% with US Next Day Air up
8% and Ground up 3%.
The uncertain global economy was still a factor in the
international package segment as overall revenue increased only 1.6%. Customers
continued to trade down to non-premium products however, the growth in demand
for these products was evident as international export volumes increased 5%. International export volume from Asia grew in
the mid-teens and was aided strongly by the tech sector. Within Europe,
Germany, Italy and the UK showed solid export increases.
The Supply Chain and Freight Forwarding segment reported a
4% increase in Q4 revenue to $2.4bn. The
Freight Forwarding and Logistics revenue increased 2.5% while UPS Freight
revenue increased 6.2%. Although there was a revenue increase, margin and
profit declined for the total segment. For example, transportation expense
increased particularly in Asia where the air freight market saw a short term
volume surge which exceeded capacities and drove up buy rates. Also, three
additional healthcare facilities opened and the rollout of technology
enhancements within these facilities continued. It was noted on the earnings
call that Ocean Freight Forwarding had its most profitable year in 2012 thanks
in part to its LCL offering.
Although the European Commission’s negative ruling on the
TNT acquisition was a major disappointment to the company, it remained positive
in its growth opportunities in Europe. According to Dan Brutto, UPS President
of International, there are opportunities to expand in certain areas of Europe
and Eastern Europe such as expanding its healthcare operations across the
region. Also, the European ecommerce market appears to be another interest as
UPS plans to announce the expansion of its European parcel network, Kiala, into
the UK.
For 2013, UPS expects overall revenue to increase mid-single
digits with domestic and export daily volume growing faster than global GDP.
For the Supply Chain and Freight segment, revenue is expected to increase at
the mid-to-high single digits with a profit growth of 10%.
