Profit slips at UPS

Global - UPS continues to suffer at the hands of a global economic downturn, with profits slipping some 7% in its latest third quarter results.

For the three months ended 30 September, consolidated revenue per piece increased 8.1% while package volume per day declined 2.6%. Operating profit fell some 7% to US$1.63 billion from US$1.71 billion in the same quarter a year earlier.

The company's freight and supply chain businesses however saw better performance in the quarter with a 30% increase in operating profit from US$52 million in 2007 to US$129 million this year.

UPS said that despite the current economic climate, the Asia region were up to expectations this quarter.

"Growth in the region for the quarter was driven mainly by China and India, with more than 10% and 15% growth respectively, compared with the same period last year," said Derek Woodward, president of UPS Asia Pacific Region. "Our export volume from Asia to Europe also grew by more than 15%," he said.

Touching on the current economic environment, Scott Davis, UPS chairman and CEO said the company is "investing to ensure growth in the future so that the company will be even stronger when the global economy rebounds".

UPS today broke ground for its intra-Asia in Shenzhen. The US$180 million investment will take over its current hub located at the former Clark Air Base in the Philippines is expected to be operational in early 2010. UPS said the relocation is expected to reduce shipment transit times across Asia by at least one business day. UPS previously said it was exploring placing alternative operations at its Clark facility.          

The company said it has reduced its 2008 capital expenditure budget by US$200 million to US$2.8 billion and expects to reduce 2009 capital expenditures as well.

"Based on economic forecasts, we anticipate a challenging environment for a number of quarters going forward," said CFO Kurt Kuehn. "We believe the US consumer will be very conservative with spending this year."

The company expects 2008 earnings per share to remain toward the lower end of the US$3.50 - US$3.70 range it forecast during the middle of the year.

"Our focus on service, revenue management, cost reduction and our sound financial position will help us manage through these tough business conditions," Kuehn said, adding that the company has implemented a range of initiatives to ensure its network operation matches demand.