UPS reports higher 4th quarter revenue, poor growth in ground volumes
Strong double-digit growth in revenue from international packages and logistics services helped UPS report a 10 percent increase in its fourth-quarter revenue to $9.8 billion, despite volume growth of just 2 percent at the company’s core U.S. domestic ground transportation business.
International package revenue for the latest quarter grew 23 percent to $1.9 billion. Domestic package revenue went up 7 percent to $7.1 billion, of which ground package revenue was $4.6 billion, up 4 percent. UPS Supply Chain Solutions, the logistics arm of the group, increased its revenue 21 percent to $1.4 billion in the latest quarter.
UPS officials said they are taking immediate steps, including instituting a management hiring freeze, to reduce costs and build back lost market share in the U.S. ground market. On the revenue side, the company plans to focus attention on mid-size businesses and offer them the same integrated supply chain solutions previously marketed to large customers.
UPS reported a fourth-quarter net income of $866 million for the group, up marginally from $856 million a year earlier. Operating income fell 5 percent to $1.2 billion in the latest quarter, representing 12 percent of revenue.
UPS said an unexpected slowdown in domestic package volume growth in late December and higher operating costs dragged down earnings.
In the fourth quarter, international daily package volume rose 6 percent. Asia export volume increased 34 percent, with export volume out of China up 125 percent.
Excluding an aircraft impairment charge, operating profit for the international segment jumped 40 percent to $337 million in the latest quarter, completing a year in which the segment generated more than $1 billion in operating profit for the first time.
UPS delivered almost 3.6 billion packages in 2004.
For the full year, revenue increased 9 percent to $36.6 billion, led by growth from international packages and non-package revenue. Operating profit rose 12 percent in 2004 to $5 billion, representing 14 percent of revenue. Net income for the year totaled $3.3 billion up 15 percent on 2003.
UPS said it expects solid growth in 2005, particularly on the international side.
“UPS Supply Chain Solutions will add more than $1 billion in revenue as a result of the acquisition of Menlo Worldwide Forwarding, which should be slightly accretive to earnings this year,” the company said.