UPS SAYS LABOR UNCERTAINTIES WILL IMPACT THIRD-QUARTER RESULTS
Despite successfully negotiating a new six-year labor contract with the Teamsters two weeks early, UPS said diverted U.S. domestic business by skittish customers will impact the express giant's third-quarter results.
The early July volume diversion by customers fearing a Teamsters strike or work disruption, will impact third-quarter earnings by 4 to 5 cents per share, said Scott Davis, UPS's chief financial officer.
'UPS's domestic volume for the entire third quarter should fall slightly below last year's level,' Davis said. 'without the July diversion, UPS would have been on track for low-teens earnings growth for the third quarter.'
U.S. domestic package volume was down 4 percent in June as well, UPS said.
UPS's second-quarter net income was off 3 percent to $611 million, while revenue rose 2.5 percent to $7.68 billion. Consolidated operating profit slipped 1.2 percent to $1.03 billion.
The U.S. domestic segment's operating profit declined 6.9 percent to $899 million, while revenue was off 1.2 percent to $5.91 billion. Package volume declined 2.6 percent due to slow economic conditions and the cargo diversions.
In the international segment, operating profit jumped 158.3 percent to $62 million, on a 9-percent increase in revenue to $1.14 billion. Export volume increased 8.8 percent, with Asia up 17 percent and Europe up 13 percent. The quarter benefited from the opening of an intra-Asia air hub in the Philippines, which improved service levels within Asia and to Europe, and volume from countries on those lanes climbed 20 percent.
In the non-package segment, operating profit rose 13.4 percent to $67 million on a 37.0-percent jump in revenue, to $630 million. This reflected improvements in UPS Freight Services and Logistics, UPS said.
Adjusted net income for the first six months, which excludes non-recurring items, was $1.17 billion, down 1.9 percent from the same period in 2001.
While the Atlanta-based company said it's on a 'comprehensive effort' to regain the diverted volume, it anticipates more than half of the diverted volume returning quickly, while some of the remaining volume returning after expiration of multi-month contracts with competitors. Some diverted cargo will likely not return, UPS said.