Mark Szakonyi, Associate Editor | Jul 24, 2012 10:33AM EDT
The United Parcel Service downgraded its outlook for the second half of the year after non-U.S. volume declined 3.2 percent year-over-year in the second quarter.
“Increasing uncertainty in the United States, continuing weakness in Asia exports and the debt crisis in Europe are impacting projections of economic expansion,” UPS Chairman and CEO Scott Davis said.
A 3.5 percent increase in U.S. package volume helped push the parcel giant’s profit up 4.1 percent to nearly $1.12 billion. Profit from U.S. operations rose 12.1 percent year-over-year to $122 million on a 4.1 percent jump in revenue to $8.06 billion in the same period.
UPS said large e-commerce customers shipping low-weight residential package drove most of the domestic growth. Ground volume increased 3 percent, UPS Next Day Air rose 5 percent and deferred air traffic jumped 8.6 percent. Average revenue per package, a key measure of pricing, ticked up 0.6 percent from the same period in 2011.
International revenue, however, slipped 4.1 percent to $3 billion compared to the same period a year ago, pulling global profit down 10.1 percent to $454 million. Export volume rose 0.8 percent year-over-year, offsetting double-digit declines in Asian shipments to Europe and the U.S. Average revenue per package fell 2.4 percent, but the key measure of pricing only fell 2.1 percent when taken on a currency-neutral basis.
The supply chain and freight division saw profit rise 3.6 percent $202 million, despite revenue falling 1.5 percent to $2.2 billion. Health care and e-commerce customers drove distribution growth, while forwarding operations felt pricing pressure because of market overcapacity, particularly out of Asia. Higher yields at UPS Freight balanced out lower tonnage, resulting in flat revenue.
The company expects to close on its $6.6 billion acquisition of TNT Express during the fourth quarter, following an extended antitrust review by the European Commission. The purchase of TNT Express will UPS’s presence in Europe, South America and Asia.
Contact Mark Szakonyi at mszakonyi@joc.com. Follow him on Twitter @szakonyi_joc.