International Lifts UPS

International Lifts UPS

Copyright 2004, Traffic World, Inc.

PS cashed in on its international shipping business in both its fourth quarter of 2003 and the full year. The Atlanta-based express delivery company posted another quarter of strong earnings after a hearty peak holiday season.

UPS saw a 28 percent jump in profit for the fourth quarter with profits rising to $856 million over an adjusted profit of $670 million a year earlier.

For the full year, the company''s net income rose 19.7 percent after adjustments to $2.9 billion from $2.4 billion. Consolidated revenue increased 7.1 percent to a record $33.5 billion.

UPS''s 2002 earnings were adjusted to account for a one-time tax liability settlement with the Internal Revenue Service.

UPS Chief Financial Officer Scott Davis told analysts and reporters on a conference call that 2003 was the company''s "best year in the history of this business."

While UPS''s domestic package service was profitable, it was the company''s international business that made the real difference in its bottom line. Domestic U.S. business accounts for 75 percent of UPS''s overall business. The U.S. parcel delivery market is considered a more mature market than it was in the 1990s, and analysts predicted more restrained growth as a result. UPS fourth quarter and year-end results bear that out.

For the fourth quarter, UPS saw a 56.5 percent increase in operating profit in its international package business. That compares with a 9.6 percent increase in domestic package operating profit. International package revenue grew to $1.5 billion from $1.3 billion, a growth rate of 16.9 percent.

On the domestic side, the company reported $6.7 billion in package revenue, up 7 percent from $6.2 billion in 2002.

UPS''s nonpackage business, including its Supply Chain Solutions unit, saw less revenue growth than the package side. Fourth quarter revenue grew 2.7 percent to $755 million from $735 million.

While the package volume growth on the international side for the fourth quarter and the full year only slightly outpaced the domestic business, international revenue growth was far and above that domestically.

That differential emerged in a year in which UPS faced growing competition in the form of a stronger third marketplace competitor within the United States. In August, DHL bought Airborne Express, which had been a distant third to UPS and FedEx in the domestic parcel delivery market.

International domestic package revenue per piece grew 19 percent to $5.96, and international export package revenue per piece increased 8 percent to $33.63. That contrasts with total domestic package revenue growth per piece of 1.9 percent for the quarter. Next-day air grew the slowest at .9 percent, with revenue per piece rising to $19.01. Domestic deferred and ground revenue both grew 2.5 percent per piece to $12.56 for deferred and $6.25 for ground.

The same trend held true for the full-year results when overall international package revenue grew 17.4 percent to $16.08 per piece compared with a 2.6 percent increase domestically to $8.03 per piece. Package volume, meanwhile, increased 2.1 percent in the year for domestic packages and 3.7 percent for international packages.

Looking ahead, Davis said UPS is still dealing with increasing employee benefit costs for health coverage and pensions. But he said previously announced package-flow technology improvements are expected to increase employee productivity.