UPS sees Q3 profits decline

Washington DC
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Atlanta-based UPS saw total revenue of $13.07 billion in the third quarter, a decline of 0.7% from the previous year.

The shipping company saw its operating expenses increase by 7% in the third quarter. Net income totaled $469 million, a decrease of 56.3% from about $1.07 billion in the third quarter of 2011.

US domestic package revenues totaled $7.86 billion in the quarter, an increase of 1.2% from a year earlier. International package revenues declined by 3.7% to $2.94 billion.

Consolidated operating profit at UPS was $766 million in the quarter, a 54% decline from the previous year.

The US domestic operating profit, included in that figure, showed the biggest decline. It fell 87.7% to $129 million compared to the same period in 2011. The domestic results were impacted significantly by a $559 million after-tax charge related to UPS' decision to restructure its multiemployer pension plan for US employees in August. Operating profit was also negatively impacted by the timing of a $60 million fuel surcharge and one less day in the period versus a year earlier.

International package freight profits fared much better. They led the quarter with a 7.7% increase to $449 million.

Without the one-time charges, net income fell by only 4.1% to $1.03 billion, and total operating profit declined slightly by 0.2% to $1.66 billion when compared with the third quarter of 2011.

Package revenues were up by 2.9%.

Kurt Kuehn, UPS' chief financial officer, says that he expects increases in operating profit across all of the shippers segments during the fourth quarter and for margins similar to those in 2011. He adds that the US domestic segment is expected to see margins in excess of 15% and average daily volume growth of 3%.

For the international package segment, Kuehn says that he expects mid single-digit growth for operating profits in the fourth quarter and a slight improvement in average daily volume growth. In the supply chain and freight segment, he expects the operating profit to increase slightly on flat revenues.