UPS export volumes for Asia rise sharply in second quarter

PUBLISHED : Friday, 26 July, 2002, 12:00am
UPDATED : Friday, 26 July, 2002, 12:00am

United Parcel Service (UPS) has reported a double-digit increase in Asia-Pacific export volumes during the second quarter.

This comes despite earlier worries that shippers had been diverting traffic to other consolidators in response to the company's labour woes in the United States.

UPS, the world's largest express mail company, said Asia-Pacific export volumes grew 17 per cent for the three months to last month, the highest growth of all the regions in which the company is active.

The Asian export growth was led by China's 32 per cent increase and a 20 per cent jump for Singapore.

The company said Hong Kong reported better than 10 per cent growth.

Total export volume rose 8.8 per cent worldwide.

UPS chief financial officer Scott Davis said international operations paced the company's second-quarter results, 'growing substantially in excess of the market and showing a strong increase in profitability'.

During the second quarter, operating profit rose to US$62 million from US$24 million last year. Revenues increased 9 per cent to US$1.14 billion.

UPS said its Asian performance in the second quarter was aided by the opening of its intra-Asia hub in the Philippines at the old Clarke Airbase, improving service levels within Asia and to Europe, primarily to Cologne where UPS has its intra-Europe base.

Volume from countries on those lanes rose about 20 per cent, UPS said.

Overall, the company said it sustained an operating margin of 13.4 per cent during the period, despite the poor economic conditions and uncertainties overhanging its labour negotiations in the US.

For the first six months, global delivery volume averaged 13 million packages per day, down 1.8 per cent over last year.

Consolidated revenue amounted to US$15.3 billion, up 2.2 per cent, while adjusted net income, excluding non-recurring items, for the first half came to US$1.17 billion, down 1.9 per cent.

Total US domestic package volume fell 2.6 per cent for the quarter, with volume down 4 per cent last month.

Labour negotiations with the Teamsters union, while concluded well before the previous contract had expired, nonetheless caused some volume diversion by customers worried that the talks would split acrimoniously.

'Many customers diverted reluctantly,' Mr Davis said. As a result of the diversions, its US domestic volume for the third quarter should fall slightly below last year.

Without the diversions, the company said it would have been on track for a low-teens growth in the third quarter.

UPS said this month's diversions would drag earnings for the third quarter by between four and five US cents per share to an expected 50 to 55 US cents.

However, the company said it had undertaken a comprehensive effort to regain diverted volume, anticipating that half would return quickly.

Some of the remaining volume was expected to return after the expiration of multi-month contracts with competitors, while 'a small portion of the diverted volume likely will not return', UPS said.

The company managed to negotiate a six-year labour contract two weeks before the expiry date of the old pact, conceding average annual wage increases of 4 per cent to about two-thirds of its US employees.

The union represents 230,000 UPS employees domestically. The new contract is valued at US$9 billion, including wages, benefits and the cost of new jobs created under the pact, according to the Teamsters.