In the Asia Pacific, UPS reported nearly 25% growth in export volume for India, and around 10% for China, for the quarter compared to the same period last year. For full year 2008, the region delivered growth of nearly 5%.
"2008 was a difficult year for business, but UPS responded well in Asia with enhanced services to the region. These include new products such as UPS Paperless Invoice and International Returns, and the establishment of wholly-owned operations in Korea. Most importantly, UPS continued to invest for the future by expanding our multi-hub strategy in the region with our Shanghai and Shenzhen hubs,” said Derek Woodward, President of UPS Asia Pacific.
“We expect 2009 will continue to be a difficult year for many businesses, including our customers. In times like these, we want to stay focused on helping our customers grow and better manage their business, and at the same time strengthen our presence for long term growth. These steps will help UPS preserve its financial strength and enhance its leadership position in the industry.”
Reported results for the 2008 fourth quarter include the impact of a $575 million non-cash impairment charge primarily related to the UPS Freight business unit due to an extremely challenging LTL environment. Reported results for the 2007 fourth quarter included a $6.1 billion charge in the U.S. Domestic Package segment related to the withdrawal of UPS employees from the Central States Pension Plan. That withdrawal followed ratification of a long-term national master agreement with the International Brotherhood of Teamsters.
For the full year, UPS posted adjusted operating profit of $6.0 billion and adjusted diluted earnings per share of $3.50, within the range the company provided mid-year. On a reported basis, operating profit was $5.4 billion and diluted earnings per share were $2.94.
“The severe decline in economic activity around the world resulted in sharply lower package and freight volumes for UPS,” said Chairman and CEO Scott Davis. “Consequently, we’re making the tough decisions necessary to adapt our enterprise to today’s realities. This includes changes in organizational structure, compensation and network configuration.”
For example, UPS has consolidated operating districts, reduced air segments and eliminated some package handling operations. The company also announced it is freezing management salaries and suspending the match for its 401(k) plans. It did not make any changes to its long-standing defined benefit pension plans.
4Q 2008 4Q 2007
Consolidated Results 4Q 2008 Adjusted 4Q 2007 Adjusted
Revenue $12.70 B $13.39 B
Operating profit (loss) $803 M $1.38 B ($4.25 B) 1.85 B
Operating margin 6.3% 10.9% (31.8%) 13.8%
Average volume per day 17.3 M 17.7 M Diluted earnings (loss) per share $0.25 $0.83 ($2.52) $1.07
For the three months ended Dec. 31, 2008, consolidated package volume declined 3.7% to 1.0 billion pieces on 5% lower revenue. Declining fuel costs provided a benefit in the quarter, which was more than offset by the effects of economic deceleration around the world.
For the full year, the company delivered 3.9 billion packages, an average of 15.5 million per day. Consolidated revenue increased 3.6% to $51.5 billion.
Cash Position
UPS ended 2008 in a strong financial position. For the year, free cash flow remained solid at $5.7 billion. The company also:
? Generated cash from operations of $8.5 billion.
? Repurchased a total of 53.6 million shares for $3.6 billion.
? Paid $2.2 billion in dividends, with declared dividends up 7%.
? Invested $2.6 billion in capital expenditures.
? Ended the year with $1.0 billion in cash and short-term investments.
4Q 2007
U.S. Package 4Q 2008 4Q 2007 Adjusted
Revenue $7.99 B $8.31 B
Operating profit (loss) $932 M ($4.89 B) $1.21 B
Operating margin 11.7% (58.9%) 14.5%
Average volume per day 15.1 M 15.6 M
Total U.S. volume decreased 4.4% with ground volume down 3.7% and Next Day Air? declining 10.1%. Pricing remained stable. Revenue per piece growth was constrained by a lower average weight per package and a continuing shift away from premium products. These trends, along with lower volumes, more than offset the benefits from reduced fuel cost and competitive wins.
During the peak holiday shipping season, volume exceeded 20 million packages on five consecutive days.
4Q 2008
International Package 4Q 2008 Adjusted 4Q 2007
Revenue $2.64 B $2.87 B
Operating profit $366 M $393 M $557 M
Operating margin 13.9% 14.9% 19.4%
Average volume per day 2.2 M 2.1 M
Total export volume increased 1.6% in the fourth quarter, which clearly outpaced market trends. However, revenue and revenue per piece declined 8% primarily due to a shift away from premium products, general economic conditions and a stronger U.S. dollar. Adjusted operating profit fell to $393 million, excluding the effect of a $27 million impairment of an intangible asset related to a U.K. domestic package business. This impairment reduced operating profit to $366 million.
During the quarter, UPS continued to invest for the future, expanding its presence in China by opening a new hub in Shanghai. This is the first hub constructed by a U.S. carrier in that country and links all of China to UPS’s international network. In addition, UPS began building a new intra-Asian hub in Shenzhen. When it opens in 2010, this hub will expedite service within the region.
4Q 2008
Supply Chain and Freight 4Q 2008 Adjusted 4Q 2007
Revenue $2.07 B $2.22 B
Operating profit (loss) ($495 M) $53 M $82 M
Operating margin (23.9%) 2.6% 3.7%
The operating loss for the Supply Chain & Freight segment was $495 million, including the effect of the $548 million UPS Freight goodwill impairment. Fourth quarter revenue for the segment declined 6.5% and adjusted operating profit of $53 million represented a $29 million decrease over last year’s results.
Declines in UPS Freight profitability weighed on segment results. LTL revenue declined 9.6% with shipments per day down 8.2% in the weakest LTL environment in decades.
Despite tough economic conditions that caused revenue declines, the Forwarding and Logistics operations continued to demonstrate profit improvement.
One area of focus has been healthcare where UPS has invested to provide customers with solutions to their supply chain needs. Early this year, Merck & Co., Inc. selected UPS to manage a significant portion of its U.S. distribution of pharmaceuticals and vaccines as well as to provide package transportation services. UPS now manages 25 compliant healthcare facilities. This demonstrates UPS’s success in establishing its supply chain management capabilities for the healthcare sector.
Outlook
“Visibility into the future has become increasingly difficult given the enormous amount of economic uncertainty around the world,” said Kurt Kuehn, UPS’s chief financial officer. “Therefore, UPS will provide guidance only for the first quarter, which is earnings per share within a range of $0.52 and $0.68.
“The year will undoubtedly be one of the most difficult in UPS’s history,” Kuehn continued. “Since economists do not expect any meaningful recovery until 2010, earnings in 2009 will suffer. Lower volume levels and reductions in package weight will put further pressure on margins. We anticipate the first quarter will be weak, with slight improvements later in the year as initiatives take hold.”
Davis added, “Our company has long demonstrated the ability to manage effectively in response to changing market conditions and is financially the strongest in our industry. UPS will emerge leaner, more focused and better positioned when economic trends improve.”
UPS (NYSE: UPS) is the world’s largest package delivery company and a global leader in supply chain and freight services. With more than a century of experience in transportation and logistics, UPS is a leading global trade expert equipped with a broad portfolio of solutions. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. The company can be found on the Web at UPS.com. To get UPS news direct, visit pressroom.ups.com/RSS.
Issued on behalf of : UPS Thailand
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Ogilvy Public Relations Worldwide Ltd.
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UPS Parcel Delivery Service Limited
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