E-Commerce drives UPS 2Q shipments up 7.2%

by Canadian Shipper

ATLANTA, Ga.– E-commerce shipping in the US and strong international export growth are contributing to a 7.2% increase in global package shipments for UPS, the company announced.

US domestic revenue increased 5.2% to $8.7 billion. Daily package volume improved 7.4%, led by gains in UPS Ground and Deferred up 8.1% and 5.4%, respectively. Adjusted operating profit was $1.2 billion, up 3.0% over the prior year second quarter. Second quarter results reflect additional operating costs associated with rail service performance and investments made to enhance operational capabilities and expand network capacity.

Ground product growth was driven primarily by lightweight e-commerce shipments. UPS SurePost shipments increased more than 60% over the prior year period and accounted for about half of the total growth, the company said.

International small package revenue climbed 6.2% or $190 million to $3.3 billion. Strong growth in export shipments drove revenue expansion in the segment, UPS said. Adjusted operating profit improved 4.4% to $471 million.

Export shipments increased 9.1% over the prior year, with growth from all regions of the world. Europe led the way with daily shipment gains of more than 13% while Asia was up more than 6%. Non-US domestic products were 4.8% higher, driven by growth throughout Europe.

Revenue per package on a currency-neutral basis was down 1.7% from the prior year, driven by a 4% decline in export yield. Non-premium products continued to outpace premium as customers seek low-cost alternatives. Double-digit gains in Pan-European shipments also lowered revenue per package.

Rapid shipment growth in Europe caused UPS to purchase additional short-term capacity at a premium from local service partners. As a result, the company experienced increased delivery and network expenses during the quarter.

Supply Chain and Freight revenue increased 6.5% to $2.3 billion, resulting primarily from growth in the Forwarding and Distribution business units, the company said.

Adjusted operating profit was 11% higher at $176 million, and operating margin expanded 30 basis points to 7.5%.

On a reported basis, operating profit dropped $65 million, down 41% as a result of the post-retirement liability transfer previously mentioned.

UPS Forwarding produced double-digit operating profit growth. Strong improvements at North American Air Freight, Brokerage and Ocean Freight were offset somewhat by a drop in International Air Freight. Market pricing on the key Asia to U.S. lane continues to put pressure on rates.

The Distribution business unit experienced high single-digit revenue growth as a result of gains from Retail and Healthcare customers. UPS continues to invest in expanding its global distribution footprint.

UPS Freight revenue was 5.5% higher, driven by a 4.1% increase in LTL revenue per hundredweight and tonnage gains of 1.6%. Operating profit and margin improved from the prior year, as the business unit continued to focus on profitable revenue opportunities.

“We are encouraged by the strong demand for UPS solutions around the world,” said Kurt Kuehn, UPS chief financial officer. “As a result of this accelerated growth and our preparation for peak season, we are making investments in new capabilities and network capacity to ensure we meet customer expectations.

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