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UPS Q2 profit hit by Teamsters charge

ATLANTA: UPS reported revenue of US$14.27 billion for its second quarter ending June 30 – up 5.6 percent over the same period last year.

Earnings before tax excluded a US$1.066 billion pre-tax charge for transferring post-retirement health and welfare benefit obligations relating to its Teamsters union agreement.

The company allocated the amount between its U.S. domestic business (US$957 million); the international division (US$27 million) and its supply chain and freight segment (US$82 million).

UPS WorldportAs a result, net income fell 56 percent to US$454 million from US$1.07 billion year-on-year.

UPS said U.S. domestic revenue increased 5.2 percent to US$8.7 billion in Q2 led by respective gains of 8.1 percent and 5.4 percent in its ground and deferred businesses. Adjusted operating profit was US$1.2 billion, up 3.0 percent over the prior year second quarter.

A growth in export traffic saw international small package revenue rise 6.2 percent to US$3.3 billion to produce a 4.4 percent operating profit gain to $471 million.

The company's supply chain and freight revenue increased 6.5 percent in Q2 to $2.3 billion prompted by growth in its forwarding and distribution business units that led to an 11 percent overall rise in operating profit to US$176 million.

UPS said "strong improvements at North American airfreight, brokerage and ocean freight were offset somewhat by a drop in international airfreight. Market pricing on the key Asia to U.S. lane continues to put pressure on rates".

For the six months ended June 30, the company generated US$1.0 billion in free cash flow; paid dividends of US$1.2 billion and repurchased 13.7 million shares for approximately US$1.4 billion.

UPS said it planned to spend US$175 million this year for capacity and peak related projects including expanded operations on the day after Thanksgiving, accelerated deployment of route optimization software (ORION), IT development, additional hub sorts and temporary capacity.

Scott Davis, UPS chairman and CEO commented: "As we've said, 2014 is the year of investing for the customer. We are providing new capabilities and expanding capacity to ensure UPS meets the rapidly growing needs of the marketplace."

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