UPS is Hit by the Challenging Global Economy

April 30, 2009
The global economy has taken its toll on UPS, driving decreased revenue and profitability in all business segments.

UPS reported first quarter revenues were down 13.7% to $10.9 billion. The company said it had managed its business effectively despite the effects of the global economic slump, maintaining margins and expanding domestic US and overseas market share.

The company said it has continued to make strategic investments such as expanding its Worldport facility, building a new air hub in Shenzhen, China, and opening new healthcare distribution facilities in Europe and Puerto Rico. However, it is scaling back 2009 capital spending by an additional $200 million, bringing the total to just below $2 billion.

"As economic activity deteriorated throughout the world during the quarter, we managed costs while maintaining our excellent service to our customers," said Scott Davis, UPS's chairman and CEO. "We are optimistic about the company's future. UPS is becoming an even leaner, more efficient enterprise, making many improvements that are sustainable when the economic climate strengthens."

The company noted, “In a worsening LTL environment, UPS Freight posted declines in revenue, shipments and tonnage, compared with last year. However, there was month-over-month improvement in each of these metrics through the period.”

"We're pleased that our cost control initiatives are on plan and producing the benefits they were designed to achieve. In fact, we have identified $300 million in additional initiatives to help offset some of the recessionary impacts we're experiencing," said Kurt Kuehn, UPS's chief financial officer.

"Economic indicators tell us recovery in the US might begin late this year, but more likely not until 2010," continued Kuehn. "So we expect the second quarter will be another difficult one. As a result, UPS anticipates earnings per diluted share in a range of $0.45 to $0.55.”