UPS 2004 Annual Report Download - page 3
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Most importantly, every minute around the world,
we see international trade surging forward at an
unprecedented pace, reaffirming what we’ve known
for quite some time. There’s no better time, no better
industry, and no better company to capitalize on a
world coming closer together through commerce.
In last year’s annual report, we talked about
a world poised for economic growth and UPS as a
company that would help enable that growth.
A year later, the world is more than poised.
In 2004, global trade activity grew 10.2 percent,
well ahead of 2003’s jump of 4.5 percent, and even
surpassing the boom years of 1995 through 2000.**
A vibrant global economy creates new busi-
nesses and new jobs, as well as increased wealth,
consumer power, and a substantially better quality
of life for billions of people around the world — all
of which generates greater demand for UPS services.
The global small package delivery business is
growing along with the boom in international trade.
This trend won’t abate any time soon. Today, 20
percent of all manufactured goods cross borders.
By 2020, it’s estimated that 80 percent of these
goods will cross borders, much of it through small
package networks.***
At the same time, with markets opening and
economies growing, supply chains are becoming
increasingly global. These trends support UPS’s vision
of synchronizing the flow of goods, information, and
funds — the three flows of commerce.
In addition to providing new sources of revenue
and profit, our supply chain business complements
and strengthens the solid foundation of our small
package business. In fact, small package delivery is
perhaps the most integral part of the supply chain.
In many cases, it represents the coveted “last mile”
to the consumer.
In 2004, UPS strengthened our industry-leading,
global small package position. We delivered a record
number of packages — almost 3.6 billion — an
increase of more than 150 million over 2003. Revenue
for the year increased 9 percent, and earnings were
up 15 percent.
Our international small package operation
exhibited particular strength, with revenue up
22 percent, profitability up 58 percent, and volume
up 7 percent. The export market (packages that
cross a national border) has been a focus of our
international efforts. Export volume increased
12 percent, led by both Europe and Asia,
particularly China.
In 2004, we were pleased to be awarded 12
new frequencies to fly to China. These frequencies
triple our access to this important trade market. In
addition, we concluded an agreement that will give
us control of our express operations in China by
the end of 2005.
Our U.S. domestic operations posted
improvements, too, with volume up 3.3 percent.
Revenue increased over 6 percent and profits
increased 2 percent. Pricing was firm in the United
States, but operating margin declined slightly. This
reflects, in part, investment in a new technology that
will re-engineer our U.S. domestic operations and a
slowing volume growth rate in the fourth quarter.
UPS’s financial strength is derived from its unique
business model, combined with a company culture
developed over 97 years.
The business model is based on an integrated
network where all systems work cohesively together.
One global network results in the most efficient use of
assets and the highest reliability levels. And it makes it
easier to bring products and services that are successful
in the United States to the global market.
A significant aspect of UPS’s culture that
contributes to the strength of the company is the
owner/management philosophy, in place since the
1920s. This means UPS is run by investors for
investors. As a result, the company brings a long-
term focus to investment decision-making, with a
keen eye on economic profit. n