The integrators are coming!
Sluggish freight volumes out of Asia and shifting product mixes stifled UPS’ first-quarter growth, despite a 10-percent, year-over-year, surge in diluted earnings. But the integrator’s recent movement on the acquisition front should help boost future revenues.
UPS made a significant investment on March 19, when it bought Dutch shipper TNT Express for $6.77 billion. Its February acquisition of Brussels-based Kiala is also expected to expand the integrator’s service portfolio. In a conference call discussing the company’s first-quarter earnings, UPS CEO Scott Davis commented that Kiala’s “retail delivery network and unique technology will benefit UPS, as we continue to look for ways to serve the growing [business-to-consumer] market, especially outside the U.S.”
For its part, FedEx has been acquiring companies in the first quarter to expand its European reach. One month after the firm agreed to purchase Polish shipping company Opek Sp.z o.o., FedEx announced plans to procure French business-to-business express company Tatex. The exact terms of the deal haven’t been disclosed, but the acquisition will give FedEx Express access to a domestic ground network that handles 19 million shipments a year and generates approximately €150 million in annual revenue.
Frederick W. Smith, CEO of FedEx Corp., said the Tatex acquisition will boost the company’s operations in Europe even more. “FedEx has always recognized the importance of our Europe, Middle East, Indian Subcontinent and Africa — EMEA — region and its many unique marketplaces to global trade, and this acquisition shows we are continuing to systematically and strategically invest in growing our network and value proposition in these important areas of the world,” he said in a statement.
“The Tatex business complements FedEx’s existing operations in the French market, and will enable the company to provide additional local services in one of Europe’s largest geographies, to its customers around the world,” Smith continued.
FedEx is also branching out product-wise, taking the company’s SenseAware monitoring service to the UK, Australia, Singapore and Canada. According to FedEx’s Chris Swearingen, officials hope to offer the service in a significant number of countries by the end of 2012.
“There’s a large demand for the product,” he said, pointing out that it was originally targeted at the life sciences industry, but the scope has broadened to auto parts, perishables, art — pretty much anything.
SenseAware provides customers with real-time information about their shipments, and Swearingen said that some clients are now requiring SenseAware data long before their freight is loaded onto the plane. “It’s really about giving that end-to-end visibility inside the package,”he said.
UPS’ product expansion is occurring on the time-critical side, branching those products out to its Latin American network, a region where it more than doubled its freight capacity in the first quarter. UPS has added Honduras and Nicaragua to its UPS Express Freight network, offering the two Central American nations day-definite transportation services.
Scott Aubuchon, UPS’ director of international airfreight, said Nicaragua, in particular, demanded time-critical cargo service. According to Aubuchon, the nation exports nearly 58 percent of its commodities to the U.S., including seafood, apparel and gold; trade between Nicaragua and the U.S. has increased 21 percent per year over the last two decades.
Trade between Honduras and the U.S. has also surged in recent years. After reinforcing its manufacturing capabilities to serve the North American auto industry, Honduras now ranks as the third largest exporter of automobile wiring harnesses to the U.S. Aubuchon expects imports from Honduras and Nicaragua to the U.S. to continue to grow, thanks to near-sourcing and the continued effects of the 2006 free-trade agreement among the Dominican Republic, Central America and the U.S.