UPS 2006 Annual Report Download - page 6

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0%
3%
6%
9%
12%
15%
Operating Margin (in percent)
06
14.0
05
040302
14.4
13.6
13.3
13.1
forces, and dramatically improved service levels.
Many of our 1.8 million daily small package pickup
customers have shown great interest in our freight
offerings as we provide them with the same superior
experience that they have come to expect from our
small package operations. In 2007, we anticipate
increasing momentum in volume growth and prof-
itability improvement from our freight business as
the year unfolds.
And fi nally, 2006 brought a sharper focus in our
logistics business (distribution and post-sales).
Simply, all supply chain solutions must meet two
criteria. One, they must be linked to the transpor-
tation network and two, they must be repeatable,
that is, able to be used by a number of customers
simultaneously. As a result, we shed some business
relationships which slowed our top-line growth. But
our focus on key vertical industries—particularly
healthcare, retail, and high tech—has produced
important successes for our customers and UPS.
WHAT THE FUTURE HOLDS
UPS will celebrate its 100th anniversary on
August 28, 2007. It is remarkable to think about
all that this company has achieved in its fi rst
century of service, growing from a small
messenger company in Seattle to a global enterprise
enabling millions of customer transactions a day.
It is even more exciting to think about all that
this company has yet to accomplish. The global
trends I discussed earlier are creating compelling
growth opportunities for UPS—opportunities that
will leverage our core competency of optimizing
networks that support the effi cient movement of
goods, information, and funds.
With this in mind, we anticipate that our global
small package and supply chain and freight busi-
nesses will continue to expand as we meet our
customers’ growing global needs. The U.S. small
package business is a mature market, but should
perform slightly better than GDP growth. With a
slower-growth economy than in the last few years,
we anticipate about a 2.5-to-3 percent increase in
U.S. domestic volume in 2007, with moderating
operating profi t growth.
On the international front, world trade should
remain strong, supporting a robust international
small package market. We anticipate UPS export
volume growth will post about a 10 percent gain in
2007. Operating profi t growth is expected to be in
the mid-teens.
And the Supply Chain and Freight segment should
achieve profi tability with steadily improving
performance as the year progresses. We have targeted
2-to-3 percent margins for this segment in 2007.
4