EVP & Chief Financial Officer at United Parcel Service
Thanks, Carol and good morning. In my comments, I'll cover four areas, starting with the macro environment, then our first quarter results, next I'll cover cash and share owner returns. And lastly, I provide an update on our financial outlook for 2022.
As Carol mentioned, external factors resulted in a challenging operating environment in the first quarter. Early in January, Omicron negatively impacted retail sales and pressured volumes. The impact of Omicron subsided in February and volume growth turned slightly positive. Then late in the quarter, the combination of record high inflation, a surge in energy prices, COVID-19 lockdowns in Asia and geopolitical uncertainty resulted in our consolidated volume growth rates turning negative. Despite these external factors, we remain agile and delivered strong first quarter results by continuing to execute our strategy and quickly adjusting our network to match capacity with the needs of our customers.
In the first quarter, consolidated revenue increased 6.4% to $24.4 billion. Consolidated operating profit totaled $3.3 billion, 12.1% higher than last year. Consolidated operating margin expanded to 13.6%, which was 70 basis points above last year. For the first quarter, diluted earnings per share was $3.05, up 10.1% from the same period last year.
Now let's look at our business segments. U.S. domestic delivered strong first quarter results. Our success was driven by continued gains in revenue quality and by leveraging the agility of our network to control cost. We had planned for volume to be down slightly in the first quarter, based on volume projections from a few of our largest customers. We expected to fill this gap with other enterprise volume, but market conditions did not support. And our volume was lower than planned.
Total average daily volume in the U.S. was down 3% or 611,000 packages per day versus the first quarter of last year, driven by a 7.4% decline in residential volume. Looking back to March 2021, stimulus checks arrived at many U.S. households and contributed to difficult year-over-year comps in the first quarter of this year. The decline in residential deliveries included a reduction in SurePost volume of about 312,000 packages per day. The decrease in residential volume was partially offset by a 3.6% increase in B2B average daily volume, with growth from both enterprise and SMB customers.
In the first quarter, B2B represented 43% of our volume, which was up from 40% in the first quarter of 2021. Even within the current environment, the execution of our strategy is continuing to drive improvement in customer mix. In the first quarter, SMB average daily volume including platforms was up 1.9% and SMBs made up 28.4% of U.S. domestic volume, an increase of 140 basis points over last year.
For the quarter, U.S. domestic generated revenue of $15.1 billion, up 8%, which included the benefit of one additional operating day. Revenue per piece increased 9.5% more than offsetting the volume decline in the quarter. Together fuel surcharges and base rates drove 820 basis points of the revenue per piece improvement with mix contributing the rest of the growth. Additionally, revenue per piece grew across all products and customer segments with ground revenue per piece up 8.4%.
Turning to costs. Total expense grew 6.9%. Total payroll and benefits, which included market rate adjustments, drove 390 basis points of the increase, and fuel drove 230 basis points of the expense growth rate increase. The remaining expense growth rate increase was driven by multiple factors, including weekend expansion and appreciation. The investments we've made in our automated facilities coupled with our productivity improvement initiatives enabled us to eliminate more than 1,300 trailer loads per day, compared to the same period last year, which contributed to the positive operating leverage in the quarter. The U.S. domestic segment delivered $1.7 billion in operating profit, an increase of $242 million or 16.5% compared to the first quarter of 2021. And operating margin expanded 90 basis points to 11.3%.
Looking outside of the U.S., let me start by providing some information on our direct exposure to Ukraine, Belarus and Russia. Revenue from these three countries represented less than 1% of our consolidated revenue in 2021, while the direct financial impact is not material to our business. We are closely monitoring the broader impacts across the global economy.
Moving to our International segment performance, by leveraging the agility of our global network and focusing on revenue quality, International executed well in a challenging global market, navigating through increases in global inflation, a war and COVID-19 disruptions. In contrast to the U.S., we plan for international volume to grow in the first quarter and it did not. Total average daily volume was down 256,000 packages per day or 6.7% in the first quarter. Part of the decline was due to tough comps from one year ago, when looking at performance on a two-year stack basis, total international average daily volume was up 16.4%.
In the first quarter of 2022, international domestic average daily volume was down 10.1% representing nearly 80% of the decrease in international volume. Total export average daily volume declined 2.9% due to a combination of factors, including COVID-19 lockdowns in Asia. In response, we adjusted the network and we're able to keep our operations moving in Asia and at the same time shifted capacity, where it was needed to serve our customers globally.
For example, average daily volume on the Europe to U.S. lane grew 10.7%. In the first quarter, international revenue increased 5.8% to $4.9 billion. Revenue per piece increased 10.5%, including a 710 basis point benefit from fuel and a 680 basis point benefit from revenue quality and mix, offset by a 340 basis point negative impact due to a stronger U.S. dollar. Operating profit was $1.1 billion, an increase of 2.7% and operating margin was 23% down 70 basis points year-over-year.
Now looking at supply chain solutions, in the first quarter, the segment delivered record operating profit in a dynamic environment. Revenue increased to $4.4 billion, up 2%, despite the divestiture of UPS Freight, which accounted for $767 million of Supply Chain Solutions revenue in the first quarter of 2021.
Looking at key performance drivers, forwarding revenue was up 25% and operating profit more than doubled by managing the buy/sell spreads, while global market demand continued to outpace supply. Our teams did an outstanding job helping our customers manage through this challenging market. Within forwarding, our truckload brokerage unit delivered strong operating profit growth, driven by revenue quality initiatives. And our healthcare business delivered record revenue and operating profit results in the first quarter led by pharma, clinical trials and lab customers.
In the first quarter, supply chain solutions generated an operating profit of $481 million and delivered our record operating margin of 11%, 180 basis points above last year. Walking through the rest of the income statement, we had $174 million of interest expense. Other pension income was $298 million. And lastly, our effective tax rate in the first quarter came in at 21.5% flat to last year and lower than planned due to discrete items. For the full year in 2022, we expect our effective tax rate to be around 23%.
Now let's turn to cash and shareowners returns. We are continuing to generate strong cash flow from our discipline focus on capital allocation and bottom line results. In the first quarter, we generated $4.5 billion in cash from operations. Free cash flow for the period was $3.9 billion, a 5.5% increase year-over-year. And in the first quarter, UPS distributed $1.3 billion in dividends and completed $260 million in share buybacks, which brings us to our outlook for the remainder of 2022.
According to IHS, GDP expectations for the full year have been lowered from previous forecasts. Global GDP is now expected to grow 3.2% and U.S. GDP is expected to grow 3% and the macro environment is expected to be bumpy for the remainder of 2022. We are continuing to pay close attention to macro elements, including COVID-19, upstream supply chain constraints, inventory and inflationary pressures and the geopolitical environment. Despite this backdrop, we are reaffirming our consolidated financial targets for 2022 driven by our results in the first quarter and the momentum we are seeing in the second quarter.
Consolidated revenues are expected to be about $102 billion, which takes into account the divestiture of UPS Freight. Consolidated operating margin is expected to be approximately 13.7% and return on invested capital is anticipated to be above 30%. We expect our path to achieve these financial targets will be different than we shared with you in February. We have proven our ability to adapt in a dynamic environment, and we have many levers to pull that give us confidence in our ability to achieve our targets.
In U.S. domestic, our revenue guidance is not changing. We anticipate revenue growth of around 5.5% with revenue per piece, growing faster than volume. In terms of volume, however, we anticipate volume growth rates will be lower than we originally expected. The volume growth rate in the first half of the year is expected to be negative and we expect it to improve in the second half of the year. Pricing is expected to remain firm and will continue to price based on the value we provide to our customers.
Lastly, in U.S. domestic, we expect operating margin to expand around 50 basis points for the full year in 2022. In International, our revenue guidance is unchanged. Revenue growth is anticipated to be approximately 7.7% driven by revenue quality initiatives. We anticipate volume will be lower than originally planned. And given the value we offer our customers, we expect pricing to remain firm. Operating margin in the international segment is anticipated to be about 23.6%.
In supply chain solutions, our revenue expectation is unchanged at around $17 billion, driven by our healthcare portfolio and forwarding. We expect ocean rates to moderate below 2021 peak levels. Operating margin is expected to be about 9.4%. As a reminder, we will lap the sale of UPS Freight at the end of April.
Turning to capital allocation, for the full year in 2022, we still expect free flow to be around $9 billion, including our annual pension contributions. Capital expenditures are still expected to be about 5.4% of revenue or $5.5 billion, which includes two 747-8 aircraft, two automated hubs, more than 3,700 alternative fuel vehicles and additional technology investments. All of which will enable will greater efficiency in our integrated network and move us further down the path to achieving our 2050 carbon neutral goal. And in 2022, we are planning to pay out around $5.2 billion in dividends, subject to board approval. Regarding debt repayment, as of today, our plan is to pay $2 billion in debt at maturity this year.
Lastly, in terms of capital allocation, we are doubling the amount of cash we plan to allocate to share repurchases to $2 billion in 2022 further rewarding our share owners. We are executing our strategy and we will remain agile, as we continue to navigate the dynamic macro environment. We are laser focused on improving revenue quality, reducing our cost to serve and disciplined capital allocation. And by controlling what we can control, we are confident in our outlook and our financial condition.
Thank you, and Operator, please open the lines.