UPS up in Q2 thanks to rising demand for next-day air services

Express firm UPS saw revenues and profits increase during the second quarter of the year on the back of increasing demand for next-day air services.

The company reported a 3.4% year-on-year increase in revenues to $18bn during the period, while net income increased by 13.5% on a year earlier to $1.5bn.

UPS said that the improved results came on the back of a 7% increase in its US daily volumes while next-day air service demand improved by more than 30%.

“Our Transformation initiatives are generating greater efficiencies across the network and, when combined with our growth strategies, UPS achieved profit growth in all segments,” said David Abney, UPS chairman and chief executive.

“We also announced a very extensive roll-out of new products and services such as UPS My Choice for Business, expanded UPS Access Points, and UPS Worldwide Economy, among others, for small- and medium-sized businesses, all designed to generate additional profitable growth.”

Looking at UPS’ various business segments, US Domestic noted a 7.7% year-on-year increase in second-quarter revenues to $11.1bn and operating profit was up 28.6% to $1.2bn thanks to the aforementioned increase in demand for next-day services.

“Demand for faster delivery is a structural change in our industry,” said Abney.

“Anticipating this change, our additional air capacity and modernised network enabled this growth to have a positive impact on profitability and positions UPS well to serve the growing needs of the market.”

Both B2B and B2C shipments grew within the period. In addition, the company added more than 2m sq ft of new, automated sorting capabilities, increasing efficiency benefits and contributing to positive operating leverage.

UPS’ International Segment saw revenues decrease by 2.7% to $3.bn but operating profits improved to $663m from 618m.

Volumes decreased as a result of “macro-economic” pressures and tough year-on-year comparisons.

Finally the Supply Chain and Freight segment noted a 3% decline in second quarter revenues to $3.4bn and a 25.9% increase in operating profits to $272m.

The airfreight business achieved “robust profit growth” driven by “expanded buy/sell” spreads.

“UPS grew profits across all business segments,” said Richard Peretz, UPS’s chief financial officer.

“Our performance was driven by the efficiencies created by investments in our network, the success of ongoing initiatives and our ability to execute in an ever-changing environment. We expect to carry this momentum through the upcoming quarters.”

Earlier, today the company announced plans to start its own drone business in the US.

The results compare favorably to rival FedEx which endured a tough end to its business year.