UPS profits hit by severe winter weather
25 / 04 / 2019
UPS saw profits decline in the first quarter of the year as extreme winter weather hit earnings.
During the period, the company saw revenues increase by 0.3% to $17.2bn while net income declined by 17.4% to $1.1bn.
The company said that its profits were affected by “severe winter weather in the US” and one less operating day as a result of the Easter holiday being in mid-April.
The revenue improvements were down to gains in average daily volumes and “higher quality revenues”.
Its US domestic segment saw revenues increase by 2.5% to $10.5bn and operating profit was up 11.9% $666m.
An increase ground revenues per piece, led by gains from healthcare, manufacturing and e-commerce, contributed to the improvement.
Average daily volume for air products grew nearly 8%, driven by high demand for faster delivery options.
“We are bending the cost curve in our US Domestic segment as highly automated hubs come online, producing improved productivity benefits,” said UPS chairman and chief executive David Abney.
“These improvements contributed to the segment’s performance in the quarter and will continue to gain momentum going forward.”
Its international segment saw revenues decline by 2.1% to $3.6bn and operating profits were down 11.1% to $528m.
The company said that on an adjusted basis, without transformation related charges of $84m, operating profits reached a record $612m thanks to disciplined yield management, coupled with growth from middle market B2B customers.
Finally, its supply chain and freight segment saw revenues increase 3.9% to $3.2bn and operating profits were up 17.6% increased to $200m.
“Supply Chain and Freight generated excellent operating profit this quarter, with strong contributions from Coyote and the rest of our Forwarding unit,” said Abney.
“We continue to execute our asset-light strategies, while providing our customers with the high-quality service they expect.”
The segment also expanded operating margins, driven by disciplined cost-management initiatives and the flexibility of the network to adapt to changing market conditions.
International air and ocean freight made significant contributions to operating profit growth as a result of greater alignment with small and medium-sized customers