UPS gains $700 million second quarter profit boost

UPS aircraft loading

UPS saw operating profit and margin rise in the second quarter (Q2) of this year, fuelled by international, supply chain and freight performance.

The integrator’s operating profit in Q2 increased $1.2 billion to $1.9 billion, and total shipments rose 2.1 per cent over Q2 of last year to 1.1 billion packages.

Despite the better operating results, the company’s revenue in the quarter fell 1.2 per cent to $14.1 billion, due to currency exchange rates and lower fuel surcharges.
UPS chief executive officer, David Abney, says: “During the quarter, UPS continued to invest for the future by expanding capacity and launching new capabilities that provide higher value to customers.

“The strong momentum in our International segment is expected to continue and gives us confidence in achieving the upper end of our guidance range.” UPS says US domestic revenue increased $140 million over Q2 of 2014 to $8.8 billion. Operating profit in the segment was $1.2 billion, up $35 million.

International revenue was up 1.5 per cent over Q2 last year. Operating profit in the segment increased 17.2 per cent by $81 million.

UPS says network improvements, volume growth and pricing initiatives contributed to improved operating margin and increased profitability on its international arm.
Supply chain and freight revenue fell 4.5 per cent to $2.2 billion, due to forwarding revenue management initiatives, currency and lower fuel surcharges at UPS Freight. Operating profit improved $31 million over Q2 in 2014, driven by gains in forwarding.

UPS Freight revenue declined 2.5 per cent due to lower fuel surcharges and a drop in tonnage driven by changes in customer mix and slowing market growth.
UPS Forwarding operating profit and margin expanded due to it implementing a “disciplined pricing strategy across key trade lanes” as it benefits from improved market conditions and customer mix.

But the integrator says tonnage and revenue dropped during Q2, because of revenue management initiatives and the impact of currency fluctuations.