UPS revenue grows 6.2% but fuel and currency hit operating profits

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Revenue at UPS has grown 6.2 per cent in the first quarter of 2017 to $15.3 billion but fuel costs and currency effects affected operating profits.

Operating profits dipped 2.1 per cent to $1.78 billion with declines in the US domestic package and international package sectors though net profit was up 2.4 per cent to $1.16 billion.

Fuel expenses increased 43 per cent to $187 million and currency had a $120 million impact on business.

UPS chairman and chief executive officer, David Abney says: “We are accelerating investments to create the industry’s leading smart global logistics network and value-creating portfolio. UPS customers are benefiting from expanded capacity, choice and improved time-in-transit, while technology solutions continue to deliver efficiencies.”

US Domestic revenue was up five per cent to $9.5 billion as B2C deliveries rose but operating profit fell 2.4 per cent to $1.07 billion, with operating costs rising due to facility construction and Saturday initiative, while the fuel surcharge lag, weather problems and a facility fire added $50 million to one time costs.

Demand for cross-border shipments helped push international package revenue up 4.9 per cent to $3 billion though operating profits were down 7.8 per cent to $529 million, due to currency effects worth $119 million.

Abney comments: “The UPS International segment continues to show excellent operating fundamentals and consistent quarterly improvement.”

Supply chain & freight revenue grew 12.5 per cent to $2.7 billion and operating profits by 21.8 per cent to $179 million, with healthcare, retail and aerospace performing well.

Abney says: “We are extremely pleased with the growth and margin enhancing performance of the Supply Chain and Freight segment this quarter.”

“The team has been working on growth initiatives, cost reduction programs and business unit portfolio strategies to address unique market conditions for the last several quarters. These initiatives showed excellent progress.”