News / UPS chief determined to stay positive, despite declining profits in Q1

A marginal upturn in revenue failed to compensate for what has been a difficult first quarter for UPS, ending  with a 17% drop in net income.

Despite this, the company had a positive tone during its investor call, turning to adjusted figures to find a glimmer of hope.

And one analyst noted that, while the results were “broadly mixed”, the company had weathered the competitive storm it had faced in recent years – although the future is more uncertain as tech giants step into the arena.

Turnover during the first three months was up less than 1%, to $17.1bn, generating $1.1bn in profit, down from $1.3bn a year ago; the company citing the weather as one cause.

Using its adjusted numbers, group profits were down more than 10% on the same period last year, but divisionally the adjusted results offered some optimism.

Chief executive David Abney focused on the fact that the period saw the company move forward with its transformation process.

“The first quarter marked a good start to the year and generated solid performance across our business,” said Mr Abney. “Our transformation initiatives are enhancing revenue quality and creating network efficiencies that will increase our long-term earnings power.

“We are on a path to take advantage of growth opportunities and enhance our future performance.”

Chief sales and solutions officer Kate Gutmann told investors the B2C division had performed well, but focused on the success of UPS B2B activities during the period.

These, she said, had been helped by the company’s product “resonating” with the healthcare industry, allowing it to further “strengthen its market-leading position”.

However, it was not enough to offset declines in non-adjusted numbers across all three divisions – Domestic, International, and Supply Chain, with International faring worst.

And looking at the adjusted performance, both International and Supply Chain saw healthy growth, with operating profit up 3% and 24%, respectively.

“They generated excellent operating profit this quarter, with strong contributions from Coyote and the rest of our Forwarding unit,” said Mr Abney. “We continue to execute our asset-light strategies, while providing our customers with the high-quality service they expect.”

Domestically, he said, the company was facing an “unknown” with the US economy, as it had been giving “mixed signals”, but may succeed as there had been “solid” consumer spending.

While he did not comment on the international sector, he again sounded upbeat about future prospects, noting a “positive” trend in domestic operations.

“We are bending the cost curve in our US domestic segment as highly automated hubs come online, producing improved productivity benefits,” he said. “These improvements contributed to the segment’s performance in the quarter and will continue to gain momentum going forward.”

You can see UPS first-quarter results here. For more analysis, try UPS disappoints – is the integrated logistics model broken? on Loadstar Premium.