News / Strong Q4 drives UPS 40% profit leap in 2017, with more growth expected this year

© Alexey Novikov

UPS saw full-year profits climb almost 40% in 2017 as it put in a final-quarter performance that more than wiped out the $428m loss it recorded in the final stages of 2016.

On the back of an 8% increase in revenues of $65.8bn, the US-based company made profits totalling $7.5bn, up 38.8% year on year.

The 2017 peak season brought in profits of $1.4bn.

Chief executive David Abney told investors: “Peak surcharges did help us to some extent in shaping volumes around peak week – although I will say they didn’t help much in shaping cyber week operations”.

He added: “We are enthusiastic about the state of trade and the economy and wish to offer praise to the president and Congress for a new tax deal that will definitely stimulate the market.”

At the end of 2016, the company reported fourth-quarter losses of $570m and $139m in US domestic and supply chain service operations, respectively. And the international parcels business’s $281m profit was not enough to clear the losses.

Now, chief financial officer Richard Peretz said the international market remained strong.

“We are seeing cross-border traffic grow at a rate some seven times faster than that of our domestic services,” he said. “The trick for us is to be in the right place at the right time to capitalise on these growing markets.”

Mr Peretz’s words were backed up by the evidence of another strong peak season for UPS’s international business, with quarterly profits of $725m and 12-month numbers hitting $2.4bn.

Mr Abney added: “Our international segment has generated four consecutive quarters of double-digit export growth. That, combined with our growth strategy and the investments we’ve made over the last three-and-a-half years, produced results that exceeded expectations.”

Domestically, the performance last year was none-too-shabby either, bringing in some $627m in profit during the final quarter, while full-year profits were just over the $4.2bn mark.

Its supply chain services business remains the infant in UPS operations, with three-month profits of $142m and full-year profits of $785m.

Mr Abney said: “Going into 2018 we’ve added a lot of capacity – much more than we did in 2017 – and will also be assessing the strength of our control tower during the cyber week period.

“It’s important for us to be able to handle the volumes we receive – during the cyber attack that hit last year we gained a lot of customers and we want to be able to hold onto them.”

But Mr Abney’s praise for the Tax Cuts and Jobs Act has met with fierce criticism from the Teamsters union, with president of the Local 2727 Tim Boyle being particularly vocal.

Mr Boyle said: “Companies like FedEx quickly announced a $3.2bn investment in employee wage increases, bonuses, pension funding and growth of its US operations. But UPS execs refuse to invest in workforces and are asking aircraft maintenance workers, who keep planes flying, to agree to health care cuts and minimal raises after four years of frozen wages.

“Mechanics will no longer tolerate these broken promises and stand more united than ever to do whatever it takes to hold UPS accountable for its actions,” he added.