UPS posts healthy results thanks partly to Amazon

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Global express giant, UPS announces higher than expected fourth-quarter 2019 earnings, up 8.8 per cent year-on-year, boosted by strong peak season demand, in particular from its biggest customer, Amazon.

Revenue rose 3.6 per cent to USD 20.6 billion from USD 19.8 billion a year ago, on the back of strong volume growth in the US domestic segment in particular. Operating profit grew 6.4 per cent (13.7 per cent on an adjusted basis), with margin improvement across all segments.

In 4Q 2019, average daily volume levels exceeded 26.6 million packages, an increase of 7.5 per cent, driven by high demand for air services in the US.

For the full year revenue rose 3.1 per cent year-on-year USD 74.1 billion.

“Our network improvements from transformation enabled UPS to embrace a surge in demand for air products while at the same time generate productivity improvements and positive operating leverage,” says David Abney, UPS chairman and CEO.

“Looking to 2020, we will continue to adapt to the changing environment, strengthen our network and create new solutions to support our strategic growth initiatives and compete.”

The US domestic segment benefited from several transformation initiatives, including increased automated capacity and new aircraft added to the global air fleet, which positioned UPS to handle volume growth in each month of the quarter.

Total volume across all products grew nearly 9.0 per cent. Growth was driven by the structural shift to faster delivery in retail and e-commerce, and from competitive wins, the company says. UPS experienced growth from a number of large and SMB customers, with the growth led by its largest customer, Amazon.

“We processed record volume during the quarter as customers took full advantage of the capabilities of our integrated network and broad portfolio of solutions,” says Abney.

“Given the tremendous opportunities ahead, we have elected to implement SMB initiatives now to speed up our network and broaden our weekend operations, actions that will improve our competitiveness and generate growth.”

The international segment delivered higher profit and expanded operating margin, adapting well to the dynamic macro environment, the company notes. “Strong execution, cost management and a strategic focus on market and e-commerce opportunities enabled the solid performance for the quarter,” it adds.

Export volume was down slightly as gains on intra-Europe, intra-Asia and US export trade lanes did not fully offset the declines into and out of the UK and on the Asia-US lane.

Supply Chain and Freight produced strong profit growth in the quarter. The segment also expanded operating margins driven by what UPS says was disciplined cost management action and continued focus on growing its SMB customer base.

Logistics and Marken grew profits by double digits, which helped offset softer conditions in Forwarding and truckload brokerage.

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