Higher shipping rates boost UPS profits

UPS said higher shipping rates are helping to boost its revenue and bottom line.

The Sandy Springs-based shipping giant had nearly $71.9 billion in revenue last year, up 7.9 percent from 2017.

UPS and FedEx announced late last year that they were increasing many of their rates an average of 4.9 percent.

The cost of shipping is expected to continue to increase. UPS chief operating officer Jim Barber said with rate hikes for 2018 and 2019, “we don’t consider this a one-time event.” The company is adding services and technology to make shipping more convenient for customers and is seeking to cover those costs.

Barber discussed the company’s financial results with The Atlanta Journal-Constitution on Thursday as UPS reported a nearly $4.8 billion profit for 2018, falling just short of the $4.9 billion reported for 2017. But this year’s profit included the effects of a $1.2 billion charge to reflect an adjustment in the value of pension plans.

UPS said it achieved "record shipments and exceptional on-time service during the peak holiday season" in 2018. But it also faced tumultuous union contract votes that cut into its financial results.

The company lost $60 million in profit due to the Teamsters contract vote process for freight workers. That's because, with concerns about a vote against the deal and potential strike, UPS stopped picking up shipments from freight customers.

After the contract was approved in November, the company started taking freight business again, with about 80 percent of customers returning that month. Close to 90 percent of the business has now returned, according to UPS chief financial officer Richard Peretz. But the company lost some freight customers.

Now, out of roughly 10,000 freight workers, about 1,000 are furloughed or laid off, according to Peretz. The company is still trying to win back business and said it will “continue to rightsize our freight network” as needed.

And labor negotiations continue on supplemental agreements for a Teamsters contract covering more than 200,000 UPS package division workers. The main contract deal failed to get a majority vote in favor in early October, but the Teamsters said the deal was still ratified because of a provision in its governing principles.

Peretz acknowledged that the company saw “softening package demand due to labor relations headlines” early in the fourth quarter, but had strong demand in December.

The shipping giant had ramped up operations, including the opening of a new regional hub in Atlantain anticipation of handling more than 800 million packages during the 2018 holiday season.