“2023 was a unique and quite candidly a difficult and disappointing year”, according to UPS CEO Carol Tomé. Pointing to falls in revenues, profits and volumes almost across the board, she said that the company must take “Bold measures to rightsize… for the future”.
Overall operating profit was down 30.2% y-o-y to US $9.14bn on revenues that fell 9.3% to $90.96bn with few exceptions all of its business lines. Revenues, volumes and profits fell across the board:
UPS Healthcare gets stronger
Despite having the sharpest drop in earnings, Supply Chain Solutions held the one particularly bright spot in 2023 for UPS – the UPS Healthcare subdivision that helped maintain the company’s global #1 position in the vertical sector. Tomé pointed out that this subdivision’s revenues grew to $10bn in 2023.
In 2023 UPS fully onboarded its 2022 acquisition Bomi Group and in November last year acquired MNX Global Logistics as it further expanded its interest in the sector. Speaking in September last year of the MNX acquisition, President of UPS International, Healthcare and Supply Chain Solutions Kate Gutman said, “We continue to invest in services that bring unique value to our customers and create additional growth opportunities for UPS”.
Clash with labour unions a factor in earnings drops
The CEO hit out at UPS’s labour unions for impacting revenues and profits in 2023. The company has one of the most unionised labour forces in the global logistics industry, and negotiations with them contributed to the woes of the company according to its leadership.
Tomé said, “Some [of the financial impact] was due to our labour contract negotiations … and higher costs associated with the contract.” Perhaps in response to the difficulties with the unions, she announced that as many as 12,000 full time positions will have to be cut in the next year – some 2% of the overall workforce – for a hoped for cost saving of $1.0bn.
Some of the jobs will likely go if the Supply Chains Solutions subsidiary, truck brokerage Coyote, is divested. Calling its income “highly cyclical”, Tomé said that further announcements will be made soon on the matter.
No big bounce-back in 2024?
Looking forward, the CEO doesn’t see dramatic recovery in 2024, saying that the US domestic parcels market is unlikely to grow more than 1.5% in the coming year. Again hitting out at the trades unions, she suggested that the new labour contract will squeeze earnings in the first half of the year. However, the same contract will improve earnings in the second half.
There are signs of a gentle recovery in the US and international express markets, perhaps pointing to the ‘soft landing’ hoped for by major central banks due to their anti-inflation measures. With a ‘landing’ hoped for as opposed to a ‘takeoff’, major logistics players like UPS can’t hope for the big gains that occurred around the pandemic era for some time. Stable and gentle growth will be a major gain in its own right as a crash landing could be painful across the board.
Author: Richard Shrubb
