UNITED Parcel Service reported first-quarter profit above estimates on Tuesday (Apr 23) as cost cuts partly offset subdued demand for small-package delivery, sending its shares up 3.5 per cent premarket.

The company cut 12,000 jobs in January to save US$1 billion in costs in 2024, attempting to counter sagging volumes and higher labour expenses as demand normalised following a boom during the pandemic.

UPS reported a 3.2 per cent decline in average daily volumes in its domestic segment and a 5.8 per cent drop in its international segment, but said volumes “showed improvement through the quarter”.

The Atlanta-based company is also focusing on more high-margin businesses such as small and medium enterprises and healthcare logistics, where revenue hit US$10 billion for the first time in 2023.

A new labour contract with the Teamsters union has been squeezing the Atlanta-based company’s margins, however. UPS is absorbing 46 per cent of the wage and benefit costs of the new five-year contract in 2024.

It reported an adjusted operating margin of 8 per cent for the quarter, down from about 11.1 per cent last year. The company earlier said this quarter’s margin would be its lowest in 2024, with business conditions improving in the second half of the year.

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Growing its market share has also been a priority for the company.

UPS recently secured the contract to provide Priority Mail and other speedy services for the US Postal Service (USPS) – work previously handled by rival FedEx.

The world’s biggest package delivery firm by market capitalisation posted an adjusted profit of US$1.43 per share for the quarter, down 35 per cent from last year but above analysts’ estimates of US$1.29, according to LSEG data.

Its revenue of US$21.71 billion was below estimates of US$21.86 billion. REUTERS