Deutsche Post announced plans to expand its German Mail division, starting with the takeover of its parcel delivery operations in other European countries to help serve the boom in demand for deliveries from online retailing.

Announcing a 7 percent rise in its third-quarter operating profit to 646 million euros ($866 million) on revenue down 2.5 percent at 13.5 billion euros, the company said it is to transfer its existing parcel delivery operations in Belgium, the Netherlands, Luxembourg, the Czech Republic and Poland from its DHL logistics arm to the Mail division.

Mail, a business which until now has been confined to Germany, will then launch additional initiatives to push the business-to-consumer delivery operation in these countries, Chief Executive Frank Appel said.

The Mail unit currently generates a quarter of the group’s revenue but is grappling with a slowdown in the amount of letters posted in Germany along with mail-order traffic and subscriptions for newspapers and magazines.

But Mail’s revenue still rose 5 percent in the last quarter to 3.44 billion euros thanks in part to the continuing growth in online retailing in Europe’s biggest economy as well as an increase in the price of stamps for letters and a rise in mail volumes due to postal voting in the elections in September.

“We intend to further expand this business and not just in Germany,” Appel told reporters, referring to the parcel unit, which resides in the Mail division.

“In other regions we can also profit much more than before from the continuing boom in e-commerce,” he added.

The parcel business counts Amazon and online fashion retailer Zalando among its major clients in Germany, where the market is forecast by Deutsche Post to grow 5 to 7 percent annually by 2015 and was worth 32 billion euros in 2011.

Parcels revenue rose 8.8 percent to 868 million euros in the last quarter, accounting for 25 percent of the Mail division’s revenues.


However, the world’s biggest postal and logistics group by revenues, still makes most of its profits from its DHL logistics business which comprises three units - Express courier services, Global Forwarding/Freight and Supply Chain.

The DHL units’ combined operating profit was up 5.6 percent at 489 million euros in the third quarter and competes with United Parcel Service, FedEx, Kuehne & Nagel KHNIN.VX and Panalpina.

UPS saw its quarterly earnings per share growth driven by U.S. e-commerce shipments and strong European export growth, while FedEx reported a better than expected quarterly profit, driven by its Express segment.

Deutsche Post also reaffirmed on Tuesday its full-year operating profit target of between 2.75 billion euros and 3 billion euros, even though a hoped for economic recovery in the second half of the year had yet to materialize.

The shares were up 0.9 percent at 25 euros by 1510 GMT, the highest level since May 2007.

DZ Bank analyst Dirk Schlamp, who reiterated his “buy” rating on the stock, said Deutsche Post had published “solid” quarterly results.

“We consider Deutsche Post to be well positioned and assess the long-term growth prospects as attractive,” Schlamp said.

Deutsche Post said Express, its 24-hour delivery service for international routes, saw operating profit rising nearly 14 percent to 263 million euros as investments in the expansion of its delivery hub in Asia started to bear fruit, helping to mitigate the negative impact of weak currencies in the region.

However, DHL Supply Chain, which provides warehousing and distribution services to aerospace, automotive and technology sectors, suffered a 9.1 percent drop in operating profit to 100 million euros on weak markets in Europe.

Kuehne & Nagel, its Swiss competitor in contract logistics, told analysts in October the market was stagnating in a very competitive environment. (Reuters)