Deutsche Post invests in network as parcel deliveries drive profits

Deutsche Post DHL said it would continue to invest in its European parcel delivery network after strong demand for deliveries of goods to shoppers buying online helped it beat expectations for third-quarter profit.
Like other European postal groups, Deutsche Post is expanding its business and investing in new technology and services to cope with declining letter volumes and stay ahead of new rivals in the lucrative parcel delivery market such as Amazon.com.
Merger activity has already heated up, with Dutch firm PostNL on Monday rebuffing a revised offer from Belgium's bpost. The move by Amazon to carry out more of its own parcel deliveries is seen as a threat to Deutsche Post. The US online retailer accounts for about 30 percent of DHL's parcel volumes, analysts at Credit Suisse estimated in March.
Shrugging off competition from Amazon, Deutsche Post is instead investing in expanding its delivery network further, setting up what it dubs the "United Parcel Nations of Europe".
The latest step is its acquisition of Britain's UK Mail for 243 million pounds ($316 million), and the group plans to enter the market in Spain and Portugal next year.
Revenue at its e-commerce parcel division rose 11.6 percent in the third quarter, Deutsche Post said on Tuesday, helping to contribute to a doubling of profit to 295 million euros ($326 million) after last year's results were hit by postal strikes in Germany.
"The underlying EBIT progression in Mail/PeP is helpful - especially given recent B2C parcel expansion outside Germany, where we find investors crave profit proof of concept," RBC analyst Damian Brewer wrote in a note. Chief Financial Officer Melanie Kreis told Reuters last month the group was expecting a record Christmas in Germany, with a peak of 8 million parcels a day expected.
It has also developed its own electric van, dubbed the Streetscooter, to deliver parcels without adding to air pollution. CEO Frank Appel said on Tuesday in an interview posted on the group's website that about 2,000 of the bright yellow vans would be on German roads by the end of the year. Deutsche Post DHL reported third quarter earnings before interest and tax (EBIT) of 755 million euros, beating forecasts for 717 million in a Reuters poll. It confirmed it expected 2016 EBIT to rise to a record level of 3.4 billion to 3.7 billion euros. Analysts are forecasting on average full-year revenue of 58 billion euros and underlying EBIT of 3.5 billion.