November 6, 2018 / 6:16 AM / 15 days ago

Deutsche Post says restructuring will start to pay off next year

BONN, Germany (Reuters) - Deutsche Post DHL Group (DPWGn.DE) expects a restructuring at its troubled post and parcel division to start bearing fruit next year, as it reported a smaller-than-expected decline in third-quarter operating profit.

FILE PHOTO: A Deutche Post sign stands in front of the Bonn Post Tower, the headquarters of German postal and logistics group Deutsche Post DHL, in Bonn, Germany March 11, 2015. REUTERS/Wolfgang Rattay/File Photo

The rapid growth in parcel shipments thanks to the popularity of online retailers such as Amazon (AMZN.O) and Zalando (ZALG.DE) has been both a boon and a burden for Deutsche Post as price increases have not kept pace with rising transport costs.

The German postal and logistics group issued a profit warning for 2018 in June and started a restructuring programme at its Post - eCommerce - Parcel (PeP) division.

The measures include an early retirement programme for civil servants, as well as splitting its post and parcel delivery division into a German and an international unit.

Chief Executive Franz Appel said the group was making “swift progress” in implementing measures to overhaul its cost structure and improve productivity.

“The effects will be clearly visible next year already,” he said.

Deutsche Post affirmed its target for 2018 group profit of about 3.2 billion euros (2.8 billion pounds) and said it was on course for a profit of more than 5 billion euros in 2020.

Analysts at Bankhaus Lampe said the confirmation of its 2018 and 2020 targets should help regain investors’ trust.

Shares in Deutsche Post, which have shed around 45 percent of their value since hitting a high of 41.36 euros at the end of last year, were trading up 3.6 percent at 28.93 euros by 0853 GMT.

Sales at the group rose 1.4 percent in the three months through September to 14.85 billion euros, beating the average analyst forecast for 14.77 billion.

Earnings before interest and tax fell 54.9 percent to 376 million euros, hurt by 392 million euros in restructuring costs at the PeP division.

However, that beat a forecast of 339 million euros in a Reuters poll of analysts.

Reporting by Matthias Inverardi; Writing by Caroline Copley; Editing by Maria Sheahan and Susan Fenton

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