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Deutsche Post invests in network as parcel deliveries drive profits

The logo of German postal and logistics group Deutsche Post DHL is seen on the delivery car "Street Scooter" in Aachen, Germany, August 23, 2016. REUTERS/Thilo Schmuelgen

By Victoria Bryan BERLIN (Reuters) - Deutsche Post DHL said it would continue to invest in its European parcel delivery network and in new ways of getting packages to online shoppers, after the parcels unit helped it beat expectations for third-quarter profit. Like other European postal groups, Deutsche Post is expanding its parcels business to cope with declining letter volumes and to stay ahead of new rivals in the lucrative parcel delivery market. Merger activity has already heated up, with FedEx buying TNT and Dutch firm PostNL on Monday rebuffing a revised offer from Belgium's bpost . The move by major customer Amazon.com to carry out more of its own parcel deliveries is seen as a threat to Deutsche Post DHL, Europe's biggest postal group. However, the German company has shrugged it off, saying no single customer accounts for more than 2 percent of total group revenues. The group is instead investing in expanding its delivery network further, setting up a Europe-wide parcel delivery network. It is buying Britain's UK Mail for 243 million pounds, and plans to enter the market in Spain and Portugal next year. CEO Frank Appel said on Tuesday that the group was also using its DHL Express network to meet demand for cross-border next-day deliveries, with business to consumer (B2C) shipments now making up 20 percent of 'time definite' international shipments, up from 10 percent in 2013. Seeking new ways of getting parcels to customers in Germany, the group is using "pack stations", lockers where customers can pick up their goods, plus a scheme to deliver parcels straight to the trunks of people's Smart cars. "If we offer high service quality and innovation, we will continue to work very successfully with Amazon," Appel said, adding the company's business with Amazon was still growing strongly. Revenue at its e-commerce parcel division rose 11.6 percent in the third quarter. The group is expecting a strong Christmas, forecasting a peak of 8 million parcels a day. Shares in Deutsche Post DHL rose 1.3 percent to 28.66 euros by 1122 GMT, the top gainer among leading German companies. "The underlying EBIT progression in Mail/PeP (Post-eCommerce-Parcel) is helpful - especially given recent B2C parcel expansion outside Germany, where we find investors crave profit proof of concept," RBC analyst Damian Brewer said in a note. Deutsche Post has also developed its own electric van, the Streetscooter, to deliver parcels without adding to air pollution. About 2,000 of the bright yellow vans will be on German roads by the end of the year. The group reported third quarter earnings before interest and tax (EBIT) of 755 million euros, beating forecasts, and confirmed it expected 2016 EBIT to be a record high at 3.4 billion to 3.7 billion euros. (Reporting by Victoria Bryan; Additional reporting by Matthias Inverardi in Bonn; Editing by Louise Heavens and Susan Fenton)