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Deutsche Post Profit Misses Estimates on Euro’s Increase

Deutsche Post AG (DPW)’s third-quarter profit rose as Europe’s largest postal company focused on expanding its express-package and cargo businesses.

Earnings before interest and taxes rose 7 percent to 646 million euros ($865 million), the Bonn-based company said today. That compares with the average analyst estimate of 649.6 million euros compiled by Bloomberg News. Sales fell 2.5 percent to 13.5 billion euros, while analysts had expected 14.2 billion euros. Without currency swings, sales would have grown 3.4 percent, the company said.

Deutsche Post reported profit growth at the express subsidiary that was more than double the gain at the letter-delivery division, where Chief Executive Officer Frank Appel has sought to stabilize earnings and avoid most of the effects of recessions in Europe that have left freight companies struggling to maintain earnings.

“It will be a tough ride until the end of the year,”Appel said in a video posted on the company’s website. “We have the right measures in place, but nevertheless, since we don’t expect any upside from the economy, it will be challenging.”

Deutsche Post rose 2.8 percent to 25.5 euros at 12:26 p.m. in Frankfurt. That brings the gain for the year to 52 percent, the third-best performance on the 26-stock Bloomberg Europe Transportation Index, valuing the company at 30.5 billion euros.

The euro is the best performer among a basket of 10 developed-market currencies this year, meaning sales outside the region are lower when converted into the currency.

Parcel Operations

Third-quarter Ebit at the letter-delivery division rose 6.1 percent to 261 million euros, Deutsche Post said. Ebit at the express unit rose 14 percent. Profit at the supply-chain business fell 9.1 percent, while rising 4.1 percent at the global forwarding and freight businesses.

Parcel volume in Germany rose 8.7 percent to 238 million units. To expand parcels operations abroad, the company will move the respective businesses in Belgium, the Netherlands, Luxembourg, the Czech Republic and Poland from the express into the mail unit.

Deutsche Post profit by 2015 will amount to 3.35 billion euros to 3.55 billion euros, the company reiterated. Analysts expect the measure to climb to 3.52 billion euros then, estimates compiled by Bloomberg show. This year, profit will amount to as much as 3 billion euros, the company reiterated.

Europe Tough

The express-package, freight-handling and forwarding operations that use the DHL brand posted a third-quarter sales decline of 4.8 percent in the Americas and 1.8 percent in the Asia-Pacific region.

Time-definite express shipments handled daily rose by an average 8 percent, while advancing 9.9 percent in the Asia Pacific region and 10.4 percent in the Middle East and Africa, the Bonn-based company said. Air freight volumes declined 5.3 percent and ocean freight slid 2.4 percent. Global freight and forwarding revenue fell 7.6 percent.

Clients continue to switch some shipments from air to cheaper sea routes, while the company suffered from weak demand by multinational customers in the engineering, manufacturing and technology industries.

Appel said he was “carefully optimistic” for the Christmas season, in which daily parcel shipments may climb to as many as 8 million pieces per day. The executive said the company’s board will soon decide on potentially raising prices after winning leeway from regulators

Deutsche Post today lowered its forecast for capital expenditures by 100 million euros to 1.7 billion euros this year. Appel said there was no change in investment policy.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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