Deutsche Post profit jumps, helped by Chinese supply chain deal

Reuters with CNBC.com
Key Points
  • First-quarter sales rise 4.1% to 15.4 billion euros, slightly ahead of poll.
  • First-quarter operating profit surged 28% to 1.2 billion euros.
Deutsche Post CFO: Continue to see growth across Europe

Deutsche Post confirmed its profit forecast on Friday after first-quarter earnings jumped 28 percent, boosted by a supply chain partnership in China.

The German post and logistics group reported a 4.1% increase in first-quarter sales to 15.4 billion euros ($17.28 billion), while operating profit came in at 1.2 billion euros, in line with the average forecast in a Reuters poll.

"The first quarter played out as we expected. We achieved growth in all five divisions. This shows that we are very well-positioned in attractive markets and that our fundamental growth drivers are intact," Chief Executive Frank Appel said in a statement.

The company, which is partly state-owned, has enjoyed a boom in volumes thanks to the rapid growth in parcel shipments by online retailers such as Amazon.com and Zalando, but price increases have not kept pace with its costs.

At the start of this year it split its former Post - eCommerce - Parcel (PeP) division into separate German and international units as part of restructuring measures to raise profitability.

Deutsche Post said these measures are expected to be one of the main drivers for full-year earnings growth, although operating profit at the German post and parcel unit fell 44% in the quarter, hit by higher staffing costs and investments to automate and expand its parcel infrastructure.

Profit also fell at its new e-commerce solutions business, hurt by restructuring expenses and declined slightly at its DHL Express division as it reduced the volume of heavy shipments.

But operating profit rose sharply at both its global forwarding, freight business and its supply chain business, with the latter boosted by a one-time positive effect from a supply chain agreement with S.F. Holding in China.

Chief Financial Officer Melanie Kreis told journalists there should be an improved dynamic in the second half due to a postal fee increase in Germany among other factors.

Kreis told CNBC's "Squawk Box" Friday morning that the company had worked to insulate itself against the ongoing trade tensions between the U.S. and China by maintaining a "broad and balanced portfolio."

"We have some parts of our portfolio that are more exposed to tariff developments and we have other parts which are more resilient," she said.

"We have a big 'self-help agenda', which is what we call it internally, and I think on that basis we are confident that we will find a way to work through the new situation. Our focus now is to support our customers in implementing those new regulations."

Last month, German regulators agreed Deutsche Post could increase prices by 10.63 percent from July 1 in return for the company pledging to hire an extra 5,000 delivery workers.

Deutsche Post confirmed its guidance for operating profit to rise to between 3.9 billion euros and 4.3 billion euros in 2019, and confirmed its outlook for the metric to reach at least 5 billion euros by 2020.