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UPDATE 3-Deutsche Post invests in network as parcel deliveries drive profits

Tue, 08th Nov 2016 12:14

* Q3 EBIT 755 mln eur vs poll avg 717 mln

* Revenues at eCommerce-Parcel up 12 pct in Q3

* Invests in new delivery options for online shoppers

* CEO says Amazon business still growing strongly

* Shares up 1.3 pct (Adds CEO comments on Amazon and parcel business, updatesshares)

By Victoria Bryan

BERLIN, Nov 8 (Reuters) - Deutsche Post DHL saidit would continue to invest in its European parcel deliverynetwork and in new ways of getting packages to online shoppers,after the parcels unit helped it beat expectations forthird-quarter profit.

Like other European postal groups, Deutsche Post isexpanding its parcels business to cope with declining lettervolumes and to stay ahead of new rivals in the lucrative parceldelivery market.

Merger activity has already heated up, with FedEx buying TNT and Dutch firm PostNL on Monday rebuffing arevised offer from Belgium's bpost.

The move by major customer Amazon.com to carry outmore of its own parcel deliveries is seen as a threat toDeutsche Post DHL, Europe's biggest postal group. However, theGerman company has shrugged it off, saying no single customeraccounts for more than 2 percent of total group revenues.

The group is instead investing in expanding its deliverynetwork further, setting up a Europe-wide parcel deliverynetwork. It is buying Britain's UK Mail for 243 millionpounds ($316 million), and plans to enter the market in Spainand Portugal next year.

CEO Frank Appel said on Tuesday that the group was alsousing its DHL Express network to meet demand for cross-bordernext-day deliveries, with business to consumer (B2C) shipmentsnow making up 20 percent of 'time definite' internationalshipments, 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 canpick up their goods, plus a scheme to deliver parcels straightto the trunks of people's Smart cars.

"If we offer high service quality and innovation, we willcontinue to work very successfully with Amazon," Appel said,adding the company's business with Amazon was still growingstrongly.

Revenue at its e-commerce parcel division rose 11.6 percentin 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 eurosby 1122 GMT, the top gainer among leading German companies.

"The underlying EBIT progression in Mail/PeP(Post-eCommerce-Parcel) is helpful - especially given recent B2Cparcel expansion outside Germany, where we find investors craveprofit proof of concept," RBC analyst Damian Brewer said in anote.

Deutsche Post has also developed its own electric van, theStreetscooter, to deliver parcels without adding to airpollution. About 2,000 of the bright yellow vans will be onGerman roads by the end of the year.

The group reported third quarter earnings before interestand tax (EBIT) of 755 million euros, beating forecasts, andconfirmed it expected 2016 EBIT to be a record high at 3.4billion to 3.7 billion euros. ($1 = 0.9056 euros) (Reporting by Victoria Bryan; Additional reporting by MatthiasInverardi in Bonn; Editing by Louise Heavens and Susan Fenton)

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