UPDATE 2-Deutsche Post says need to do more to meet mid-term goals

Thu Nov 8, 2012 7:52am EST

* Q3 EBIT 604 mln euros, vs poll 648 mln

* Q3 revenues 13.84 bln euros, vs poll 13.59 bln

* Q3 Mail division EBIT down 1.9 pct at 3.28 bln euros

* Affirms 2012 and mid-term targets

* Shares down 1.1 pct in early trade vs slight gain in DAX

By Marilyn Gerlach

FRANKFURT, Nov 8 (Reuters) - Deutsche Post, Europe's biggest express delivery and mail company, said it would need to step up efforts to achieve its mid-term targets after the slowing global economy and the European debt crisis hit its markets.

Some of Deutsche Post's competitors have already been forced to lower guidance, with European logistics rivals Kuehne & Nagel and Panalpina reporting weak volumes in air freight and ocean cargo amid reduced trade between Asia and Europe.

"Our growth trends remains firmly intact even as market conditions have become more challenging," Chief Executive Frank Appel said on Thursday after the company published quarterly results and confirmed its full-year profit target.

Deutsche Post missed expectations for quarterly operating profit after costs at its Mail business rose, but said it continued to target group operating profit of 3.35 billion-3.55 billion by 2015.

"This is indeed ambitious, especially if the global economy does not accelerate again," Appel said.

There was need to "further intensify our efforts", he said, without providing specifics.

Federal Express in September lowered its fiscal 2013 forecast while United Parcel Service reported lower quarterly profit on Tuesday.

Analysts said that while Deutsche Post did not have any special cost-cutting programme, they do not expect it to come up with one now as it had continually been improving its cost structure even during the good times.

"Deutsche Post is much more optimistic than its rivals and it would be natural for any company to be more cautious now given this kind of market environment," said Hamburger Sparkasse analyst Ingo Schmidt, who raised his stance on the stock to a "buy" on Thursday from a "hold".

According to Appel's presentation charts to analysts, the company was "prepared to pull additional levers for further flexibility if needed", such as on discretionary spending, citing advertising as example.

Deutsche Post's Mail unit - which generate 40 percent of group revenues - was also hit by seasonal trends and the insolvency of mail order company Neckermann, a household name in Germany which shipped everything from computers and crockery to refrigerators and TV sets.

The company is also in the business of courier express, global forwarding and supply chain - all under the DHL unit, whose operating profit grew 5 percent in the quarter.

Despite Neckermann's collapse and a possible recession in Germany, Deutsche Post was still optimistic about online sales growth among retailers, affirming its goal to invest 750 million euro up to 2014 to boost parcel delivery infrastructure.

Deutsche Post said that while it continued to profit from a still flourishing intra-Asian trade, the slowdown in transport volumes was starting to impact DHL customers.

"The crisis symptoms are increasingly unsettling our customers. Furthermore price-sensitive customers are more frequently and more quickly switching to lower-cost shipping options than is normally the case," he added.

Analysts said corporate customers in the courier express industry, which handles overnight package delivery through its fleet of aircraft, were opting to ship car spare parts, medicines and electronic products by ocean rather by air, to cut costs because of pressure on selling prices for products.

Frankfurt Airport operator Fraport AG said third quarter cargo tonnage fell 4.7 percent while Lufthansa Cargo last week slashed its capacity for winter due to an economic slowdown.

Deutsche Post, which raised its profit guidance in August, said it continued to expect 2012 EBIT of 2.6 billion-2.7 billion euros, compared with 2.44 billion last year.