UPDATE 2-Deutsche Post sees profit falling, cuts dividend

* Says demand deteriorated further in 1st quarter

* Says 2009 reported EBIT will improve

* Full-year 2008 reported EBIT loss 567 mln euros

* Says proposes dividend cut to 0.60 euros per share

* DHL Express head Mullen resigns (Adds dividend, CEO quote, management board changes)

FRANKFURT, Feb 25 (Reuters) - Deutsche Post (DPWGn.DE) said it expects underlying earnings to fall in 2009 as the global economic crisis further chipped away demand for mail and logistics services in the first quarter.

"We expect that this level of volume decline will continue throughout the first half of the year, if not longer," Chief Executive Frank Appel said in a statement on Wednesday.

But 2009 reported earnings, excluding one-time charges, will improve significantly from a 2008 EBIT loss of 567 million euros ($722.5 million), the company said. Analysts polled by Reuters expected a 2008 loss of 706 million euros.

In reaction to weaker business, Europe's biggest mail and express delivery company said it would cut its 2008 dividend to 0.60 euros per share from 0.90 euros a year earlier. Analysts from brokerages including Deutsche Bank and Commerzbank had expected the dividend to remain unchanged.

Sluggish consumer spending and shrinking investments by businesses are hurting shippers around the world, with the United States being hit the hardest. Deutsche Post has lost more than $1 billion a year there for the past few years.

The company last year said it would halt its domestic U.S. DHL Express business after failing for five years to gain share in a market dominated by rivals United Parcel Service Inc (UPS.N) and FedEX Corp (FDX.N).

In 2008, the global Express business posted a reported EBIT loss of 2.1 billion euros, hurt by costs to shut down its U.S. business, where the last domestic shipment went out at the end of January.

Restructuring is on track, Deutsche Post said, adding it already has cut costs faster than expected as domestic revenues fell at a faster-than-expected pace.

The has said it will cut a total of 14,900 jobs and rack up $3.9 billion of restructuring costs in the United States to shrink its exposure to the market there.

Amid the strategic retreat, Deutsche Post on Wednesday said the head of its DHL Express business, John Mullen, had resigned and would be replaced by Ken Allen, who most recently headed up the U.S. restructuring project.

Mullen, who has had health problems, will remain available as an advisor, Deutsche Post said.