FRANKFURT Deutsche Post DHL (DPWGn.DE) nudged up its 2011 outlook as it cut costs and garnered more customers seeking supply chain services.
As the economy improves, manufacturers of machine parts, cars and other goods ramp up production and pay Deutsche Post to transport parts and finished products to and from their factories.
Europe's biggest express delivery and mail company said on Tuesday it now expects full-year operating profit to reach the upper end of the outlook range of 2.2-2.4 billion euros ($3.2-3.5 billion), compared with consensus of 2.36 billion.
The positive earnings trend would last into 2012 if the global economy continues to recover, Deutsche Post said.
"The cyclical divisions showed an excellent performance in particular in view of slowing economic growth and what we saw from competitors," WestLB analyst Raimon Kaufeld said.
"Express showed roughly twice the margin reported by TNT (Express) TNTE.AS as underlying development, forwarding matched the strong earnings growth reported by DSV (DSV.CO), and the progress at supply chain is significantly better than that seen from almost any competitor."
FedEx Corp (FDX.N) and Dutch TNT Express have both reported better than expected quarterly results as cost controls offset high fuel prices.
Deutsche Post's supply chain business, which generates about a quarter of group revenue, agreed new contracts representing about 540 million euros in annual revenue in the first half and more than doubled its operating margin to 3.6 percent.
Among other, Deutsche Post will run a high-security warehouse for Philips (PHG.AS), distribute drugs made by Bristol-Myers Squibb (BMY.N) in the United States and deliver cars to dealerships in Scotland for BMW (BMWG.DE), which earlier reported consensus-busting quarterly profits.
Deutsche Post's second-quarter earnings before interest and tax (EBIT) more than doubled to 562 million euros, beating consensus of 542 million.
Its shares gained 1 percent to 12.14 euros by 0815 GMT, while Germany's blue-chip DAX index .GDAXI fell 0.5 percent.
Aside from demand for supply chain services, results were also helped by the sale of unprofitable express businesses in Britain and France last year and by Deutsche Post's ability to pass on higher fuel costs to customers.
The company has raised prices for express delivery in Asia Pacific, the Middle East and Africa this year, and Rosen said it was able to fully pass on higher costs in the second quarter.
Deutsche Post also sent more express shipments with a guaranteed delivery time -- the most profitable category -- driven by demand in Asia, where it generates about a fifth of group revenue.
The company has benefited from growth in emerging markets as its customers grew there, and finance chief Larry Rosen said on Tuesday he saw good growth prospects for regions such as China, India and Latin America in the second half of this year.
(Reporting by Maria Sheahan; Editing by David Cowell)