August 7, 2018 / 5:23 AM / 3 months ago

Deutsche Post second quarter profit drops on post, parcel woes

FILE PHOTO: A Deutche Post sign stands in front of the Bonn Post Tower, the headquarters of German postal and logistics group Deutsche Post DHL, in Bonn, Germany March 11, 2015. REUTERS/Wolfgang Rattay/File Photo

BERLIN (Reuters) - Deutsche Post DHL Group (DPWGn.DE) reported slightly lower than expected operating profit for the second quarter, with earnings at its troubled post and parcel division weighing.

Spiraling costs at the division, which has seen parcel deliveries boom thanks to eCommerce, led to the group issuing a profit warning for 2018 in June and starting a restructuring program.

The group confirmed on Tuesday that it had set aside 500 million euros for restructuring this year, mostly for an early retirement program for civil servants.

“We are not short of ideas,” Chief Financial Officer Melanie Kreis told journalists, explaining how the group was looking to reduce overlaps, streamline the division, cut marketing spend and closing non-core activities.

Above average price increases for parcel deliveries, especially for bulky items, for 2019 will also help, she said. Some price increases will start from September.

Earnings before interest and tax fell 11 percent to 747 million euros ($863 million) in the three months through June, compared with a forecast for 762 million in a Reuters poll.

Profit at the post, eCommerce, parcel division more than halved to 108 million euros from 260 million one year ago, mainly due to higher transport and staff costs.

Still, Deutsche Post confirmed its reduced targets for the year for 2018 group profit of about 3.2 billion euros and said it was on course for more than 5 billion in 2020.

Reporting by Victoria Bryan; Editing by Maria Sheahan

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