By Marilyn Gerlach
FRANKFURT (Reuters) - Deutsche Post (DE:DPWGn) beat forecasts with a 5.7 percent increase in second-quarter profits and said it would invest heavily in its parcel and logistics business DHL, whose sales volume growth helped to boost earnings.
The world's No. 1 postal and logistics company, which went public in 2000 and lost its German mail monopoly seven years later, makes three-quarters of group revenues from DHL, compensating for the decline in traditional letter deliveries.
The group has already been investing in a new IT platform at its forwarding and freight business that allows customers to track shipments and will spend more on it this year and next.
Finance chief Larry Rosen said the IT system, New Forwarding Environment launched in 2012, would help standardise processes and cut costs in the longer run because it allows the company to fill contracts more quickly.
"That leads to savings and more transparency... it will help customers know the status of their contracts," he said during a conference call with reporters on Tuesday.
Deutsche Post will also make investments to restructure its supply chain business, which provides warehousing and distribution for customers like fashion groups Tom Tailor (DE:TTIGn) and Zara, as well as for the automotive and aerospace industries.
Shares in the group rose 3.1 percent to 23.98 euros at the top of Germany's blue-chip DAX index <.GDAXI> by 11:11 BST.
Cantor Fitzgerald analyst Robin Byde reiterated his "buy" recommendation on the stock, saying Deutsche Post was attractively exposed to a general turnaround in global trade.
Europe's recovery, though still fragile, and continuing economic growth in North America have increased trade flows and helped boost the volume of goods shipped by Deutsche Post's DHL division, comprising express courier delivery, freight forwarding and supply chain services.
DHL contributed the bulk of quarterly earnings, with core profit up 10 percent at 540 million euros.
Deutsche Post's performance joined a string of positive earnings from European freight forwarders like Kuehne & Nagel (VX:KNIN), Panalpina
Deutsche Post's international express rival United Parcel Service Inc (N:UPS), the world's biggest courier company, unveiled higher investments last week to boost capacity ahead of the busy holiday shopping season. UPS also slashed its earnings forecast for the year, having reported a bigger-than-expected drop in quarterly profit.
Deutsche Post said investment at DHL would weigh on earnings growth and scrapped its 2015 profit target.
The company did not provide specific guidance to replace its previous outlook for 2015 core profit of 3.35-3.55 billion euros, saying it still needed to determine how much it would invest. It said it saw annual core profit rising to 3.4-3.7 billion euros in 2016.
Analysts in a Reuters poll on average see Deutsche Post's core profit rising to just over 3 billion euros this year, about 3.4 billion next year and 3.7 billion in 2016.
Deutsche Post's second-quarter group core profit of 654 million euros, beat analysts' consensus forecast of 628 million in a Reuters poll.
Its freight forwarding business reported a 21.3 percent drop in operating profit to 100 million euros due to weaker currencies in emerging markets and tough pricing competition.
($1 = 0.7467 Euros)
(Reporting by Marilyn Gerlach; Editing by Louise Heavens and Jane Merriman)