Deutsche Post DHL seeks cost reduction at post, parcels division

BERLIN (Reuters) - German postal and logistics group Deutsche Post DHL Group is working on ways to cut costs at its post and parcels division after it missed first-quarter profit expectations.

The group said on Tuesday that profit in its post-eCommerce-parcels (PeP) division was hit by higher staff and transport costs, plus the costs of expanding production of its StreetScooter electric delivery vehicles and growing its international parcel business

Shares in Deutsche Post fell 4.2 percent in early trading after the earnings disappointment.

In Germany, Post has awarded wage increases as part of a collective labour agreement but also saw increased costs due to a wave of influenza in the early part of this year.

The company said it therefore had work to do to make its 2018 operating profit target of 4.15 billion euros ($4.95 billion) this year.

"We are working on different measures to keep the cost base under control for the remaining months of the year," Chief Financial Officer Melanie Kreis told journalists, adding that an update would be given at second quarter results.

The company said its first quarter results were a mixed picture, with profit increases at its freight and express divisions, but one-off effects of 50 million euros from customer contracts in its supply chain division.

Fast food chain KFC had to close most of its UK stores in February due to chicken shortages after it switched its delivery contract to DHL.

"We are working on resolving the start-up problems and we're on the way to normal operations," Kreis said, declining to break down the exact costs linked to the KFC problems.

Overall, the company reported first quarter revenues down slightly to 14.7 billion euros ($17.51 billion), missing expectations for 15.15 billion euros due to currency effects and the sale of unit Williams Lea.

It posted operating profit of 905 million, also below the 960 million expected in a Reuters poll.

It confirmed plans to increase profit to over 5 billion for 2020.($1 = 0.8386 euros)

(Reporting by Victoria Bryan; Editing by Maria Sheahan/Keith Weir)