Sales are in line, but the net profit is a disappointment and the operating profit is also below expectations

Juergen Boehlen Merck, Finck & Co.

Compared to last year, the company reported a near 6% fall in net profits for the first quarter to 539 euros.

The fall came despite a 10% rise in sales to 8.6bn euros.

This is despite predictions by chief executive Klaus Zumwinkel that annual group sales would rise to 40bn euros this year from 32bn euros last year.

Deutsche Post stressed that when excluding items such as tax and interest payments, the group's profits actually rose by 4.2% to 840m euros, relative to last year.

Bouncing back

As trading progressed on Wednesday, Deutsche Post's share price bounced back.

The main mail business seemed to be holding up

Steven Bowen BNP Paribas

"Sales are in line, but the net profit is a disappointment and the operating profit is also below expectations," said Juergen Boehlen of fund management company Merck, Finck & Co.

The stock was trading down 0.7% at 18.55 euros late in the afternoon. In November, the stock launched at 21 euros.

Letters

Since its partial privatisation in November, when a 25% stake was floated on the Frankfurt stock exchange, Deutsche Post has pushed on with its diversification beyond its core letter delivery unit.

That business performed well during the quarter.

"The main mail business seemed to be holding up, the margins are good, the growth is very flat but then we had expected that," said BNP Paribas analyst Steven Bowen.

But the company's non-postal activities are becoming increasingly important for Deutsche Post.

Other divisions

Mr Zumwinkel predicted that letter deliveries would account for about a third of the group's business by the end of this year, compared to three quarters of its business last year.

Deutsche Post's logistics and express division grew slower than analysts had expected, with little hope of an improvement later this year, according to Commerzbank analyst Andy Brook.

The third pillar of Deutsche Post's diversification strategy is its financial services division, which saw its earnings before tax and exceptional items rise 11.7% to 124m euros.