According to a study, Germany’s stock market heavyweights are on course for a record year despite economic headwinds.
In the third quarter, the business of the 40 Dax companies was excellent with record sales and earnings, according to an evaluation by the auditing and consulting company EY. “It seems that the momentum of the first three quarters is enough for 2022 to be a record year overall,” said EY partner Mathieu Meyer. The corporations also benefit from the fact that they are often active in different markets and can thus compensate for declines. Domestic concerns.
no slump in demand
“So far, most DAX companies have been able to pass on the rising costs of personnel, procurement, logistics and energy to their customers,” explained Meyer. So far, the feared slump in demand has not happened, and the high backlog of orders offers a comfortable buffer against falling demand. “But no one can say how long this situation will last. A recession is still looming – and sooner or later we will see that in the balance sheets of the Dax companies.”
According to EY, many companies have recently confirmed or even increased their optimistic annual forecasts. “The headwind is getting stronger, but a deep crisis is unlikely,” said Henrik Ahlers, CEO of EY in Germany, cautiously optimistic.
According to the information, the turnover of the evaluated groups without banks rose sharply in the third quarter compared to the same period last year by around 23 percent to a total of almost 479 billion euros. The operating profit (EBIT) even improved by 28 percent to around 44.7 billion euros and, according to the information, was higher than ever before in a third quarter since the start of the analysis in 2013.
Concerns about Germany as a location
Business in North America in particular was in full swing. Total sales there increased by 29 percent compared to the third quarter of 2021. The corporations benefited from strong demand in the United States, but also from the comparatively weak euro. “The depreciation of the euro means that income generated abroad increases when it is converted into the common European currency – from which above all highly internationalized companies benefit,” explained Meyer. Sales growth of 15 percent was achieved in Europe, and the increase in Asia was 16 percent.
Ahlers is particularly concerned about Germany as a location. “For energy-intensive industries, the electricity and gas prices are becoming a question of survival. Large companies can relocate production abroad, small medium-sized companies often cannot, they are threatened with extinction.”
According to an analysis by the information service provider Crif, more and more companies in Germany have their backs to the wall. More than 300,000 companies are currently having financial problems, Crif recently determined in an analysis of data on almost three million companies. Compared to March 2022, the number of bankruptcy candidates increased by 15.6 percent in November.
Is the number of company bankruptcies increasing?
“The high energy costs, the existing problems in the supply chains and inflation are causing problems for many companies,” said Frank Schlein, Managing Director of Crif Germany. “In addition, consumers are reluctant to spend money because of high energy prices and inflation.” Like other market observers, Crif also assumes that the number of company bankruptcies in Germany will increase in the current year.
However, German companies active abroad are also increasingly concerned about the slowdown in the global economy. Almost every second company expects a downturn at its respective location, according to the results of a survey by foreign chambers of commerce. Above all, the prospects in Europe deteriorated, it said. On the other hand, companies in the Asia-Pacific region – excluding China – Africa, the Middle East, South and Central America and North America are less pessimistic.
Economists expect that Germany and the European economy will slip into recession over the winter. In the third quarter, the German economy surprisingly grew slightly by 0.3 percent compared to the previous quarter, according to an initial estimate.
