DAX companies feel effects of weak economy

The economic slump in Germany is also leaving its mark on the balance sheets of the leading DAX companies. Although most corporations were able to increase sales and profits in the second quarter, growth slowed significantly and even remained below the rate of inflation.

According to a recent study, sales and profits of the largest listed companies increased between April and June. Nevertheless, the trend was mixed, with numerous DAX-listed groups reporting lower revenues and profits compared with the same period last year. In its survey, consulting firm EY highlighted that the weak economy is having an increasing impact on many companies.

In the second quarter, total revenue of the 40 companies listed on the DAX rose by 1.1 percent year-on-year to around 446 billion euros. Operating profit also grew by almost three percent to 40.5 billion euros. However, the year-on-year comparison was severely impacted by the effects of the Ukraine conflict.

It is particularly striking that sales declined year-on-year at 14 groups and profits fell at 18 companies. Henrik Ahlers of EY stressed that the air was now thin for many companies after a strong previous year. It is becoming increasingly difficult to maintain the high level of profits, he said.

In this context, chemical companies in particular reported lower demand and revised their forecasts downward. For example, BASF, the largest chemical group, reported a significant drop in sales and profits in the second quarter. Revenues fell by a quarter to 17.3 billion euros, while net profit dropped to 499 million euros from a good two billion euros a year earlier.

By contrast, the auto groups were the growth engine in the second quarter. They benefited from an easing chip shortage and generated profits mainly from sales of models with internal combustion engines. Volkswagen, Mercedes-Benz and BMW were among the most profitable companies, with profits of 5.6 billion euros, 5.0 billion euros and 4.3 billion euros respectively. Deutsche Telekom landed in second place with an operating profit of 5.2 billion euros.

Despite these positive developments, EY analyzed that the automotive sector also faces challenges. Order intake is weak, and customers' willingness to buy is declining due to inflation, economic worries and high interest rates. Excess capacity could soon impact margins.

Experts expect a difficult second half of the year, as growth impulses are lacking and low sales growth is being eaten up by high inflation. In addition, Henrik Ahlers warned that the cost problem in Germany is becoming increasingly pressing. High energy prices are leading to investments being postponed and relocation of production abroad being considered. The complex and lengthy approval procedures are further exacerbating this trend.