Record profits in the crisis

Record profits in the crisis

Despite the chip crisis, Corona and disrupted supply chains, the DAX companies achieved record profits and sales in the third quarter. The large forwarding companies also earned well.
by Dirk Mewis

Germany’s top corporations are thus generating more turnover than ever before, with Asia in particular driving business. Overall, the total turnover of the 40 companies listed in the Dax rose by nine percent compared to the same period last year. This also exceeded the turnover of the pre-crisis year 2019 by four per cent. This is shown by an analysis of the audit and consulting firm EY based on the companies’ annual reports. The vast majority of the Dax 40 companies increased their turnover significantly compared to the previous year. Only three companies, Volkswagen, Airbus and Continental, showed a decline in turnover in the third quarter. The main sales driver in the third quarter was business in Asia, where revenues rose by a total of 14 percent. In North America, growth of 13 percent was recorded in the third quarter, while in Europe total sales were at the previous year’s level.

The operating profits of Germany’s top companies developed even better than sales: after a total EBIT of 14.2 billion euros in the same period last year, the Dax companies generated a total profit of 35.7 billion euros in the past quarter – an increase of 152 percent. The fact that the profit more than doubled naturally also has to do with the slump in the Corona autumn of 2020. Compared to the third quarter of the pre-crisis year 2019, however, profit also grew – by 21 per cent. “We are in the second year of the pandemic and the operating environment remains very challenging. Supply chain disruptions, sharply rising logistics and material costs, supply problems with raw materials as well as components and resulting production cutbacks are causing problems for companies,” explains Henrik Ahlers, CEO at EY. “Nevertheless, the vast majority of Germany’s top groups managed to stay on course in the third quarter.”

Freight forwarding groups set profit records

The international positioning of many companies as well as the focus on high technology and premium segments is currently paying off. For example, demand in Asia has picked up significantly. According to Ahlers, companies would do well to continue to focus on cost discipline and to work hard to make their production networks and supply chains crisis-proof. He expects that the current procurement problems will strengthen the trend towards so-called backshoring, i.e. production closer to the sales markets – and a partial withdrawal from so-called best cost countries. Mathieu Meyer, partner at EY, adds that it is possible that we will see even stronger effects of the supply bottlenecks in the fourth quarter. The fourth Corona wave and the coming winter could lead to further production losses and logistics disruptions.

At the same time, according to DVZ calculations, the large forwarding groups DHL, Schenker, Kühne + Nagel and DSV have also strongly increased profits and earnings in the current year. DHL and Schenker achieved EBIT margins of five per cent and Kühne + Nagel and DSV of almost ten per cent. So konnten DHL und Schenker EBIT-Margen von fünf Prozent und Kühne + Nagel sowie DSV von annähernd zehn Prozent erzielen.

The large shipping groups benefited even more from the immense demand for transport and the resulting boom in rates. Their EBIT margins are likely to be between at least 30 per cent (Maersk and CMA CGM) and a peak of a good 50 per cent (Evergreen), estimates DVZ. The shipping companies are now using their exorbitant profits and high liquidity – Maersk expects an annual EBIT of up to 19 billion US dollars and a free cash flow of at least 14.5 billion US dollars – to enter deeper into the logistics chain. These include terminal investments (Hapag-Lloyd at Jade-Weser Port and CMA CGM in Long Beach/Los Angeles) and even freight forwarder acquisitions (Senator by Maersk).

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