Struggling DAX Titans Report Lower Profits Amidst Economic Downturn and Job Cuts
Corporations generate considerably smaller revenue compared to anticipated figures - Dax Group Experiences Decrease in Profit Margins Substantially
Germany's heavyweight stock market companies are grappling with lower profits, slashed jobs, and stiffer international competition in the face of a persistent economic downturn. According to a new analysis by audit and consulting firm EY, obtained by the German Press Agency, the 40 companies listed in the DAX index are feeling the heat. In the first quarter of 2025, the consolidated turnover of the DAX companies (excluding banks) surged by 3.3% to an impressive €458.9 billion. However, ten companies experienced a decrease in turnover, including notable players like BMW, Mercedes-Benz, BASF, and Bayer.
A staggering 16 of the DAX companies reported a drop in their operating profit compared to the previous year, including all automobile manufacturers and the two reinsurers Hannover Re and Munich Re, who bore the brunt of financial burdens due to wildfires around Los Angeles at the start of the year. Overall, the operating profit (EBIT) before interest and taxes shrank by a significant 8.1% to €44.8 billion (a decrease from €48.7 billion in the previous year).
Unfortunately, the employment trend is on a downward spiral. The number of employees at the 27 DAX companies that disclosed figures fell by 1% to 3.17 million, which translates to approximately 32,000 jobs being axed within a year. In spite of the ailing economy, geopolitical upheavals, and the US trade spat, many DAX companies display remarkable resilience, as stated by Henrik Ahlers, CEO of EY. Nevertheless, the majority of companies still managed to record an increase in turnover.
However, the effect of US tariffs has yet to surface in the companies' balance sheets. As many companies stockpiled in the US in anticipation of high tariffs and US customers pre-emptively bought goods to benefit from lower prices, a clear picture of the situation is expected to emerge only in the latter half of the year. The tariff uncertainty poses a substantial challenge, especially for export-oriented industries.
While some DAX companies registered impressive turnover growth - such as Rheinmetall with a 46% jump in turnover and engine manufacturer MTU Aero Engines with a 28% increase - the automotive sector took a hit: The car manufacturers listed in the DAX experienced a 2.5% decline in turnover and a 42% drop in profits.
Deutsche Telekom leads the pack with an operating profit of around €6.8 billion, followed closely by Allianz (€4.2 billion) and Siemens (€3.1 billion). The only DAX company reporting an operating loss is Porsche Holding.
- Economic Downturn
- DAX Companies
- Stock Market Company
- Germany
- Prominent Index
- Frankfurt Stock Exchange
- United States
- Global Economic Recovery
- German Workforce
- Skill Shortages
- Export-driven Economy
During the economic downturn in Q1 2025, several factors need consideration, such as the performance of the DAX, the valuation expansion that may not be sustainable if earnings growth slows, uneven global economic recovery, job cuts, profited declines, and the potential impact of US tariffs. While the DAX has experienced growth, the complex economic landscape, labor market challenges, and potential tariff effects require vigilant monitoring to forecast future trends.
In response to the economic downturn in Q1 2025, it is crucial to analyze various factors affecting DAX companies, such as potential sustainable valuation expansion slowdown, uneven global economic recovery, job cuts,declining profit margins, and the impact of US tariffs. As the performance of the DAX shows growth, it is essential to monitor the complex economic landscape, labor market challenges, and potential tariff effects to forecast future trends and address skill shortages in a challenging export-driven economy.
To cope with the economic downturn, DAX companies may need to focus on vocational training programs to upskill their workforce for better business strategies and improved financial performance. It is important for stock market companies in Germany to invest in vocational training as a long-term solution to address skill shortages and adapt to the changing business landscape during a global economic recovery.
