Unraveling the Profit Dip and Job Cuts in DAX Giants ‘25
Slowing economy decreases earnings for DAX companies
Got your attention? Yeah, the German economy ain't all roses and sunshine. According to EY's analysis, profits took a hit for a bunch of DAX heavyweights in the first quarter, while some chopped 30,000 jobs compared to last year. What's the deal? It's a concoction of economic slowdown, beefed-up competition, and a touch of chaos from the global stage.
Shrinking profits, employment cuts - the first quarter was a grim start for the 40 largest listed German companies. Automakers like BMW, Mercedes-Benz along with chemical giants BASF and Bayer couldn't make the grade, with 10 companies witnessing a drop in revenue. On the flip side, Rheinmetall and MTU Aero Engines raked in record-breaking revenues of 46% and 28% respectively. The telecommunications giant, Deutsche Telekom, emerged as the most profitable company, banking a whopping €6.8 billion in operating profit. The old titleholder, Volkswagen, slid to second place with a 37% profit drop.
The operating profit of the DAX companies shrunk by a whopping 8%, according to the report. 16 companies felt the burn with lower profits including, you guessed it, all automakers and the two reinsurers Munich Re and Hannover Re, thanks to wildfire-related burdens in LA. The total employment fell by one percent, shedding around 32,000 jobs compared to last year. Employment numbers are expected to keep slipping as companies tighten their belts with ambitious cost-cutting programs.
EY's CEO, Henrik Ahlers, acknowledges the tough economy and geopolitical challenges. Yet, he commends the 'remarkable resilience' shown by DAX companies in the first quarter. The full picture, however, will only materialize in the second half of the year as trade tensions between the USA and its trade partners start showing real effects.
Quick Takeaways:
- Profits dropped for 40 DAX companies in Q1 '25, leading to over 30,000 job cuts.
- Automakers like BMW, Mercedes, and chemical giants BASF, Bayer were among those impacted.
- Rheinmetall and MTU Aero Engines were the standoutperformers, raking in record revenues.
- Deutsche Telekom overtook Volkswagen as the most profitable company, reporting a 19% increase in profits.
- The operating profit of DAX companies shrank by 8%, with 16 companies reporting lower profits than last year.
- Employment numbers dipped by one percent, shedding around 32,000 jobs compared to last year.
- Cost-cutting measures are expected to intensify, leaving more employees vulnerable to layoffs.
- The trade tensions between the USA and its trading partners are yet to reflect significantly in the balance sheet figures of DAX companies.
[1]: Economic Growth Uptick: Germany Sees Green Shoots Amidst Fiscal Reforms[2]: A Break From Trade Tensions: How Germany's Economy Benefits[3]: Wayfair's Exit from the German Market: What It Means for Local Businesses[4]: Strategic Restructuring Pays Off: SAP Reports Accelerated Growth[5]: Inside SAP's Restructuring Efforts: The Measures, Results, and Challenges Ahead
- In light of the decline in profits and the resulting job cuts, some German companies may consider reviewing their community policy and employment policy to ensure they are aligned with current economic challenges, fostering a more resilient workforce.
- Amidst political and economic uncertainties affecting the profits of German businesses, it is crucial to closely monitor financial trends and adjust business strategies accordingly, which could include the implementation of aggressive cost-cutting measures, tightening of employment policies, and seeking innovative avenues for revenue growth.
