German companies reduce their profit targets

Insurers, construction companies, fashion designers and automakers all see their profits melt away. Six DAX companies also lowered their forecasts. The reasons are very diverse – and sometimes disturbing.

Commercial war, Brexit, diesel scandal, hot summer – the reasons why German companies are less optimistic about the future are multiple. In recent weeks, there have been earnings warnings, only six DAX companies have lowered their forecasts.

"We are not satisfied with the development of our activities and development on our part," BASF Chairman Martin Brudermüller said on Friday when he presented the quarterly figures. The group had already lowered its profit forecast at the end of September – but mainly because of the separation of its oil and gas subsidiary Wintershall.

Economics researchers at the Ifo Institute have also recently noted a less positive mood in the executive floors. "The German economy is entering a phase of weakness," said VP Bank economist Thomas Gitzel, speaking about development.

Automotive manufacturer under pressure

The automotive industry is the hardest hit sector. With Daimler and BMW, two of the top three German automakers lowered their forecasts. The costs of the self-inflicted diesel scandal and the bumpy introduction of the WLTP emissions test, higher customs duties on exports to the United States and China and battles on rebates with the competitors are felt.

And when Germany's largest sector stutters, many other businesses are suffering. The suppliers, who are already groaning under the tight pricing pressure of their customers, were particularly shocked: Continental, the cable, Leoni, the Grammer seat manufacturer, as well as lubricant supplier Fuchs Petrolub, had to meet two consecutive expectations because of the decline in results. "In the automotive industry, pessimism is spreading," said Klaus Wohlrabe, an economics expert at Ifo, citing this state of mind.

This could even be critical for small businesses. The number of bankruptcies among mid-size auto parts suppliers is increasing, said Thomas Steinberger, industry expert, PwC's consulting and audit firm. At the same time, the most dramatic structural changes in the electric car will only affect suppliers in two or three years. The first signs of a crisis were exposed by mechanical engineers working for the auto industry, added attorney Frank Grell, who accompanied major renovations to the firm. Latham & Watkins lawyers.

Heat, wages, damages

However, profit warnings are typically generated by many sectors: from the medical technology provider Drägerwerk to the manufacturer of Krones packaging facilities and from the Talanx insurer to the Fresenius Medical Care (FMC) dialysis specialist. In part, the reasons are general because of commercial concerns or monetary influences, but sometimes very specific. In addition to the weakness of its US business, FMC also supported the cost of an information campaign in the debate over a dialysis treatment change in California. Talanx has spoiled an accumulation of major losses among industrial customers in profit planning.

High-consumption companies have been particularly troubled by the hot summers: at temperatures ranging from 30 degrees to September, customers have the impression that fall fashion and long shopping sprees are at the rendezvous. Among them, the online retailer Zalando, fashion company Tom Tailor or the largest electronics retailer Cecelia Europe. The fact that the parent company of the channels Mediamarkt and Saturn missed their profit target already capped cost the chef Pieter Haas.

However, the producer of salt and fertilizer K + S also suffered from drought: due to the low water level of the Werra, the group was no longer able to discharge the waters wastewater from potash production and production was interrupted for several weeks.

The building materials companies have very different problems: HeidelbergCement lowered its earnings forecasts due to the bad weather conditions in the United States and high energy costs, which made the operation of cement kilns more expensive . The competitor LafargeHolcim moved Friday with a warning on profits. The Swiss group cites yet another reason: wages have increased due to the lack of truck drivers.