Frankfurt / Main (dpa) – Germany’s stock market heavyweights have yet to regain their former strength despite the economic recovery in the third quarter.
It is true that sales and profits for Dax companies increased compared to the second quarter, the peak of the Corona crisis, as an assessment by the audit and consulting firm EY shows. However, compared to the previous year, the crisis left deep traces, especially in earnings. Due to the increasing number of infections, the outlook for the end of the year has also deteriorated.
Many states in Europe have decided to severely restrict public life and thus markedly slowed the economy again, although not as strongly as in the spring. EY sees the major corporations in view of well-filled but well-equipped coffers for a possibly difficult end of the year. Thus, at the end of the third quarter, the companies had a total of more than 140,000 million euros in liquid funds. The availability of liquidity remains comfortable.
In the third quarter of 2020, major corporations offset some of the crown-related drop in the spring. Most of DAX’s 30 companies showed “clear signs of recovery,” Hubert Barth, chairman of EY’s German board of directors, said on Friday.
The total turnover of the major corporations increased by 16 percent to around 330 billion euros compared to the second quarter. Compared to the same period last year, sales increased slightly by 0.4 percent. However, acquisitions also played a role. For example, Deutsche Telekom made a leap in sales thanks to the acquisition of US competitor Sprint.
Total operating profit (EBIT) increased significantly compared to the catastrophic quarter from € 203 million to € 14.3 billion. However, compared to the third quarter of 2019, it fell 47 percent.
The bottom line is that the effects of the crisis on jobs so far have been limited, according to EY. Worldwide, DAX companies employed a total of 3.2 million people at the end of the third quarter, 0.04 percent less than a year earlier.
The euro zone economy had recovered in the summer from the fall of the Crown in the spring. However, the increase did not fall as strongly as initially calculated. Economic output (GDP) for the third quarter was 12.6 percent higher than in the previous quarter, according to Eurostat’s statistics office. In the first survey, the authority reported an increase of 12.7 percent.
Despite record growth in the summer months, the economy of the 19 eurozone member states was unable to fully compensate for the fall of the krone. Economic output in the third quarter was 4.4 percent lower than a year earlier.
Meanwhile, the economic outlook has been clouded again. Due to a second wave of the corona pandemic, many countries in Europe have decided to severely restrict public life. “Since Europe remains the most important market for the major German corporations, they too will have to live at a loss,” said EY manager Barth. After the big lockdown experience in spring, boardrooms would know how to best handle it.
Management consultancy PwC now expects “a persistent recession and long-term restricted consumption behavior” for Europe. The industry is very affected because companies are investing less. PwC expects the auto industry to see a slow or worst-case recovery for the next three years.
The travel and tourism industry and the entertainment sector continue to grapple with the fallout from the Corona measures, and sales in the German service industry as a whole are likely to collapse by 10 percent this year. The pharmaceutical and medical technology industry is likely to generate around 6% fewer sales in 2020 and grow 3% in 2021.
Grocery retail is nearly stable and is likely to be one of the few industries that will add more value in late 2021 than in late 2019. Online retail is a clear winner. The telecommunications industry is also crisis-proof: according to the PwC study, it should increase by 1 percent this year and 2 percent next.