Corporate earnings continue climb

12th November 2004, Comments 0 comments

12 November 2004, BERLIN - Germany's third-quarter corporate reporting season is drawing to a close with rigorous cost-cutting and an export boom helping to power company profits in Europe's largest economy. Indeed, with key groups such as chemical giant BASF AG, engineering group MAN AG, airline Lufthansa AG and power company E.ON AG unveiling upbeat results this week, corporate Germany is tipped to report earnings this year that outpace its counterparts in the rest of Europe and the United States. The bu

12 November 2004

BERLIN - Germany's third-quarter corporate reporting season is drawing to a close with rigorous cost-cutting and an export boom helping to power company profits in Europe's largest economy.

Indeed, with key groups such as chemical giant BASF AG, engineering group MAN AG, airline Lufthansa AG and power company E.ON AG unveiling upbeat results this week, corporate Germany is tipped to report earnings this year that outpace its counterparts in the rest of Europe and the United States.

The buoyant earnings performance by many leading German companies also reflects the nation's industrial strength in key cyclical sectors such as chemicals, cars and mechanical engineering, which have benefited from the pickup in the world economy over the last 12 months.

Market research group International Brokers Estimate System is projecting the 30 members of the Frankfurt Stock Exchange's key Dax index to report a 57.6 percent jump in earnings for 2004 with the German companies having enjoyed strong foreign orders despite the robust performance of the euro, which this week pushed to a new record high of over USD 1.30.

The rise in German company earnings compare to the international brokers' forecast of a 23.5 per ent rise in earnings this year for Europe's leading companies and about 20 percent for the U.S.'s S & P 500 companies.

"Bolstered by the strong third-quarter performance, the BMW Group anticipates that the development achieved during the first nine months of 2004 will be sustained in the fourth quarter," said the Munich-based carmaker's chief executive Helmut Panke.

Germany's solid third-quarter reporting season also comes in the wake of a round of major corporate restructuring and cost cutting by many of the country's leading companies as they face up to tough global competition.

As a measure of the tough cost-cutting programmes launched by German companies to bolster their balance sheets, the nation's corporate sector is expected together to slash about 45,000 jobs this year.

This year's tally of job cuts comes on top of the more than three million jobs that were cut from German industry's workforce, excluding the nation's troubled building sector, between 1991 and 2003 as corporate Germany launched its restructuring drive.

More recently, key German companies including transatlantic carmaker DaimlerChrysler AG and electronics giant Siemens AG have stepped up their restructuring drives by moving to roll back employee benefits and to extend working hours with the nation's business leaders now seeking to return the country to a 40-hour week.

BMW, which is challenging its arch rival Mercedes-Benz to become the world's leading luxury car brand, reported an 8.2 percent jump in group sales in October after posting a 7.6 percent increase in third-quarter pre-tax profit.

Despite signs of weaker global growth, BMW joined a raft of other German companies in maintaining their 2004 earnings and sales goals or raising their targets.

"We have exceeded the goals we have put in place," said Fresenius Medical Care chairman Ulf Schneider after the world's largest provider of dialysis products and services reported a 17 percent jump in third-quarter profit.

A similar picture emerged across other industries with soap powder maker Henkel AG also posting a rise in quarterly earnings before interest and tax of about 17 percent and German fashion powerhouse Hugo Boss beating analysts' forecast to report a seven per cent increase in net profit during the first nine months of the year.

Despite even the hurricanes that raged across the southern part of the United States and the Caribbean during the late northern summer months, Munich-based reinsurer Munich Re managed to turn in better-than-forecast third quarter earnings.

Likewise sportswear-to-trendy fashion groups Puma AG and Adidas-Salomon AG basked in strong third-quarter performances with Puma raising its full-year earnings outlook and Adidas chief Herbert Hainer predicting that 2005 would be "another great year" for his company.

But as a mark that German corporate earnings might slacken next year, the Puma results fell short of analysts' forecasts and data released this week showed the nation's exports starting to plateau out in recent months.

German exports grew by 5.8 percent year-on-year in September to record their slowest rate of growth in eight months and the International Brokers Estimate System expects earnings to taper off next year.

DPA

Subject: German news 

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