German company profits rebound
9 August 2004 , BERLIN - Corporate profits in Germany have grown at the fastest rate in four years thanks to the global recovery and a concerted drive to cut costs in the world's leading export nation. Carmakers BMW and DaimlerChrysler, chemicals giant BASF, sporting goods manufacturer Adidas and electronics group Siemens were among those who recently unveiled sparkling new profit results. "I am confident of our ability to perform significantly better than we'd originally anticipated at the beginning of th
9 August 2004
BERLIN - Corporate profits in Germany have grown at the fastest rate in four years thanks to the global recovery and a concerted drive to cut costs in the world's leading export nation.
Carmakers BMW and DaimlerChrysler, chemicals giant BASF, sporting goods manufacturer Adidas and electronics group Siemens were among those who recently unveiled sparkling new profit results.
"I am confident of our ability to perform significantly better than we'd originally anticipated at the beginning of the year," said Adidas chief Herbert Hainer after the world's second-biggest sporting-goods manufacturer raised its full-year earnings forecast from 15 per cent to 20 per cent.
Analysts have already upgraded several leading German stocks as business confidence grows and evidence emerges that three years of economic stagnation have come to an end.
The International Brokers Estimate System (Ibes) predicts that the 30 blue-chip members of the German stock market's leading DAX index will report a 54 percent jump in profits this year with earnings growing at more than 20 percent next year and profits surpassing the last corporate boom year in 2000.
Consequently, Ibes expects both the DAX and the Eurostoxx of 50 leading European shares to outpace the US's S&P 500 index this year and next. Profits of the DAX-30 rose 36 percent last year.
As a further sign that an economic upswing has been taking hold in Germany, Europe's biggest travel group, German-based TUI AG, said last week it expects earnings in its key tourism business to jump by 70 per cent this year.
Pre-tax second-quarter profit from tourism surged to EUR 100 million from EUR 53 million a year earlier, beating analysts' forecasts.
With data prepared by the OCED and International Monetary Fund showing Germany as having replaced the US last year as the world's leading export nation, German business has stood to benefit from the economic upturn that begun to take shape last year.
Exports now represent about a third of economic activity in Germany where fast-paced globalisation has transformed several of the nation's leading companies into major international players.
Only 19 percent of total orders for electronics giant Siemens are derived from the group's domestic German market. Last month Siemens reported a 29 percent jump in quarterly profit, adding that it expected to beat its full-year earnings target after sales gained for the first time in two years.
"The improvement in the broader macroeconomic environment is now arriving in our industry," said Siemens' chief executive Heinrich von Pierer in releasing the group's results.
Stabilisation of the euro has also helped boost corporate earnings. The common currency's strong rise earlier this year has resulted in many companies driving forward with the cost-cutting programmes they launched in recent years in a bid to shore up international competitiveness.
But corporate Germany's campaign to lower labour costs has done little to help ease the nation's high unemployment. Data released last week showing the jobless rate at 10.5 percent in July.
Emboldened by Chancellor Gerhard Schroeder's far-reaching economic reform plans as well as high unemployment and a slump in the fortunes of Germany's once influential trade union movement, the nation's industry has now moved to cut labour costs by rolling back the 35-hour working week and introducing longer working hours.
Leading retailer KarstadtQuelle has become the latest company to join the growing list of firms pushing employees to extend working hours as a way of cutting labour costs.
This follows recent landmark deals hammered out by trans-Atlantic carmaker DaimlerChrysler and Siemens extending the working hours without a commensurate pay rise.
Subject: German news