Corporations Thrive Amid Economic Challenges as Profits Surge

A recent analysis conducted by the auditing firm EY has revealed that the cumulative operational profits of DAX-listed companies saw an increase of over four percent in 2024 compared to the previous year. Notably, this analysis excludes Porsche SE, which reported a substantial loss of approximately 20 billion euros for 2024, primarily due to significant write-offs that impact its balance sheet rather than its operational performance.

According to EY's calculations based on the latest financial reports from DAX firms, the total earnings before interest and taxes (EBIT) of all 40 corporations reached around 181 billion euros in the past year. Additionally, the combined revenue amounted to 1,824 billion euros, reflecting a modest growth of 0.3 percent. The final quarter of 2024 also exhibited accelerated gains in both revenue and profit, indicating a positive trend as the year concluded.

The Deutsche Telekom stood out as the highest profit generator within the DAX, reporting an impressive profit of 26.3 billion euros. The majority of DAX companies experienced improvements in both profit and revenue in 2024. Despite numerous challenges, Henrik Ahlers, the head of EY's German operations, emphasized that there is no overarching negative trend. He noted that industrial companies faced a particularly tough year, grappling with stagnating growth, limited investment willingness across Europe, fierce international competition, and economic weakness in China. However, many German enterprises have successfully adapted their business models and even created new jobs, demonstrating resilience in the face of adversity.

Among the sectors facing significant challenges are automobile manufacturers. Major players such as Volkswagen, BMW, and Mercedes-Benz reported profit declines exceeding 30 percent. Nonetheless, these companies still achieved substantial operational profits of 44 billion euros collectively in 2024. The aerospace and defense sectors, particularly companies like Rheinmetall and MTU Aero Engines, saw their sales surge by over 30 percent, reflecting a contrasting success story.

Only three companies within the DAX reported losses in 2024: Bayer, Vonovia, and Porsche SE. The overall outlook for DAX corporations appears mixed, with potential tariffs and geopolitical uncertainties posing risks. Jan Brorhilker from EY pointed out that unpredictability has become the new normal, compelling businesses to adapt to this reality.

In addition, a financial package from a prospective new coalition government could provide a much-needed boost, with plans for an investment offensive that may help break the cycle of weak growth, investment hesitation, and negative sentiment in the market. Meanwhile, many DAX firms are adopting cost-cutting measures, with job reductions frequently announced across various sectors. This trend is not limited to automotive manufacturers and their suppliers but also extends to companies like Siemens, DHL Deutsche Post, and Commerzbank. Despite a slight decrease in employee numbers to 4.05 million among the 40 DAX firms in 2024, this trend is expected to accelerate in 2025 as companies seek to streamline operations and enhance efficiency.