The record-setting spree of many large companies is temporarily over: in the past third quarter, Dax corporations recorded a total decline in revenue by 5% to 436 billion euros. The operating profit (Ebit) shrank by 11% to 39.2 billion euros from July to September 2023, reaching nevertheless the second-highest value ever achieved in a third quarter. These are the results of the analysis by the auditing and consulting firm EY based on the business reports of Dax companies.

Consequently, the slowdown is spreading further: 22 companies now reported lower revenues than in the same period last year—compared to 14 companies in the second quarter that experienced revenue losses. Business in the United States and Asia, in particular, showed weakness. Only in Europe did revenues increase by 6% due to higher sales of new cars. The last time Dax corporations recorded losses in both revenue and profit was in the second quarter of 2020, during the global lockdowns caused by the Covid-19 pandemic.

The defense company Rheinmetall experienced the strongest growth, with a 24.2% increase in quarterly revenue to 1.8 billion euros. On the other hand, MTU Aero Engines experienced the deepest decline with a 59% decrease in revenue to 560 million euros.

"Germany's top corporations are increasingly feeling the global economic headwinds," analyzed Henrik Ahlers, CEO of EY. "We are facing a dangerous mix of a sluggish economy, high energy and material prices, delivery difficulties, political crises, and armed conflicts." More and more industries are struggling and implementing cost-cutting measures to cope with the crisis.

However, not everything is gloomy. Regarding revenue, 15 out of the 38 Dax corporations included in the analysis reported an increase compared to the same period last year—not only Rheinmetall. When it comes to operating profit, 16 Dax corporations recorded a higher value compared to the previous year. According to the EY analysis, the leader in profit was Deutsche Telekom with over 5.4 billion euros. Following in the ranking are the automotive manufacturers Volkswagen, Mercedes-Benz, and BMW, each with well over 4 billion euros in operating profit.

Nevertheless, four companies reported a negative Ebit: Bayer recorded the largest loss with 3.6 billion euros. However, MTU Aero Engines, Siemens Energy, and Zalando also posted operating losses.

Despite the overall uncertain outlook, companies, in contrast to the decline in revenue and profit, are on average slightly increasing their workforce. According to EY, in 28 Dax corporations with available data, the number of employees increased by 1.6% to over 3.3 million in the third quarter compared to the same period last year.

In the German auto industry, which is particularly important for the economy, warning signals are increasing, as emphasized by EY partner Mathieu Meyer: "While the profits of the top automotive companies remained high in the third quarter, the industry has been benefiting from high prices for new cars and the high order backlog from the previous year." However, the chip shortage is now playing a minimal role, and customer willingness to buy has significantly decreased, leading to a decline in orders. In addition, the industry is grappling with issues such as material shortages and the inability of suppliers to deliver. 'Things are not going smoothly in the automotive industry,' summarizes Meyer.

His colleague Ahlers expects further declining profits in the coming months: "Currently, there is nothing indicating a shift in sentiment among consumers and businesses — on the contrary," warns Ahlers. "Additionally, financial figures must be seen in the context of the persistently high inflation: In real terms— adjusted for currency devaluation — the revenue and profit development looks even bleaker."