Capital Market Communications

After an uninterrupted economic upswing for a decade, this year Germany will experience the deepest recession in post-war history. Consequently, the 2020 reporting season is marked by massive uncertainties. Many companies have reduced their forecasts or have cancelled them all together for the current financial year. The share­holders seem to accept this in view of the exceptional situation caused by the Corona pandemic. The following analysis of major AGMs this spring shows the new substantive priorities set by companies and their CEOs.

Due to the current hight of uncertainty, plain financial figures such as “earnings per share” no longer have much meaning. More important are statements about how companies are getting through the crisis and how employees are coping with the challenges. The focus is on statements about the continuity of the business and building entrepreneurial resilience. In addition, there is a recognizable desire to position a company in the middle of society, also as a protection against a perceived growing criticism of the market economy.

ESG is increasingly coming into focus

CEOs are called upon to provide orientation in this “perfect storm” and to signal to stake­holders that they have confidence in their own strengths. As the analyses of speeches at the mostly virtual AGMs show, there is a clear orientation towards ESG (environment, social, governance) criteria. Following the extremely strong growth of sustainably oriented investment forms in recent years – the E in the ESG triad –, the issues of social responsi­bility, i.e. cohesion within the company and “tackling things together”, are now becoming increasingly important.

Many companies are making it clear that inclusion and the cooperation of all employees are of great importance to them. In this year’s speeches, thanking the employees seems less dutifully and thus more seriously meant than in previous years. In addition, the CEOs agree that Germany will also experience a digitalization push with the Corona crisis. Now it is time to show what lessons are being learned from the Corona crisis and what influence it will have on the management principles for the coming year.

German economy on the verge of a turnaround

No less than the traditional business model of the German economy is up for discussion. Exports as the driving force of German industries have been severely affected by the pandemic, and traditional value chains have collapsed. In this respect, generous state aid to get the European internal market back on its feet is in the best interests of German industries. This is also made clear by the statements of the CEOs.

The statements from the speeches of CEOs at their AGMs cover the areas mentioned and illustrate the new focus that has changed as a result of the Corona crisis. Important statements made by different CEOs are summarized in brief below: 

Timotheus Höttges, Deutsche Telekom: Promoting inclusion and creating opportunities for the general population through digitalization

In his speech, Höttges makes it clear that Deutsche Telekom wants to shape change in such a way that participation by as large a section of the population as possible is feasible. This claim pays off in the form of the slogan “Be all there” known from advertising but leads thematically well through the experiences of the lockdown. Accordingly, Höttges also makes it clear that the “common” topics determine the AGM and not new products and innovations that are traditionally placed in the foreground. For Höttges, it is clear that Deutsche Telekom is making a significant contribution to advancing digitalization in Germany and Europe. He points out that this “cooperation” is also based on the commitment of the company’s own employees. While working from home, for example, sick leave has fallen and productivity has increased. Inclusion of all employees is emphasized as a management principle, and there is also a strong emphasis on other social issues and the responsibility lived by employees. Höttges also emphasizes that diversity is defining the everyday working life at Deutsche Telekom – a clear positioning in times of “black lives matter”. And of course the merger of T-Mobile and Sprint in the United States, which has now been approved, is an important topic for Höttges, as it promises strong growth and underpins the claim “Act locally, network globally”. For the time being, the company’s forecast remains unchanged; in a few weeks, the economic consequences of the merger will be added to the outlook.

Martin Brudermüller, BASF: Restructuring the company to be closer to customers and more freedom for employees

BASF also has a very strong international business. Consequently, Brudermüller emphasizes in times of the corona pandemic: We work together, we are innovative. The CEO continues: Many things cannot be planned at present, but BASF continues to be reliable. The procurement and free distribution of disinfectants to hospitals is an example of BASF’s commitment to society. Protective masks were also procured and donated. More generally, the CEO makes it clear that health is the over­riding issue in maintaining ongoing operations. 40,000 employees work from home. BASF’s role as a pre-supplier and guarantor of supply security is also highlighted as an important goal. Brudermüller makes it clear that business performance varies by sector, but also states that BASF has a high equity ratio and therefore a high resilience. The company plans to stick to its goal of a profitable and sustainable growth. Never­the­less, there will be a reduction in capital expenditures from € 3.4 billion to € 2.8 billion. Growth targets are also under review. Overall, BASF wants to reduce hierarchies through structural changes, bring employees closer to customers and create a culture of strong individual responsibility with more freedom for employees.

Oliver Bäte, Allianz: High demands mastered, because employees excel themselves

At Allianz, the focus was naturally on the stability of financial strength and dividend payments. Allianz-CEO Bäte was proud of the trouble-free operation: “In a crisis, everyone outgrows themselves. Motivation is big and loyalty is very high.” He makes it clear that the crisis has also led to a new sense of pride in the company amongst employees. He mentions as examples the donation of masks, the additional establish­ment of hotlines and the support for sick people. In his view, what has been achieved is that the connections to customers have been strengthened. In addition to these issues, climate protection remains a major business challenge. Such challenges, he said, must not only be perceived as a crisis, but also as an opportunity. Bäte is confident that Allianz will master this crisis. However, due to the significant increase in volatility on the financial market, no hard forecast for the coming year was made at the time of the AGM.

Joachim Wenning, Munich Re: Employees show dedicated commitment

Munich Re’s boss Wenning also considers the weakness on the capital market as a major burden, further losses are expected in individual insurance companies. Thus he stated very clearly: The profit target for 2020 as given at the beginning of this financial year cannot be maintained and the share repurchase programme has been suspended. He also thanked customers and employees for their dedicated commitment. The Group’s economic position is strong, Munich Re will cope well with the crisis. The company is becoming more digital, faster and more flexible. According to Wenning efficiency has increased and co­oporation continues to adhere to its goal of enhancing sustainability.

Rolf Martin Schmitz, RWE: Secure energy supply and ongoing transformation thanks to the staff

Schmitz states very clearly at the beginning of his speech that in crises the character proves itself and the employees have passed this character test with flying colours. RWE is reliable around the clock. The company is proud of the achieve­ments of its employees. Economic damage is enormous due to the pandemic, disrupted supply chains, closed borders and inter­mission of projects were crucial here. Corona has unhinged large parts of the global economy. The EU aid packages are appropriate, also regarding size. Despite all this, Schmitz expects the transformation process towards climate protection to continue. Therefore, the decisive factor is the path ahead, not the current portfolio of business activities. RWE is already one of the largest international suppliers of renewable energies.

Ola Källenius, Daimler: Loyalty and international solidarity

New Daimler-CEO Källenius clarifies that progressive digitalization is a basic requirement for this (virtual) AGM to be able to take place at all. The company is operating in 180 countries and is thus particularly affected by the pandemic. He thanked customers and employees for loyalty and cohesion. According to the CEO, Daimler continues to have a robust liquidity. Nevertheless, Daimler has carried out early adjust­ments of production and focusing of investments on future topics. Despite the crisis, a dividend payment for 2019 at the known level was carried out. The CEO also thanked government agencies for their impressive work. Källenius was clearly closing ranks with politics. Social cohesion is of importance for companies and their work. Daimler is also in discussions with trade unions on further cost reductions. Previous efforts to cut costs were an expression of the existing economic challenges, which have become even greater as a result of the Corona crisis. Because of the crisis, it is now necessary to “sharpen up”. At the same time, a “change of track towards climate protection” is necessary. As one goal Daimler wants to offer a CO2-neutral car fleet by 2039. For this “electric first” prevails. In finance the foundations for Green Finance are laid, a first green bond issue is in progress. In addition to electric drives, the fuel cell will be an important part of the future portfolio. Källenius makes it clear that the future of Daimler is digital and electric.

Joe Kaeser, Siemens [1] : Shaping change

Kaeser started by thanking the team that completed the preparations for the spin-off of the energy activities on time despite the Corona crisis. Speaking very clearly, Kaeser said that the spin-off has no alternatives: “In a time of unprecedented power and speed of change, the ability to anticipate change, adapt quickly and improve continuously is more important than ever. Those who fail to do so have no future. But those who succeed can shape the future.” For reasons of climate protection, the spin-off will quickly present a plan to phase out coal-fired power generation. Kaeser is thus making it clear that he wants to avoid future conflicts between Siemens and the climate protection movement at all costs.

Werner Baumann, Bayer: Strengthening resilience and supply chains

Bayer was the first DAX company to hold its AGM digitally. Consequentially Baumann made clear that Bayer likes to be a digital pioneer. Unfortunately, a direct exchange with the shareholders is hardly possible anymore at a purely digital AGM. According to Baumann, Bayer is systemically relevant and therefore has high security standards for its employees. The focus is on safeguarding production and supply capability. Baumann named a multitude of concrete examples of employees who have been involved in measures to contain the pandemic. But also the company itself is involved: Bayer is reviewing the production of medicines to combat the Corona­virus, including the possibility of making them available to the public free of charge. Bayer considers itself well positioned in the crisis with its health care product port­folio. Nevertheless, many uncertainties remain with regard to the future. An overall assessment is currently hardly possible. It is crucial to strengthen the company’s resilience and safeguard supply chains. According to Baumann, it remains to be seen how the Corona crisis will affect the financial markets and the solvency of customers.

Christian Klein, SAP: Assuming responsibility as a global company

Right at the beginning Klein thanked the employees for their “untiring commitment”. The safety of employees and customers is his highest priority. SAP wants to be a reliable partner in the Corona crisis as well. The company has a robust business model. SAP intends to focus on four key areas: 1. being open to dialogue with employees, 2. maintaining a focus on customers, 3. driving innovation, and 4. assuming social responsibility.

Rolf Buch, Vonovia: Corona as tragedy and opportunity

According to Buch, Corona is a great tragedy, but also an opportunity. He appeals to society to use the stop button of nature and make society better – humbler, more understanding and more sustainable. He considers Vonovia to be systemically relevant as a company, because they provide a home for 1 million people. The protection of employees is the top priority, including foreign workers – not a clumsy hint in times of discussions about work contracts. The social solidarity experienced in times of crisis was impressive, according to Buch. With its business model, Vonovia wants to give something back to society and be part of it. The company has clear guidelines for the areas and megatrends urbanization, demography, integration and climate protection. Vonovia is one of the few companies to set clear earnings targets for the current financial year.

This is an interim assessment of the AGMs held to date following the lockdown. Significant shifts of emphasis in the speeches of the CEOs are remarkable and make it clear that the economic world after Corona will sustainably bring with it new focal points in co-operation and international trade.

If you have any questions or are interested in the topic, please contact Volker Heck or Daniela Münster.

[1] Extraordinary AGM regarding the spin-off of Siemens Energy on July 9, 2020, ordinary Siemens AGM was held on February 10, 2020.

© picture: iStock