Capital Market Communications

Step by step, Germany is breaking free from the lockdown. The Federal Ministry of Economics (BMWi) and the German Central Bank believe the economic low point has been passed. The infection figures currently remain low, whereas in other countries such as the USA or Brazil the numbers are rising dramatically again. In Germany, the city centres, shops and restaurants are full again and many people are looking forward to their summer holidays after all. But the economic outlook remains cloudy. A glance at the company forecasts for the current fiscal year shows this.

Although the shopping streets are full again, the consumer climate index is still well below the previous year's level. On a small scale, this is a sign of what is troubling the corporations. A look at the DAX 30 companies reveals that the economy is not recovering so rapidly.

62 % of the DAX companies have cancelled or reduced their forecasts

Of the 30 DAX-listed companies –excluding Wirecard due to the current situation – eleven corporates withdrew their forecasts without issuing a new one. That is 38 % of the listed companies. The reasons are obvious: the market is feeling the uncertainties, planning can almost never be made realistically, and rebuilding supply chains takes time. The German foreign trade surplus will probably decline by 75 %. As the F.A.Z. reported in mid-July following analyses by the EQS Group, the increased number of ad hoc announce­ments by the 30 DAX companies is another indicator: The numbers have almost doubled from the first to the second quarter – from 24 to 46 announce­ments.

Not only is it absolutely unusual not to make a forecast, but above all it does not comply with the German law. According to § 289 (1) sentence 4 of the German Commercial Code (HGB), the expected develop­ment of a company must be assessed and explained. However, the German Accounting Standards (DRS) also state that, due to major macro­economic conditions, the requirements for the forecast report of a company can be reduced. This is certainly true for the current situation. Neverthe­less, a reduced forecast remains mandatory. It is therefore all the more surprising that eleven companies have not issued a new forecast so far – and ultimately high­lights the exceptional nature of the situation.

Another seven companies (24 %) reduced their forecast. Some companies have given more precise figures, while others have issued a reduced – rather vague – forecast in accordance with German Accounting Standards. However, eleven corporates, 38 % of the companies, have also confirmed their forecast. Not surprisingly, these are mainly companies from sectors that have been less affected by the current crisis than others – such as energy, real estate, and healthcare. Overall, the DAX is split in two parts. However, the performance of the DAX suggests otherwise: after the enormous Corona-driven slump of around 40 % in March, the lead index is now, in July 2020, back at the level of summer 2019. It is there­fore to be feared that the stock indices are currently showing considerably more optimism than is justified in real economic terms.

Nevertheless, the companies are still holding on to their dividends

Considering that 62 % of DAX companies have cancelled or lowered their forecast for the current fiscal year, it is quite surprising that the overwhelming majority of companies have maintained their dividends for the past fiscal year. The main reason for doing so lies in the good results of the past reporting year. Against the backdrop of the uncertain future and the generally poorer current year, voices are increasingly raised demanding that capital should be left in the company and used as a reserve for future crisis situations.

Ultimately, only three companies have suspended dividend payments for 2019: Adidas, Deutsche Bank and MTU Aero Engines. And they have announced the same for the year 2020. To be fair, it must be added that Deutsche Bank had already announced its dividend suspension last year as part of its planned transformation, in other words, it has nothing to do with the Corona crisis. Another three companies have reduced their dividends for 2019.

Overall, the DAX dividend payments for 2019 fell by only 10 %, they still reached 34.5 billion euros. Allianz paid out the largest amount of 4 billion euros, followed by Volkswagen with planned 3.3 billion euros and Siemens with 3.1 billion euros. The dividends in Germany thus remain more stable in comparison with other European countries. However, experts also expect the dividends for 2020 to fall by a further 11 % compared with the previous year, bringing them down to the level of 2016. 

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

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