With the technology manufacturer Siemens, the last of the 40 Dax companies presented its business figures for the third quarter on Thursday.

Although Germany and the world economy are currently fighting against problems and dangers of historical proportions, the companies listed in the leading index of the German Stock Exchange have now once again set record balance sheets.

Mark Fehr

Editor in Business.

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According to the quarterly Dax analysis by the auditing and consulting company EY, the listed German companies increased their sales by 23 percent and, on balance, even achieved 28 percent higher profits than in the third quarter of the previous year.

That sounds unbelievable given exploding energy prices, disrupted supply chains, a lack of workers and customers unsettled by the war.

How do companies do that?

And are they building up enough reserves for the winter and future crises?

With market power on the long lever

Wolfgang Schnellbächer, partner at the management consultancy BCG, cites three main reasons for the high profits.

This would make it easier for large companies to relocate their added value away from Germany in order to avoid the local cost increases.

In addition, thanks to their market power, large companies have so far found it easier to pass on inflation to their suppliers while they themselves enforce price increases on their customers.

In times of scarce supplier parts, they would also have prioritized products with a higher margin.

This means that they have preferably sold goods that can be used to generate more profit.

During the chip crisis, the car industry preferred to produce SUV models instead of small cars.

With a view to the high corporate profits, however, currency depreciation must also be taken into account.

According to EY partner Mathieu Meyer, most DAX companies have so far managed to pass on the rising costs for personnel, procurement, logistics and energy to their customers.

In addition, demand has so far - contrary to fears - not collapsed.

In addition, the high backlog of orders offers a buffer in the event that demand falls.

This applies, for example, to the technology provider Siemens, which has an order book worth more than 100 billion euros.

But a recession is still looming.

"And sooner or later we will also see that in the balance sheets of the Dax companies," says Meyer.

An important part of the growth of the Dax companies active on the world markets depends on an effect that is actually problematic from an economic point of view, namely the current weakness of the euro.

The depreciation of the common currency against the dollar, for example, makes products manufactured in Germany appear cheaper to foreign customers, which increases demand.

Added to this is the fact that income generated in foreign currency on foreign markets grows as a result of the conversion into euros.

According to EY specialist Meyer, international companies that generate significant sales outside of the euro area will benefit most from this.

The 40 Dax companies achieved only 40 percent of their sales in Europe in the third quarter.

Almost a third of sales came from North America and another 20 percent from Asia.

According to EY partner Meyer, the momentum of the first three quarters could still be enough to make 2022 a record year as a whole.

Despite this prospect, very few companies feel like celebrating.

The auditing institute IDW also warned at the end of October that the situation was getting worse from quarter to quarter.

In many cases, the risk provisions posted in the balance sheets for the third quarter are not sufficient.

The auditors' guild therefore wants to pay special attention to depreciation when it examines the balance sheets for 2022 next year and, if necessary, raise its voice in warning.

The first signs of slowing down can already be seen in the balance sheets, for example in the case of the automotive supplier Continental, whose quarterly profit has collapsed by 97 percent.

This was also due to an amortization of the goodwill, which became necessary due to the rise in interest rates.

Goodwill depreciation could also become an issue for other Dax companies.

The quarterly profit of the chemical giant BASF, which has been hit hard by the exploding prices for energy and raw materials, also collapsed.

BASF has written off a high position to its subsidiary Wintershall.

Wintershall produces half of the gas it supplies in Russia and has invested in the Nord Stream 1 natural gas pipeline, which was destroyed under circumstances that have not yet been clarified.

It's no wonder that BASF announced a savings program in the third quarter to cut costs by half a billion euros a year.