Illustration: Jens Bonnke
The 200 largest German companies generated a total of 3.9 trillion euros in sales in 2023. That is not quite as much as in the record year of 2022, when revenues exceeded the 4 trillion euro mark for the first time since the FAZ archive began collecting data. The FAZ list of the largest companies was first published 65 years ago. Despite the decline of almost 3.6 percent, 2023 sales significantly exceed the totals from 2011 to 2021. The list of companies looks very stable in the top positions. As usual, the automotive industry dominates here with the manufacturers Volkswagen, Mercedes and the supplier Bosch, the retail sector with the Schwarz Group (Lidl, Kaufland), Aldi, Rewe and Edeka as well as the utilities Eon and Uniper. Can the Ukraine war and the numerous crises have no effect on the companies at all? That would be too good to be true, but a closer look at net sales and profits shows how unusual and unpredictable the situation has become for companies.
The truth is that profits have fallen significantly more than sales. The total annual profits of the 200 largest companies on the FAZ list fell by 12.8 percent to 118 billion euros. The impact on the top-tier companies was not quite as severe. The 40 DAX companies achieved a manageable increase in sales of one percent, while their profits fell by 1.5 percent overall. The big profits of the car manufacturers Volkswagen, Mercedes and BMW and Deutsche Telekom, which generated the highest annual profit of all large companies at almost 22 billion euros, provided some relief. In contrast, six of the 40 DAX members suffered losses.
Unrest in the energy sector
The energy industry has experienced quite a rollercoaster ride. The sharp rise in oil, gas and electricity prices has inflated the sales of many providers and suppliers. Among the ten companies with the largest sales increases in 2023, there are seven representatives of the energy industry, with the network operator 50Hertz Transmission at the top. The company, which is primarily responsible for the East German networks, increased sales by almost 45 percent to 10 billion euros. However, 50Hertz points out in its annual financial statements that sales contain a large proportion of items that the company only passes on in order to process requirements such as the Renewable Energy Sources Act, network fee-based surcharges or the electricity price brake. Adjusted for these items, which immediately lead to expenses, sales amount to only 2.4 billion euros, slightly less than in the previous year.
The figures for the utility Uniper also require a second look. In 2023, the company suffered a deep drop in sales of over 60 percent and fell from 2nd to 7th place on the current FAZ list of large companies. Nevertheless, the company, which has been nationalized since the energy crisis, celebrated its most financially successful year with a profit of 6.3 billion euros – after a horror loss of 19.1 billion euros in the previous year. What was going on there? Uniper’s recent drop in sales can be seen as a normalization after revenues shot up absurdly in 2022 due to the enormous increase in electricity and gas prices as a result of the war in Ukraine. The international accounting standards IFRS require sales to be presented according to daily prices on the energy exchanges. Energy prices have fallen again from these peaks, so that Uniper was also able to value derivatives, i.e. financial contracts to hedge against commodity price fluctuations, more cheaply in 2023. In addition, the utility was able to release provisions that had been set up to protect against the failure of Russian gas supplies.
The fall in raw material prices also caused the sales of chemical giant BASF to fall sharply by 21 percent. In addition, demand from customers of the DAX company has fallen significantly due to the weak economy. Nevertheless, BASF was able to make a profit again in 2023, which at 379 million euros was roughly the same amount as the loss in the previous year – only with the opposite sign.
Is the change in arms policy making itself felt in the corporate world?
To get on the current list of the 200 largest companies, a turnover of almost 3.9 billion euros was needed in 2023 instead of just under 3.8 billion euros in the previous year. As a result, stock market star Biontech, which rose to the top of the 200 largest companies for the first time two years ago thanks to its invention of the Comirnaty corona vaccine, narrowly missed out on the list with a drop in turnover to 3.8 billion euros in 2023. In contrast, the Nuremberg-based family company Diehl just managed to get its foot in the door in 200th place. It recently became known for its defense division, which offers air defense systems and guided missiles. Overall, however, the turning point, i.e. the completely changed importance of the defense industry, is not yet particularly evident in the corporate landscape.
The steel and technology company Thyssenkrupp, which also manufactures systems for submarines and naval vessels, moves to 23rd place on the list with a drop in sales of almost 9 percent. Sales in the marine division remained stable at 1.8 billion euros in the face of a sharp decline in incoming orders. In contrast, tank manufacturer Rheinmetall has worked its way up to 112th place after a 12 percent increase in sales to just under 7.2 billion euros. However, the stock market expects significantly stronger growth; at least the price of Rheinmetall shares has roughly quintupled since the outbreak of the Ukraine war in February 2022. Rolls Royce Power Systems’ sales also increased significantly, by almost 17 percent to 4.5 billion euros. The versatile company, based in Friedrichshafen on Lake Constance, manufactures engines and motors for military vehicles, aircraft and ships, among other things. However, the sales growth in 2023 was not due to the changing times and rising defense spending, but to increased demand for energy systems for data centers and from commercial shipping.
What remains of the turnover
The FAZ archive’s list of the largest companies, first published 65 years ago, measures size by net sales. The figure shows how much money a provider earns each year from the sale of its products and services, minus transitory items such as value added tax or energy taxes. But sales are not an end in themselves. What is much more important for companies is what they can keep of the money they earn in order to invest it in new technologies and business ideas, to store it for rainy days, or to distribute it to the owners. High sales do not automatically lead to high profits, as a look at the companies with the highest annual profits, with Deutsche Telekom at the top, shows. Here, the largest company by sales, Volkswagen, comes in second place.
However, absolute profit does not show how profitable a company is. Therefore, it is interesting to take a look at the return on sales. It shows how much of the sales stays in the till. A return on sales of 10 percent means that the company can keep 10 cents for every euro of sales. Deutsche Börse is therefore the most profitable of the large German corporations, mainly due to its digital trading platform, which can handle a sharply increasing demand for trading activities at largely constant costs. Of the ten largest companies by sales, Telekom is the only one that makes it into the ten most profitable. This is no surprise, since the sales giants are car manufacturers, for example, which incur high material and manufacturing costs for each vehicle sold. And although the high-revenue retail groups do not publish profits, their margins are probably not very high due to their competition for price-sensitive consumers.
Business Edition 2024 with bonus material
The complete tables of the FAZ company ranking “The 100 Largest” are available as a data package. With additional data and evaluations, a company database and a reader with background information, the Business Edition 2024 is ideal for professional use.
Order the current Business Edition including usage licenses for up to three workstations from FAZ-Research:
Further information and ordering
#FAZ #database #largest #German #companies