The growing economic chasm between Germany and southern European countries such as Greece was underlined today when industrial powerhouses BASF, Siemens and Bayer reported bigger than expected profits.
The German trio benefited in particular from higher sales in Asia, where economies are rebounding strongly from the worldwide downturn. The chairman of chemicals group BASF reported that, in terms of global demand growth, Europe was "bringing up the rear". Siemens and Bayer also indicated they believed the worst of the downturn was over, and lifted their annual profit forecasts.
Germany's manufacturers were particularly badly hit by the slump in global demand, forcing them to slash production and mothball plant last year and in 2008. Siemens and BASF said yesterday they ramped up production in the first three months of this year in response to higher demand, resulting in higher margins.
Economists said the strong performance of such manufacturers would see Germany, Europe's largest exporter, continue to outstrip the rest of the continent's economies, increasing the disparity with heavily indebted countries such as Greece, Spain and Portugal. Siemens, Europe's largest engineer, said pre-tax profits rose by almost half in the first three months of the year to €1.5bn (£1.3bn).
It lifted its profit forecast for this year by more than a quarter, promising to beat last year's record of €7.5bn. The company said it was benefiting from cutting costs early on in the financial crisis. For example, it cut more than 20,000 jobs at its Osram unit, which makes lightbulbs and lamps. The division reported the biggest profits improvement in the group. Siemens employs 402,000 people worldwide.
BASF, the world's largest chemicals conglomerate, also reported a strong increase in sales, resulting in pre-tax profits almost doubling in the first quarter to €1.95bn, from the previous year. Demand from the automotive, electric and electronic industries rebounded most, it said. The company, based in the Rhineland, reported double-digit sales growth in all regions but Asia was the strongest, up 77%.
Dr Jürgen Hambrecht, chairman of BASF, said: "We have almost achieved the level of the very good quarters before the crisis … we saw high demand in Asia and South America. North America is also slowly recovering. Europe is bringing up the rear." But he warned the recovery is "shaky". He said risks in 2010 include the continuing financial and debt crisis, the winding down of national stimulus programmes, high raw material prices and protectionism. He added this year's recovery would become slower and more uneven because comparative figures from last year improved as 2009 progressed, making it harder to improve on these.
Bayer, Germany's largest drugmaker, reported first-quarter operating profits of €1.9bn, up 13.2%. It issued a forecast for full-year profits of more than €7bn; initial guidance had been "towards" €7bn.
Archer, an economist at IHS Global Insight, said Germany was reaping the benefits of a major economic restructuring before the crisis hit. This could reinforce German opposition to bailing out fellow eurozone members. "Germany went through a tough period of [re]structuring between 2002 and 2007 which saw hardship and a squeeze on wages. It's one reason why German consumers are reluctant to spend and are asking why they should bail out a country like Greece, which has lived beyond its means and lied about the state of its finances."
