Analysis: German blue-chip firms lift profits despite weaker sales

Germany's blue-chip companies increased profits in the first quarter despite lower revenues, driven mainly by strong results in the financial sector, according to an analysis by consultancy EY.

Operating profit, measured as earnings before interest and taxes (EBIT), rose 4.4% year-on-year across the 40 companies in Germany's DAX index, while revenues fell by an average of 3.7%.

Banks and insurers were the main drivers, posting a profit increase of 15.9%, while industrial companies reported profit growth of just 0.5%, EY said.

The highest quarterly profits were reported by Deutsche Telekom at €5.8 billion ($6.7 billion), followed by Allianz with €4.5 billion and Eon with €3.9 billion.

Only online retailer Zalando and investment holding company Porsche Automobil Holding reported quarterly losses.

The strongest profit growth was recorded by Eon, Siemens Energy and reinsurer Munich Re.

All carmakers in the DAX index reported lower profits.

Henrik Ahlers, chairman of the executive board at EY Germany, described the results as a weak start to the year but said the picture was mixed on closer inspection. Despite the economic slowdown, the financial sector is delivering strong results, Ahlers said, citing high interest rates, favourable insurance claims trends and elevated market volatility.

EY managing partner Jan Brorhilker warned of broader structural problems in Germany's economy. He said the country's traditional business model as a former export powerhouse was no longer working, citing increasingly aggressive competition from China and high costs in Germany.