Europe's powerhouse shows it is not immune to slowdown as Siemens, BASF and Puma report a fall in earnings

This article is more than 8 years old

This article is more than 8 years old

The idea that Germany could somehow emerge from the current economic crisis unscathed has proved illusory. Europe's industrial powerhouse is now feeling the effects of the economic crisis, particularly in its export-driven sector.

A slew of household names, including Siemens, BASF and Puma, has had bad news to announce this week.

On Thursday, engineering giant Siemens announced that orders were drying up, saying it would make it "more difficult" to reach annual targets that it had already cut in April.

"We see growing reluctance among our customers to invest," said the CEO, Peter Löscher.

That was obvious in the fact the group saw orders in the second quarter of 2012 decline by 23% compared to the same period in 2011. "Our focus, above all, is on increasing our productivity and efficiency," Löscher said. "Given the deteriorating environment, it becomes more difficult to achieve our guidance for the fiscal year."

Siemens had already reduced its revenue expectations for this year, from €6bn to between €5.2bn and €5.4bn. Now the company regards even that lowered target as "ambitious".

Another German major player, chemicals maker BASF, also had bad news. It reported a 15.5% reduction in second quarter net earnings, which it blamed largely on the slowdown in China.

Much of Germany's ability to weather the storms in Europe so far has been based on its strong exports to emerging economies, particularly China. But the Chinese economy is beginning to show signs of slowing down.

BASF said it had earned €1.23bn between April and June, down from €1.45bn in the same period in 2011.

"The Chinese growth engine has started to stall," the firm explained in a statement.

Chief executive Kurt Bock said: "Our customers are continuing to act cautiously and are reducing their inventories."

BASF's business is a good indicator of the state of the global economy as it chemicals are used in a wide range of industries, including the auto industry, pharmaceuticals, textiles and electronics.

The impact on German business is not just being felt in the industrial sector. Consumer sportswear manufacturer Puma is also feeling the heat. On the eve of the Olympics, where it is a major sponsor of athletes such as Jamaica's Usain Bolt, it said it is likely to shut stores and cut jobs after suffering a 29% drop in net profits.

Puma said that second-quarter sales in Europe, where it does half its business, dropped by 3%.

"Growth in Europe has stopped," chief executive Franz Koch told reporters on Thursday. "We believe that the macro economy will not improve, if anything the opposite will be true, especially here in Europe."

Even as Germany enjoys record low unemployment and strong consumer confidence, the business world is decidedly worried.

The closely watched survey by the Ifo thinktank reported a drop in confidence for the third month in a row, reaching the lowest level in two years.

"It will be a hard landing for German companies," wrote the Süddeutsche Zeitung on Friday.

"The global economic downturn is now hitting with full force. It may have been delayed but many fear that as a result it will be all the harder."