Kirchhoff Consult and DSW: Forecast transparency of the DAX 40 companies remains stable despite uncertain environment

The Hamburg-based financial communication consulting firm, Kirchhoff Consult AG, and the German Association for the Protection of Securities (DSW) have published the latest edition of their annual forecast report study. The study deals with the analysis of the qualitative and quantitative information on the future business development of the DAX 40 companies. The subject of the investigation is the forecast reports in the annual reports for the 2021 fiscal year. The study was conducted for the first time since the DAX was expanded to 40 companies.

Overall, the survey shows a stable level of transparency in the forecast reports. Similar to previous years, forecast transparency was evaluated on the basis of 15 criteria. The reports were classified into three categories: "high transparency," "medium transparency," and "low transparency." in the study year, 16 companies achieved the highest level of transparency. Deutsche Telekom once again ranked highest, sharing the top spot with Fresenius. Siemens, the DAX newcomers Daimler Truck, Hannover Rück and Sartorius, and Deutsche Bank - which rose directly from the low transparency level last year to the highest category - also made it to this category. On the other hand, E.ON slipped into the "medium transparency" category. Due to a lack of a forecast report for the corporation, Airbus, Linde, and Qiagen were excluded from the ranking.

"Forecasts create trust. This principle also applies in uncertain times. After the pandemic affected forecast certainty last year, the conditions have become even more unstable this year with the Russia-Ukraine war. Nevertheless, most companies dared to make quantitative forecasts. This shows that they are aware of the importance of forecasts for the capital market," comments Klaus Rainer Kirchhoff, founder and CEO of Kirchhoff Consult AG.

Forecast results provided by almost all companies

The most important criterion in the study is the forecast results. In the 2021 annual reports, 36 out of 37 analyzed companies quantified their forecast results at the group and/or segment level. Merck was the only company that did not provide a quantified group or segment result forecast. Therefore, the company is the only one in the "low transparency" category. Last year, there were two companies in this transparency category. Despite the uncertain conditions of inflation, the Russia-Ukraine war, the pandemic, and supply chain problems, this shows a slight improvement. However, only six companies have published a medium-term forecast over a period of more than one year.

"At this particular time, a longer-term orientation for investors would be particularly valuable. Even if companies shy away from a forecast in the narrow sense due to current uncertainties, the ambitions and targets for the next three to five years should at least be stated. This is quite feasible based on assumptions," demands Marc Tüngler, CEO of the DSW.

Detailed forecast reports tend to have higher transparency.

The two best forecast reports from Deutsche Telekom (12 pages) and Fresenius (8 pages) are also among the longest. In total, 11 out of 13 reports with at least five pages fall into the highest transparency category. However, a transparent report does not necessarily have to be long. Bayer, Deutsche Post DHL, RWE, and Sartorius only need three pages for forecast reports in the highest transparency level.

Non-financial performance indicators are still not a fixed component of forecast reports.

Non-financial performance indicators are becoming increasingly important for companies. Therefore, they are part of the transparency criteria for forecast reports. The DAX 40 companies still have a lot of potential in this criterion. Only seven companies provide a quantitative forecast for non-financial performance indicators - four fewer than last year - despite the expansion of the DAX. Four other companies make qualitative statements.

Jens Hecht, CEO of Kirchhoff Consult AG, says: "The downward trend in the integration of non-financial performance indicators into forecast reports is surprising. Forecast reports should contain all bundled information about the future development of the company. While a growing number of investors have established ESG factors as a mandatory criterion for investment decisions, many companies make information research more difficult. The DAX 40 companies still have further potential here."

This year's forecast report study is available for download here.