Between multiple crises and high interest rates: companies from the DACH region continue to expect high returns from investors

Results of the KPMG cost of capital study 2023

Results of the KPMG cost of capital study 2023

Results of the KPMG cost of capital study 2023:

  • Significantly higher return requirements: Average weighted cost of capital rises from 6.8 to 7.9 per cent
  • Majority of companies expect economic uncertainty to have a negative impact on their business planning
  • Companies expect inflation rates above the European Central Bank's inflation target

Berlin/Frankfurt, 7th November 2023

Geopolitical crises, persistent recession, high inflation, rising interest rates, significant declines in demand: companies in German-speaking countries are expecting rising return requirements from investors and rising borrowing costs in a difficult economic environment and under high uncertainty. These are the findings of the latest edition of the cost of capital study by KPMG AG Wirtschaftsprüfungsgesellschaft. A total of 322 companies from the umbrella region took part in the survey between April and July 2023, including 65 per cent of DAX 40 and 46 per cent of MDAX companies. The reporting dates of the consolidated financial statements of the participating companies shown in the study were between 30 September 2022 and 30 June 2023.

Highest return requirements for technology companies

Compared to the previous year's study, return expectations increased significantly across all sectors. The weighted average cost of capital (WACC) increased across all sectors from 6.8 per cent to 7.9 per cent. The technology (9.2 per cent) and automotive (8.3 per cent) sectors as well as the manufacturing industry (8.1 per cent) took the top positions with the highest WACC values. This means that the sectors most affected by a high WACC are those in which political guidelines and technology-related changes to business models have a particular impact.

The most significant increase in expected returns compared to the previous year's study can be observed in the property sector (plus 1.7 percentage points), in the media and telecommunications sector (plus 1.3 percentage points) and in the consumer goods sector (plus 1.3 percentage points). However, the WACC did not fall in any sector.

70 per cent of the companies surveyed also expect the economic uncertainty to have a negative impact on their business planning. However, only 17 per cent see the need to adapt their own business planning processes.

Inflation remains above the European Central Bank's inflation target

Record inflation rates have also recently contributed to the general economic uncertainty. According to the cost of capital study, the majority of companies surveyed expect company-specific inflation rates that are significantly higher than the European Central Bank's medium-term, consumption-oriented inflation target of 2.0 per cent. The companies cite higher energy prices, shortages of raw materials and geopolitical crises such as the Russian war of aggression against Ukraine as the main reasons for this.

Press contact

Clemens Reisbeck

Deputy Head Corporate Communications
KPMG AG Wirtschaftsprüfungsgesellschaft

T +49 89 9282 1722