CFO Survey Q2 2014

Call for policy change and regulation predictability

Corporates are willing and ready to invest provided the long-term perspective is clear.

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Sophie De Meyer

Deloitte Belgium

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Diegem, 17 July 2014 – Deloitte Belgium announces the results of its quarterly CFO Survey, conducted between 2 and 19 June 2014. Belgian CFOs remain optimistic and actual performance and expectations are on the rise. Appetite for risk continues to be high and funding is attractive and available.

However, defensive strategies still take precedence over expansion. Efficiency improvement and cost reduction remain high on the agenda for all companies. CFOs are concerned about policy risk and the long-term success of businesses in Belgium, yet most of them have bullish growth predictions for their own organisations in the short term.

Optimism remains high
Following the optimistic mood of the first quarter of 2014, CFO optimism has stabilised and remains positive. The top line is expected to grow for 70% of respondents and despite modest growth expectations for Belgium as a whole, the CFOs surveyed are bullish with 56% expecting top line growth of more than 2% and 32% even predicting a revenue increase of more than 5%.

At the end of the second quarter, 70% of survey respondents report financial performance is in line with the budget, up from around 50% last year and only 40% in 2012. The percentage of CFOs reporting that second quarter results will outperform the budgets has gone up from 20% in 2012 and in 2013 to 40% today.

“The CFO optimism that has been prevalent for the past four quarters has finally translated into improved financial performance. The vast majority of CFOs expect their top line, margins and profits to grow this year. With over 40% of organisations planning to reduce headcount, average productivity should go up,” said Deloitte Partner Thierry Van Schoubroeck.

Safeguarding competitive position is priority
Appetite for risk marked a sharp increase and reached the high levels recorded in 2010 just before the Eurocrisis escalated. Up from 35% in the first quarter, 42% of the responding CFOs say that now is a good time to take greater risk onto their balance sheet.

Safeguarding the competitive position of their businesses remains the top priority for the CFOs, both in the short and long term.

CFOs are placing emphasis on expansionary strategies such as increasing capital expenditure and expanding by acquisition. Yet, defensive strategies focusing on efficiency and cost reduction remain the most important priority for half the surveyed organisations.

"Today’s strategic priorities are not very different from those reported one year ago. Despite there now being less concern about the economy and appetite for risk has reached a high, defensive strategies remain more important than expansionary strategies,” observed Thierry Van Schoubroeck.

Long-term perspective worrying
CFOs continue to have low expectations of the Belgian economy, despite being positive about both the top and bottom line prospects for their own organisations. With 90% expecting that Belgian economic growth will not exceed 1% this year, they are significantly less optimistic than The National Bank of Belgium.

CFOs remain dissatisfied with Belgian priorities for financial and economic policy-making. They are most negative about taxation and labour market policies. Policy areas related to urban planning, energy, infrastructure, public expenditure and general levels of regulation for businesses are also considered inappropriate for the long-term success and viability of businesses in Belgium.

“The CFOs top priority for policy makers is the reduction of labour costs, by lowering employer contributions. This direct measure could provide a welcome stimulus for the CFOs who are concerned about their competitive positions in the market and focused on cost reduction.”

Most CFOs do not expect the newly created political situation will result in a marked change in the business environment in Belgium. If a long government formation process and continued political instability ensues, half of the organisations surveyed are expected to be impacted, resulting in reduced consumer demand, lower or delayed capital spending, and reduced foreign investment.

“With positive sentiment increasingly being reflected in the numbers, things are looking up. It remains to be seen how political instability and regulatory concerns will impact the longer term outlook,” commented Thierry Van Schoubroeck.

About the survey
The 2014 second quarter edition of the Deloitte Belgium CFO Survey was conducted between 2 and 19 June 2014. A total of 60 CFOs completed the survey. The participating CFOs are active in variety of industries. 27% of the participating companies have a turnover of over €1 billion, 46% of between €100 million and €1 billion, and 27% of less than €100 million.

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Thierry Van Schoubroeck

Partner, Consulting

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