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CFO Survey Outlook 2014

Continued risk avoidance threatens 2014 optimistic growth ambitions

The quarterly Belgian CFO Survey results. While the new mood of optimism seems confirmed by many CFOs predicting growth in revenue and margins, their outlook for growth in the Belgian economy as a whole is restrained and the appetite for risk remains low.

Diegem, 7 February 2014 – Deloitte Belgium announces the results of its quarterly Belgian CFO Survey, conducted between 11 December 2013 and 6 January 2014. While the new mood of optimism seems confirmed by many CFOs predicting growth in revenue and margins, their outlook for growth in the Belgian economy as a whole is restrained and the appetite for risk remains low.

Many corporates will continue to hold back from increased capital spending into 2014, remaining focused on defensive strategies to remain competitive. With investment being a key driver of growth, weak capital spending remains a worrying aspect in a broadly positive picture.

A new mood for a new year
Belgian CFOs have entered 2014 differently from recent years. Having weathered 2011 and 2012, CFOs rightly predicted that 2013 would see little improvement. But the previous CFO survey identified “a new mood of confidence” and the current survey shows that almost half the respondents are more optimistic about the financial prospects for their businesses compared with three months ago.

Only 17% of CFOs rate the current level of financial and economic uncertainty as high, compared with 26% three months earlier. This is the lowest level since early 2011. While 19% of CFOs consider it likely that the Belgian economy will enter a new recession in the next two years, 40% now rate the risk as quite low, compared to only 21% last quarter.

“Following five quarters in which CFOs were outright pessimistic about the financial prospects for their businesses, the majority of CFOs confirm the optimistic mood that already surfaced in the third quarter,” said Deloitte Partner Thierry Van Schoubroeck. But on a cautionary note he added, “International businesses, deriving over 70% of their turnover outside Belgium are however less optimistic as those that have significant business in Belgium.”

Growth, not survival, is back on the agenda
A little over half the CFOs reported that their company did not meet financial budget in the last twelve months, a figure largely consistent over the last two years. Despite another disappointing year, CFOs are looking more positively at 2014 than they did at 2013. 63% anticipate revenue growth, with almost a quarter (23%) expecting growth to exceed 5%. Improvements in operating margins are predicted in 40% of businesses.

“Corporates look positively towards 2014, and this is reflected in their plans. Almost three quarters of our survey respondents have budgeted top line growth for 2014. At the same time, the challenge will likely be the continued pressure on prices and margins across different industries,” commented Joël Brehmen, Lead Finance Partner at Deloitte.

Reflecting this new mood, the main concern of CFOs is no longer economic recovery, which has dominated for two years. They are now most concerned about the competitive position of their company in the market.

Thierry Van Schoubroeck observed: “As Belgian and Eurozone growth is not expected to exceed 1%, U.S. 2.5% and emerging markets 4-5%, budget increase projections of corporates seem bullish. Taking into account corporates’ growth ambitions, competition in the low growth markets is likely to be very intense.”

Defensive strategies threaten to undermine growth ambitions
While CFOs have changed their outlook regarding growth compared with previous quarters, business priorities have altered little. Defensive measures such as improving productivity and efficiency, cutting costs and boosting cash flow still dominate. Only 14% give increasing capital expenditure a strong priority and growth by acquisition is only a strong priority for 6%. Protecting the balance sheet from additional risk remains a strong theme.

This is despite financing being available and attractive. Credit is perceived to be both accessible and cheap and, compared to last quarter, CFOs are much more relaxed in their expectation of interest rate rises in the next few months.

Despite their raised optimism and ambitious growth expectations, this quarter’s survey reveals CFOs’ concerns about the fragility of the upturn.

“Recovery seems to be coming. The signs for the global economy are positive. But the actual path of the economic cycle is unpredictable. We hope the early signs of recovery will motivate corporates to gradually put more focus on growth strategies and value creations in the course of 2014. Current business priorities might not be in line with the expressed growth ambitions,” concluded Thierry Van Schoubroeck.

About the survey
The 2013 fourth quarter edition of the Deloitte Belgium CFO Survey was conducted between 11 December and 6 January 2014. A total of 73 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, 41% of between €100 million and €1 billion and 32% of less than €100 million.

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