2015 Q2 Global CFO Signals


2015 Q2 Global CFO Signals™

Staying focused; remaining vigilant

Last quarter, while levels of uncertainty were on the rise, many global CFOs had the opportunity and the wherewithal to focus on corporate growth. However, within the last few months, there have been several notable global economic tremors. Will such geopolitical issues influence the focus and sentiment of CFOs?

How does CFO sentiment in 2015 Q2 break down? What follows is a synopsis by region:

Download the report for more on CFO sentiment.

CFO Sentiment 2015 Q2

There have been several notable global economic tremors in the last few months. The continuation of the Greek crisis in the eurozone and jitters in the Chinese stock market topping the list. However, in many of the nine country reports in this edition of Global CFO Signals, CFO optimism seems increasingly tied to their own country’s or region’s situation— for better or for worse.

Consider, for example:

  • In the wake of the election of a majority conservative government, UK CFOs are reporting higher risk appetites and more expansionary strategies.
  • Australia’s federal government policy is now viewed as neutral instead of starkly negative thanks to a budget that promises fiscal repair.
  • An undercurrent of uncertainty about the strength of the US economy tempered optimism and expectations among North America’s CFOs.
  • In the Middle East, where the price of oil has both a regional and global impact, CFO optimism has fallen to one of its lowest levels in recent years.

From a CFO’s perspective, “some of the geopolitical issues that were alarming, in particular the eurozone situation, may be less alarming now,” notes Ira Kalish, Chief Global Economist for Deloitte. And given that global companies are obviously influenced by what happens in their home countries, those factors may be weighing more heavily this quarter.

At the same time, this seeming lull in geopolitical crises may be an opportunity to develop a clearer “road map” for future growth, says Kalish. To that end, CFOs seem to be focusing more on their longer-term prospects. Instead of citing economic uncertainty as their biggest concern this quarter, UK finance chiefs pointed to the possibility of rising interest rates; Belgium’s CFOs are worried about the competitiveness of their companies; and North America’s CFOs are greatly concerned that equity markets are overvalued.

Still, those are not the only “triggers that could reignite uncertainty,” says Kalish, adding China, the price of oil, and another possible budget crisis in the US to the list. So as CFOs look ahead, he adds, “vigilance continues to be a good idea.”


Regional perspectives


In North America, CFOs remain optimistic this quarter. But while 38% express rising optimism about their companies’ prospects, that figure is down sharply from last quarter’s 48% and is the lowest level in more than two years. Moreover their growth expectations were down dramatically: revenue growth expectations, for example, fell to 3.1%* from 5.4%* last quarter and now sit at their historic survey low. Similarly, earnings growth expectations fell sharply to a survey-low 6.5%* from last quarter’s 10.6%*. Still, and apparently contradicting their declining growth expectations, CFOs see the outlook for the broader North American economy as quite good—only slightly below where it was last quarter and their assessments of Europe rebounded substantially.


Low interest rates and a weaker Australian dollar are fueling optimism among that country’s CFOs. In addition, the federal government’s policy-making has a neutral influence on optimism this quarter, whereas last quarter two-thirds of finance chiefs felt that the influence was negative. In this environment, CFOs’ views on their own companies’ metrics for the coming year show a number of continuing positive signs, with 71% forecasting increased operating cash flows and 49% expecting increased capital expenditures. Still, the rate of fiscal repair is seen as too slow among CFOs, even though the majority (58%) believes the government’s budget could have a positive impact on the economy.


CFO sentiment remains mixed across much of Europe. In the UK, for example, optimism is apparent in CFOs’ rebounding risk appetite: up to 59% from a two-year low of 51% last quarter. Moreover, CFOs’ strategies have turned markedly more expansionary, and expectations for hiring and capital expenditure have risen close to their highest levels in five years. The positive sentiment is shared among Belgium’s CFOs, whose outlook is bolstered by the fact that halfway through the year, 37% of them report their companies have performed better than what was initially budgeted. Netherland’s CFOs, on the other hand, report a slightly less optimistic outlook, but their perception of uncertainty took a positive turn: 46% now rate it as above normal—compared with 89% two years ago. Meanwhile, Switzerland’s finance chiefs remain gloomy as they continue to adapt to the removal of the currency floor in January. And only 17% of Austria’s CFOs are feeling confident about economic development in their own country, while just 14% report increased optimism toward their companies’ prospects.

Middle East

The continuation of low energy prices is impacting both optimism and risk appetite in the Middle East. With oil at $53 a barrel at the time of the survey, CFO optimism fell to one of its lowest values in recent years, with only a net 26% reporting positive prospects for their company. That is down from 47% in the previous survey, which was conducted just before the fall in oil prices. Moreover, risk appetite has been curbed, with only 33% of CFOs believing it is a good time to take greater risk onto the balance sheet. For now, the favored strategies are cost reduction and improving internal economics. But the CFOs are optimistic about at least one thing: they expect oil prices to be higher in a year. 

Global CFO Signals - By the numbers

Risk appetite

Risk appetite is on the rise in several countries. In the UK, 59% of CFOs say now is a good time to take greater risk onto their balance sheets, up from a two-year low in Q1. Meanwhile, risk appetite in Belgium (44%) and the Netherlands (54%) are at their highest levels since the launch of those surveys. The sentiment is not shared in Switzerland, however, where only one in five CFOs believes it is a good time to take on risk.


Uncertainty continues to be troublesome for CFOs. In Switzerland, 75% say that the level of financial and economic uncertainty facing their business is high, while 51% of Australian CFOs see it as either above normal, high, or very high (and 64% also expect it to last more than a year). Still, only 46% of CFOs in the Netherlands rate the general level as above normal—a far cry from the 89% who thought so two years ago.

Sales/operating margins

Expectations for revenues and earnings are mixed this quarter. Some 78% of Australia’s CFOs and 68% of Netherlands’ expect top-line growth this year. North America’s CFO expectations for sales growth, however, fell to 3.1% to 5.4%, the lowest level in the history of the survey, and just 78% expect year-over-year gains (another survey low). As for operating margins, almost 40% of UK CFOs expect increases, while 54% of Russia’s and 73% of Switzerland’s expect decreases in the next 12 months.


The news on the global job front is very country specific. In the UK, for example, hiring expectations are close to their highest levels in five years. But in North America, expectations for year-over-year gains in domestic hiring fell to 1.2% from 2.4%—the lowest level in two years. Elsewhere, in Switzerland, where 62% of CFOs expect employee numbers to decrease over the next 12 months, 82% are also planning to take action to cut personnel costs in response to the higher costs resulting from the strength of the Swiss franc.

Corporate strategy

Many CFOs continue to favor growth and expansion. For UK finance chiefs, for example, introducing new products and services or expanding into new markets is the top priority for 41% of CFOs, the highest level in more than four years. In Australia, 71% of finance chiefs voiced a similar sentiment, with even more (84%) prioritizing organic growth. Meanwhile, North America’s CFOs report their highest focus on current offerings since 2013 (38%) and have a firm bias for organic growth over inorganic growth (54% vs. 27%).

M&A activity

Some 88% of the Netherlands’ CFOs expect M&A activity to increase in the next 12 months, and 63% expect their own companies to make a deal in that time frame. M&A also saw a rise in popularity in Australia, where 60% of CFOs expect an increase in activity, up from 49% last quarter. In the Middle East, however, expectations have declined, while in the UK only 23% of CFO prioritize expanding by acquisition.


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