CFOs forecast profits to rise by 9 per cent but costs to rise 7 per cent
the GE Capital Mid-Market CFO Survey says the majority of Canadian companies that responded plan to continue hiring over next 12 months but European fiscal conditions and U.S. economy remain top concerns
MISSISSAUGA, Ont. and MONTREAL—Chief financial officers (CFOs) of mid-market companies in Canada expressed a “steady and positive sentiment” on the state of their industry and the strength of the national economy in the third quarter, according to the GE Capital Mid-Market CFO Survey.
Although down three percentage points from Q1, 48 per cent of CFOs surveyed think the economy will stay the same over the next 12 months while 38 per cent think it will grow.
The biggest internal challenges continue to be implementing service process improvements, with 55% of all CFOs surveyed citing it as an issue. Talent and leadership development was second at 51 per cent.
Highlights of the survey include:
2012 Growth and Profit Expectations
• 72 per cent expect profits to increase or remain the same this year compared to last year. Of those who say profits will rise, the expected increase holds steady at 9 per cent.
• 61 per cent expect revenues to increase, down from 67 per cent. Expectations for a revenue decrease jumped 12 points. Of the 61 per cent who say revenues will rise, the expected increase grew five points to 13 per cent.
• 73 per cent said their new order pipeline is the same or better compared to this time last year; that represents a 17 point decrease among respondents who said their pipeline had increased.
Confidence Indicators: Hiring, Cost Structure and Capital Expenditures
• 74 per cent of CFOs said their companies have been hiring this year, up from 63 per cent in Q1 2012. Seventy-three percent plan to hire over the next 12 months, down three points. The retail, energy and transportation industries are the most bullish in their hiring plans.
• CFOs in four of the five industries surveyed expect their cost structures to increase in 2012. Of those who say cost structures will rise, the expected increase rose to 7 per cent from 5 per cent.
• 37 per cent plan to increase capital expenditures this year. Transportation CFOs lead all industries in expectations for greater cap-ex (45 per cent, up 5 points)
• 59 per cent said financing needs will remain the same through the next 12 months. 34 per cent said their financing needs will increase (up four points); those in the energy industry are most likely to expect increased financing needs.
Systemic Concerns Remain
• End-market demand: Canadian CFOs are concerned about end-market demand and capital / liquidity constraints.
• Credit availability: The majority of CFOs said their current lender has maintained credit availability (61 per cent) and will continue to do so if additional financing is necessary (58 per cent).
• Pricing outlook: Over half (51 per cent) plan to raise prices in 2012, although more plan to decrease prices than in Q1 2012; that compares to 44 per cent in the U.S., where CFOs are more likely to keep pricing stable (45 per cent).
• In the U.S., the number one challenge is employee benefit cost reductions (54 per cent).
The survey was conducted during the third quarter of 2012 with responses from 203 CFOs of companies with average revenues of $163.3 million operating in the energy; food, beverage and agribusiness; metals, mining and metals fabrication; retail; and transportation sectors.