Mid-market CFOs optimistic about their industries: GE Capital survey
MISSISSAUGA, ON, May 9, 2012 -- Canadian chief financial officers (CFOs) of middle-market companies are positive about the current state of their own industry as well as the domestic economy, according to the first Canadian Mid-Market CFO Survey by GE Capital, Canada. According to the survey, 40 percent of respondents expect their industry to grow over the next 12 months, and 39 percent expect the economy to grow. However, they show significantly lower sentiment about the current state of the global economy.
Their number one concern as it relates to the growth and stability of the Canadian economy in 2012 is the future health of the U.S. economy, cited by 36 percent of respondents. European fiscal conditions were the second-greatest concern, cited by 19 percent.
The survey, which took place during the first quarter of 2012, included responses from 186 CFOs of companies with mean revenue of $136 million, operating across four major industries: metals, mining and metals fabrication; food, beverage and agribusiness; retail; and trucking, also referred to as transportation. GE Capital conducted a similar survey of 495 U.S.-based CFOs during the first quarter of 2012.
“Mid-market CFOs are confident about their industries and their ability to drive business forward despite ongoing U.S. and European fiscal issues,” said Katherine Lee, president and CEO of GE Capital, Canada. “While their concerns are clear, CFOs are focused on growing their businesses this year through smart investing and the effective use of capital.
“The outlook expressed in the survey very much mirrors what our own business is experiencing,” she continued. “We finance nearly 30,000 businesses across Canada, and we look forward to continuing to support existing customers and new ones as they aim to take advantages of growth opportunities in their markets.”
Current views on health of Canadian and U.S. economies and industry
In general, Canadian CFOs are more optimistic about the state of the industry in which they operate than their U.S.-based peers; they’re also more optimistic about their national economy than those in the U.S. However, both groups of CFOs have significantly lower opinions about the global economy.
In the U.S., the domestic budget deficit and European fiscal conditions lead the economic concerns.
The costs of doing business in Canada — labour, energy, and materials, supplies and equipment — are cited as the top three factors that will significantly impact business performance in the next 12 months. U.S. CFOs expect health care to be the biggest factor, followed by the cost of materials, supplies and equipment.
Growth and profit expectations
Slightly more than two-thirds (67 percent) of CFOs surveyed in Canada expect their revenue to be greater in 2012 compared to 2011. Another one-quarter expect revenues to be stable.
CFOs were fairly split in their predictions related to profit margins, with 45 percent expecting similar figures compared to last year, and another 40 percent expecting greater margins.
Confidence indicators: cost structure, hiring, new orders and capital expenditures
Most (42 percent) CFOs expect their cost structures to remain fairly stable this year, while 36 percent expect them to increase.
Sixty-three percent of CFOs have already made new hires in 2012, and 76 percent anticipate making additional hires in the next 12 months.
Almost half (46 percent) of CFOs have seen their new order pipelines increase compared to the first quarter of last year, while 40 percent say their pipelines remain about the same.
In terms of capital expenditures, 42 percent of CFOs expect to keep spending fairly flat, while 37 percent expect an increase versus 2011.
Other key findings:
When it comes to spending, 61 percent of CFOs are considering laying out more for equipment this year, followed by 42 percent who plan to spend more to achieve organic growth.
At the same time, 65 percent expect their financing needs in the next 12 months to be the same as in the previous 12 months.
Just over half (55 percent) of CFOs expect to raise prices on their company’s products or services this year. This is similar to their U.S. counterparts’ expectations (51 percent).