Deloitte Belgium publishes results of its CFO Survey for the fourth and last quarter of 2011

Expected recession in 2012 already has repercussions on 2011 results21 December 2011


50% of Belgian CFOs report their organization will not make the 2011 budget and 2012 outlook is gloomy

Difficult year ahead; Belgian CFO optimism on lowest level since the launch of CFO Survey in 2009

Over 60% of Belgian CFOs see reducing the public deficit as first priority for the new Belgian government

Brussels, 21 December 2011 – Today, Deloitte announces the results of its quarterly Belgian CFO Survey, conducted between November 24th and December 9th 2011. The survey reveals that financial results for 2011 are disappointing with 50% of CFOs reporting their organization will not make the 2011 budget. CFO optimism decreased to unprecedented levels since the launch of the survey in 2009. The Belgian economy will be in a recession entering 2012, and revenues are expected to decrease in 2012 for 60% of surveyed organisations. Corporates not only need to worry about the gloomy economic outlook. The Eurozone sovereign debt crisis and the banking crisis will impact the corporate world as well.

Disappointing results for 2011

Financial results for 2011 are disappointing. Whereas CFOs had started the year in an optimistic mood, 50% of CFOs now report their organization will not make the 2011 budget. Thierry Van Schoubroeck, Partner at Deloitte Belgium and responsible for this quarterly survey, indicates: "To put things in perspective: at the end of 2010, only 12% of CFOs reported budgets would not be achieved. For the average organization, revenues still increased in 2011, but significantly less than planned. Operating margins showed a marked decrease for the average organization, while CFOs had on average budgeted higher margins for the year. On average, organizations increased hiring in 2011, illustrating the positive expectations many organizations still had in the first semester of the year."

Economic outlook: 2012 will be very difficult – CFO optimism on lowest level since 2009

CFO optimism decreased to unprecedented levels since the launch of the survey beginning of 2009. Uncertainty remains high and more than 80% of CFOs are less optimistic now as compared to three months ago. Almost all assign a high probability to a second consecutive quarter of economic contraction – hence a recession scenario.

The economic recovery is the top concern of Belgian CFOs and 2012 announces to be a very difficult year. Austerity is the key theme. The public sector will cut back expenses, and consumers buying power is under pressure. Almost half of the CFOs expect a deep recession and do not expect demand for their products and services to pick up before 2013. Higher interest rates and access to capital complement the top three CFO concerns.

Thierry Van Schoubroeck: "Going forward, CFOs do not expect the financial outlook to improve. On the contrary, 62% expects lower revenues and no less than 79% expects lower margins. Lower cash flows are expected by two thirds of survey respondents. As a consequence, cost reduction is once again on top of the corporate agenda. Corporates report to cut back on investments and hiring of personnel will be reduced."

Euro crisis continues to worry CFOs

No less than 76% of CFOs report the Euro crisis impacts their companies businesses negatively. One third of the CFOs report their organizations are changing their plans or making new plans to address the situation. This might take different forms, from reviewing the classification of political and commercial country risk and debtor risk to changing the investment strategy and increasing focus on business outside of the Eurozone.

In the midst of the fourth quarter survey period, the new Belgian federal government Di Rupo I was inaugurated. The European commission has formulated a list of 6 recommendations for the government. For over 60% of the surveyed CFOs, reducing the public deficit should be the first priority, adjusting the wage indexation the second.

Credit crunch ahead?

Corporates are not immune to the banking crisis. Although we are not witnessing a credit crisis, all sources of corporate financing have lost attractiveness quarter by quarter this year. Bank borrowing and equity are no longer rated as attractive means of financing. Bank borrowing was the most attractive means of financing just a year ago, but has since then lost much of its appeal. And the downward trend continues. For the first time in 2 years bank borrowing is again reported difficult to obtain, while the cost of bank borrowing continues to rise. CFOs expect harder price terms and lending terms going forward.

Thierry Van Schoubroeck: "Taking into account stricter capital requirements for banks, a credit crunch scenario cannot be ruled out for 2012. CFOs should secure financing going forward, optimize cash management and invest in reliable banking relationships".

No appetite for risk

Within the current economic and financial context, appetite for risk keeps going down and is now almost back at the low level of the recession in 2009. Capital expenditure will decrease and also expectations for mergers and acquisition activity plummeted. It seems as if not a lot will move next year. With low risk appetite and focus on costs and cash flow, financial conservatism is the dominant theme.

About the survey
The 2011 fourth-quarter edition of the Deloitte Belgium CFO Survey was conducted between November 24th and December 9th, 2011. A total of 47 CFOs completed our survey. The participating CFOs are active in variety of industries. 35% of the participating companies have a turnover of over 1 billion, 37% of between 100 million and 1 billion and 28% of less than 100 million.

For more details on the results, please check