CFO Survey Q2 2012 - 60% of Belgian companies performing worse than budgeted

Expectations on Belgian economy recovery timing pushed back

Brussels, 26 July 2012 – Deloitte Belgium announces the results of the second quarter of its quarterly CFO Survey, conducted between 31 May and 27 June. The results feature the on-going pessimistic view of the Belgian CFOs. The first signs of optimism three months ago were not sustained. CFOs do not expect the economy to recover soon. 25% do not expect improvement before 2014. Defensive strategies are top of the agenda.

Confidence drops

The CFO optimism from the first quarter has seen the sharpest fall since the CFO survey started in Q1 2009. The surveyed CFOs don't expect the economy to recover soon: only 20% of the CFOs expect the demand will go up by the end of the year, compared to 60% three months ago.
Thierry Van Schoubroeck, Partner at Deloitte Belgium: "CFOs expectations on the timing of the recovery of the Belgian economy have been pushed back by at least half a year. And unlike the previous quarters, CFOs are no longer more optimistic about the prospects of their own company than the economy as a whole."

Disappointing results: financial performance is not in line with budget

Halfway through the year almost 60% of the CFOs report that the actual performance of their company is not in line with the budget. On average, CFOs expect only marginal top line growth and further decreasing operating margins going forward.
Thierry Van Schoubroeck: "CFOs were very pessimistic in the fourth quarter of 2011 when many prepared their 2012 budgets – these second quarter results illustrate the significant challenges that many organisations face."

Defensive strategies & prioritisation

With economic and financial uncertainty, CFOs do not think it's the right time to take additional risks on the balance sheet. The declining optimism and risk appetite have manifested a shift towards more defensive strategies via cost reduction and cash flow increase. Capital expenditure and expansion through mergers and acquisitions are not top of list.
Thierry Van Schoubroeck: "The CFOs main concerns are the economic recovery and securing their competitive position in the market."

Continued financial stress

Compared to the first quarter, major forms of financing – equity, bank borrowing and corporate debt – have lost attractiveness. On balance, CFOs do not seem overly concerned about the availability nor the cost of external financing. Looking into more detail, 40% of CFOs continue to perceive credit as costly and hard to get. Going forward, the majority of CFOs expects harder pricing and lending terms.
Thierry Van Schoubroeck: "Macroeconomic uncertainty and the outlook for demand appear to have greater influence on capital spending than the availability of finance."

Eurocrisis not over

The eurocrisis has intensified, driven by the political instability in Greece, market concerns over Italy and Spanish solvency. Over 40% of the survey respondents rate the likelihood of one or more member states leaving the Eurozone in 2012 as high. Only a quarter reports changing their plans to deal with the risk of the euro stress. One third of the CFOs, mainly from large organisations, who foresee at least some effect on their business from the breakup of the euro, have made preparations in the event it would happen.

The underlying causes of Europe's debt crisis – uncompetitive economies and indebted governments – remain, and will not be solved in the short run. The future of the Eurozone remains at risk. Consumer demand is far from reassured and projections for growth for many of the European countries are challenged.
Thierry Van Schoubroeck: "CFOs need to define playbooks to navigate the downturn and to ensure the availability of cash and financing the coming 3 to 5 years. Strong revenue forecasting tools are essential to successfully managing finances and cash flow."