Deloitte CFO Survey - Sweden, Fall 2010. Recovery is materializing

8/8/2019 Deloitte CFO Survey - Sweden, Fall 2010. Recovery is materializing

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The Deloitte CFO SurveyRecovery is materializing

Fall 2010 results

28 September 2010



Introduction 3

KeypointsfromtheFall2010Survey 3

CurrentstatusoftheSwedisheconomy 4

Prospects

Highexpectationsoncashgeneration 6

Marketviews

SignificantPrivateEquityM&Auptake 7

Fundingpreferences

Bankfinancingremainsfirstchoice 8-10

AvailabilityofcreditImprovedaccessbutinterestrateincreasesexpected 11

TheDeloitteCFOsurvey

Aninternationaloutlook 13

HighriskconcernsofSwedishCFOs 13

InsighttotheCFOcommunity 14

Anoteonmethodology 14

Contacts 15

Content


http://slidepdf.com/reader/full/deloitte-cfo-survey-sweden-fall-2010-recovery-is-materializing 3/16The Deloitte CFO Survey - Fall 2010 3

Introduction

ItisourpleasuretopresenttheDeloitteFall2010CFO

SurveyforSweden,asemi-annualreportprovidinga

pictureoftheCFO’sagendainSwedishcompanies.

Theoverallsentimentinthecurrentsurveyisthat

recoveryfromthefinancialcrisisandcyclicaldownturnismaterializinginSweden,althoughtheCFOoutlook

variesinotherpartsoftheworld:intheUKoptimism

hasdecreased,whilepositivesentimentisontherisein

NorthAmerica.

The Deloitte CFO Survey – Fall 2010Recovery is materializing

•Oursurveyshowsthattheeconomicrecovery

ismaterializingin2010andthemajorityofCFOsfeelthatthefinancialprospectsfortheir

companieshaveimproved,comparedtothe

Spring2010survey.

• 65%ofCFOsexpectincreasingoperatingcash

flowsintheirbusinessesoverthenexttwelve

months.Thesepositivecashflowforecastsare

likelyrelatedbothtothegeneraleconomic

recoveryaswellastotheeffectsofimplemented

restructuringactivities.

• Bankborrowingscontinuetoberatedasthe

mostattractivesourceoffundingbyresponding

CFOs,whichislikelytoreflectlowshort-term

marketinterestratesandincreasedavailabilityof

creditin2010.

• ThemajorityofCFOsconsiderSwedish

companiesingeneraltobeappropriately

leveragedeventhoughshort-termmarketinterest

ratesareexpectedtoincreasefromtheendof

2010.

•Difficultiesinfindingbankfundingwereseen

throughoutmostof2009.Theavailabilityof

bankfundingcontinuestoimprove,compared

tothesurveyssixandtwelvemonthsago.Thisdevelopmentisinlinewithothersurveyresults

acrossEurope.

• TheM&Adealflowhaspickedupsignificantly

and77%oftherespondingCFOsareexpectingenhancedM&Aactivitywithinthecomingtwelve

months.Theincreasedactivitysincethecredit

crunchappearstobemainlyrelatedtoa“back

log”ofdeals,althoughthissurveyalsoindicates

thattheimprovedavailabilityofcreditisakey

driver.

• Incontradictiontotheprevioussurvey,theCFOs

appeartohavechangedtheirviewonnewshare

issueswith31%ofrespondentsconsideringnow

nottobeagoodtimetoperformnewshare

issues.Only4%ofCFOsstateitislikelythattheir

companieswillperformanewshareissuewithinthenexttwelvemonths.Thiscouldbetheresult

ofanumberofrelativelyunsuccessfulIPOsonthe

Swedishmarketduring2010,whichcontributes

touncertainty,butalsothatbankfundingisless

cumbersomeandremainsfairlycheap.

• SurveysconductedinEuropeduringQ22010

indicateddecreasedoptimismfollowedby

financialcrisesinseveralEuro-countries.The

NorthAmericanQ22010surveyindicated

generaloptimismandthatadaptingcompanies’

growthstrategieswasdemandingagreatdealof

attentionfromCFOs.EventhoughtheSwedishsurveywasconductedlater,theconfidenceof

CFOsinSwedenseemshighandthesurvey

suggeststhereislittleconcernfora“doubledip”.

Key points from the Fall 2010 Survey



TheSwedisheconomycontinuesitsrecoveryafter

thefinancialcrisisbeginningin2008.According

toRiksbanken’s(theSwedishCentralBank)revised

figures,SwedishquarterlyGDPhasbeengrowing

sincethesecondquarterof2009.Enhancedgrowth

hascontinuedthroughoutthefirsthalfof2010mainly

drivenbyexpansionaryeconomicpolicyandincreased

demandforSwedishexportgoods.Thepositive

developmentwasindicatedbytheSwedishEMI(Export

Manager’sIndex),reportedintheSpring2010Survey.

However,sinceinternationaldemandpartlyrelatesto

therebuildingofstock,Swedishexportsareexpected

todroptolowerlevelsduringthelattermonthsof

2010,accordingtoKonjunkturinstitutet(theNational

InstituteofEconomicResearch).WhiletheNational

InstituteofEconomicResearchhasraisedSwedishGDP

forecastsforfullyear2010,theforecastfor2012has

beenloweredsinceourlatestSurvey.AsofSeptember

2010,theNationalInstituteofEconomicResearchpredictsGDPinSwedentodevelopasfollows:4.3%in

2010,3.4%in2011and3.0%in20121.

Therecoveryhasgonehandinhandwithimproved

confidenceregardingtheSwedisheconomyduring

thefirsteightmonthsof2010.TheNationalInstitute

ofEconomicResearchreportsthatapproximately50%

ofSwedishhouseholdsconsiderthecurrenteconomic

situationtobebetterthanayearago.Householdsare

alsooptimisticaboutthedevelopmentoftheSwedish

economyoverthenexttwelvemonths.Furthermore,

confidenceinthebusinesssectorasawholeremains

atahigherlevelthanthehistoricalaverage.However,confidencefellinAugust,inparticularaffecting

theretailtradeinwhichconfidencewasbelowthe

historicalaverageasofAugust.

Current status of the Swedish economy

1ThepredictionsofSwedish

GDPdevelopmentmade

bytheNationalInstituteof

EconomicResearchinQ4

2009aswereportedinour

Spring2010surveywereas

follows:2.7%in2010,3.3%

in2011and3.8%in2012.

2Thereporateistheratethat

banksreceiveorpaywhen

depositingorborrowingfunds

attheSwedishCentralBank

foraperiodofsevendays.

Asaresultofoptimisminthebusinesssectorand

increasedexportsduringrecentmonths,thelabour

markethasalsoslightlyimprovedduringthefirst

halfof2010,incontrasttothegeneralconsensussix

monthsago.Nevertheless,unemployment–standing

atapproximately8.6%inMay–isexpectedtodecrease

onlygraduallyandreachabout7.5%attheendof

2012,accordingtheSwedishCentralBank.

Expansionaryeconomicpolicyhasbeen,andis

expectedtobe,animportantdrivingforceofthe

Swedisheconomyintheremainingmonthsof2010

andin2011.Ourexpectationsforaraisedreporate

intheSpring2010Surveyweremet,withtherepo

rate2havingbeenraisedtwiceto0.75%.TheSwedish

CentralBankhasalsoslightlyraiseditsexpectationsfor

thereporate,whichispredictedtobearound2.6%in

thebeginningof2012.



The recovery has gonehand in hand withimproved confidenceregarding the Swedish

economy during the firsteight months of 2010.



ProspectsHigh expectations on cash generation

59%ofrespondingCFOsaremoreoptimisticabouttheirspecificfinancialprospectsthanthreemonths

ago.Thetrendissimilarinallindustriesandstretches

fromsmall(saleslessthanSEK500m)tolargesize

(salesmorethanSEK1,500m)organizations.The

paceofrecoveryispickingupcomparedtothe

Spring2010survey.Higherthanaverageoptimism

ingeneralisalsomeasuredinotherSwedishsurveys

suchasKonjukturbarometerninAugust(“theSwedish

EconomicTendencySurvey”).

Chart 1.

Financial prospects – Company specific

Compared to three months ago how do you feel

about the financial prospects for your company?

Chart 2.

Cash flow prospects – Company specific

How do you expect operating cash flow in your

company to change over the next 12 months?

Therearesignificantlyhigherexpectationsofincreasedcashflowoverthenexttwelvemonths

amongrespondingCFOs.Privateconsumption-

relatedbusinessessuchasmanufacturing,retailand

transportationhaveincreasedmorethanaverage.With

increasingbusinessvolumes,manywouldexpecta

buildupofworkingcapitalhavinganegativeimpact

onoperatingcashflow.However,workingcapital

reductionprogramsimplementedduringthecredit

crunchappeartohavehadamitigatingimpact.

Oursurveyshowsthattheeconomicrecoveryismaterializingin2010.AmajorityofCFOsfeelthatthefinancial

prospectsfortheircompanieshaveimprovedcomparedtotheSpring2010survey,whichisinlinewithstrong

macro-economicdevelopmentinSweden.Thetrendissimilarinallindustriesandstretchesfromsmalltolargesize

organizations.Only8%ofrespondentsfeellessoptimisticcomparedtothreemonthsago.

65%ofCFOsexpectincreasingoperatingcashflowsintheirbusinessesoverthenexttwelvemonths,whileonly

9%expectadecrease.Business-to-consumerrelatedentitiesaremostoptimisticaboutthefuture.Thepositivecashflowforecastsarelikelytobeacombinationofincreaseddemandandtheeffectsofimplemented/ongoing

restructuringeffortsandcashmanagementprogramsinbusinessesacrossmanyindustrysectors.

Q32009

Q12010

Q32010

Q32009

Q12010

Q32010



Market viewsSignificant Private Equity M&A uptake

Chart 3.

M&A activity – Sweden in general

Over the next 12 months how do you expect

levels of corporate acquisitions and divestments

in Sweden to change?

39%ofCFOsrateSwedishcompaniesasundervalued.CurrentCFOsentimentimpliesthatSwedishcompaniesare

consideredtobedevelopingandperformingwell,whilemarketvaluationshavedevelopedmorecautiously.Asa

benchmark,theOMXNordicExchangeIndexOMXStockholm30increasedby12.6%sofarin2010.

TheM&Adealflowhaspickedupsignificantlyand77%oftherespondingCFOsareexpectingfurtherincreasesin

M&Aactivitywithinthecomingtwelvemonths.During2010wehaveseenasignificantrecoveryindealflowsand

M&Aactivity,primarilywithinPrivateEquityhoweveralsoamongstrategicplayers,whichisinlinewiththeCFOpredictionsintheprevioussurveys.Theincreasedactivityafterthecreditcrunchismostlikelyrelatedtoa“back

log”ofdeals,howeverthissurveyalsoindicatesthatimprovedavailabilityofcreditisakeydriver.

Chart 4.

Valuation – Sweden in general

How do you currently rate the valuation of

Swedish companies?

TheM&Adealflowhaspickedupsignificantlyand77%oftherespondingCFOsareexpectingfurtherincreases

inM&Aactivity.Thestrongdevelopmentisaresponse

tothelowlevelsofactivityduringthesecondhalfof

2008andduring2009.Furthermore,CFOsexpectthat

PrivateEquityactivitywillincreasesignificantlyoverthe

comingtwelvemonths,inlinewithwhatwehaveseen

ontheSwedishmarketsinceSpring2010.

UnchangedfromtheSpring2010survey,only14%ofCFOsrateSwedishcompaniesasovervalued.An

increasedshareofrespondents,comparedtothe

surveyssixandtwelvemonthsago,rateSwedish

companiesasundervalued.Furthermore,Swedish

companiesareingeneralshowingperformance

improvementsandareabletodefendthesignificant

upturninvalueoverthelasttwelvemonths.

Q32009

Q12010

Q32010

Q32009

Q12010

Q32010





Chart 7.

New share issue – Sweden in general

Is now a good time for Swedish companies to

perform a new share issue?

Chart 8.

Leverage – Sweden in general

Generally speaking do you think Swedish

companies’ balance sheets are over-,

appropriately or underleveraged?

The majority of CFOs consider Swedishcompanies in general to be appropriately

leveraged

Incontradictiontothelastsurveyalmostonethird

oftheCFOsnowbelieveitisnotagoodtimefor

companiestoperformnewshareissues.Thiscould

relatetoafewlesssuccessfulIPOsontheSwedish

marketduring2010,whichresultsinuncertainty.

Furthermore,almost47%oftherespondentssaying

“Noopinion”seemstoindicatethatCFOconfidenceon

thistopicremainslow.

Only4%ofrespondentsarelikelytoperformanew

shareissuewithinthenexttwelvemonthsandboth

largeandsmall-sizedcompaniesarerepresented.

However,some45%oftherespondingCFOsthat

representlargecompaniesbelievethatnowisagood

timetoperformanewshareissue.

Theshareofrespondentsdeemingcompaniestobe

appropriatelyleveragedremainsatasimilarlevelto

theprevioussurveys.61%ofrespondentsbelieve

thatSwedishcompaniesareappropriatelyleveraged

comparedto18%whorespondedeitherover-or

under-leveraged.Theresponseisconsistentwiththe

company-specificquestion,whereabouthalfofthe

respondentsintendtomakenochangeinleverageover

thecomingtwelvemonthperiod.

ItisnotablethatasignificantincreaseofCFOs(from

8%to14%)statethatthebalancesheetsofSwedish

companiesareunderleveraged.ThisisdrivenbyCFOs

inlargesizecompanies,where25-30%ofrespondents

areoftheopinionthatSwedishcompaniesare

underleveraged.

Q32009

Q12010

Q32010

Q32009

Q12010

Q32010



Chart 10.

Balance sheet risk – Company specific

How has the level of financial risk on your

balance sheet changed over the past 12 months?

Chart 9.

Cash return to shareholder ratios – Sweden in general

Do you think current cash return to shareholder

ratios (including dividends and share buybacks),

compared to a 10 year average, are high, normal

or low?

Morethanonethirdoftherespondentsthinkthat

shareholders’cashreturnoninvestmentratioislowbut

thisgrouphasdecreasedcomparedtotwelvemonths

ago.Theresponsecouldbeseeninlightofpositive

indicationsinthemacro-economicenvironmentand

increaseddividendsinmanyofthelargerquoted

companies.Theresponsesindicatethatcurrent

sentimentsamongCFOsleantowardcontinuing

increasesincompanydividends.

TheoveralltrendsincetheFall2009surveyisthat

thefinancialriskonthebalancesheetofSwedish

companies(withafocusonsmalltomid-size

companies)hasdecreased.Only15%oftheCFOsat

largesizecompaniesconsidertheirbalancesheetriskto

haveincreasedoverthepasttwelvemonths,versusthe

totalpopulationatanaverageof20%.68%ofCFOs

inthemanufacturingsectorconsidertheirbalance

sheetfinancialrisktohavedecreasedorbeunchanged

overthepasttwelvemonths,confirmingthetrendof

increaseddemandinseveralSwedishcoreindustry

sectors.

Q32009

Q12010

Q32010

Q32009

Q12010

Q32010



Availability of creditImproved access but interest rateincreases expected

Chart 11.

Availability of bank funding – Sweden in general

How would you rate the overall availability of

bank funding for companies?

Chart 12.

Credit renegotiations – Company specific

Is your company likely to renegotiate loan

arrangements/arrange for new credit facilities

over the next 12 months?

Difficultiesinobtainingbankfundingwereseenthroughoutmostof2009.However,theavailabilityofbank

fundingcontinuestoimprovefromthesurveyssixandtwelvemonthsago,accordingtorespondingCFOs.25%

statethatbankfinancingis“hardtoget”comparedwith29%intheSpring2010surveyand43%intheFall2009

survey.ThisdevelopmentisinlinewithsurveyresultsacrossEurope.Again,theresultsconfirmthatsmalltomid-

sizecompaniesfacegreaterobstaclesinobtainingfundingatacceptabletermscomparedtolargecorporations

withsolidbankrelationshipsandaccesstothecorporatebondmarkets.

InterestratesarestillconsideredtobeveryfavorablebyasignificantmajorityofCFOs.TheSwedishCentralBank’s

forecastindicatethattherepointerestrateislikelytoincreasefromthecurrentlevelof0.75%toanaverageof

1.9%in2011andtoanaverageof3.0%in2012.44%oftherespondingCFOsbelievetheircompaniesarelikelyto

renegotiateloanarrangements/arrangefornewcreditfacilitiesoverthenexttwelvemonths,comparedto36%of

CFOsinearly2010.

Withtheincreasingavailabilityofbankfunding,

44%oftherespondentsarelikelytonegotiatecredit

agreementsoverthenexttwelvemonths.Asmarket

interestratesareconsideredlowandarerising

slowly,onewouldexpecthighpressureonfinancial

institutions’marginsandthepossibilitytolockin

financingatfavorableterms.

Bankfundingismorereadilyavailablecomparedto

thesurveyssixandtwelvemonthsago.Thetrend

isanaturaldevelopmentafterthecreditcrunch

experiencedinlate2008andearly2009.Thevast

majorityofCFOsstillcharacterizetheshorttermmarket

interestratesinSwedenaslowandattractive(seechart

5).Thereporateiscurrently0.75%,havingincreased

from0.25%duringthelastsixmonths.However,every

fourthrespondentstillrespondsthatbankfinancingis

“hardtoget”.

Q32009

Q12010

Q32010

Q32009

Q12010

Q32010



To be successful,finance must developthe capabilities thatwill allow it to fulfill

its responsibilities tothe organization, meetstakeholder expectations

and to service its keybusiness partners.



The Deloitte CFO surveyAn international outlook

BelowwehavecompiledkeypointsfromcurrentCFOsurveysintheUK/Euro-zone

andinNorthAmerica(performedinQ22010):

UK / Euro-zone

•FinancialoptimismdecreasedamongCFOsandexpectationsofa“doubledip”

increased.WenotethatthesesurveyswereperformedwhenfinancialcrisessituationsinseveralEurocountriesremainedintheheadlines.

•CreditconditionsareimprovingandCFOsentimentaboutcreditavailabilityisatthe

highestlevelsincethesurveywasfirstconductedinQ32007.

•CFOsseebondissuanceasamoreattractivewaytofinancetheirbusinessthan

bankborrowingorequity.

•Theperceivedattractivenessofraisingequityshowsasharpdecline.

•Expansionarypoliciestoraiserevenueandcapitalizeongrowthhavebecomeareas

ofincreasingpriorityforCFOsoverthelastyear,ascashflowandliquidityhave

becomelessofafocus.

North America

•CFOoptimismismostlyontherisedespiteachallengingbusinessenvironmentand

increasinggovernmentaction.

•Allsurveyedindustriesprojectrevenueandearningsgrowth(9%and17%year

overyearonaverage,respectively)whilekeepingbothcostsandemploymentin

check.

•Socialandotherpolicyconcernsarenotableacrossmostindustries–notjust

financialservices,healthcareandenergy.

•CFOworkloadstressesandfinanceorganizationchallengesareprimarilyrelatedto

growthandstrategicambiguity.

•TurmoilhaspulledCFOsdeeperintotheiroperatorandstewardroles,andmost

lookforwardtoexpandingtheirworkascatalystsandstrategists.

High risk concerns of Swedish CFOs

TheSwedishelectioninSeptember2010iscreatingsomeuncertaintyamong

CFOs.Onequestioninthesurveyaskedforwhatis“theonehigh-impactrisk

thatCFOsworrymostabout”.Theresponsestothisquestionincludedtherisk

forpoliticaldecisionsbutmostresponsesfallintothecategoriesinterestrates,

foreignexchangeratesanddevelopmentoftheworldeconomy(Europe/USA /Asia).GiventhatSwedenis,bynature,generallyexposedtointernational

developmentduetoitssmallcurrencyandsignificantexports,itisnotablethat

mostCFOsworryaboutthingsthatarebeyondtheircontrol.



Insight to the CFO community

Financeisthelifebloodofanorganizationand

stakeholdershavehighexpectationsofthefinance

function’sperformance.Aneffectivefinancefunction,

whichincludesallaspectsoffinance,tax,treasury

and,typically,riskmanagement,makesapositive

contributiontotheachievementoftheorganization’s

strategicobjectivesandtoitsvaluecreationgoals.To

besuccessful,financemustdevelopthecapabilities

thatwillallowittofulfillitsresponsibilitiestothe

organization,meetstakeholderexpectationsandto

serviceitskeybusinesspartners.Thechallengeforthe

CFOistocreateafinancefunctionthathasboththe

capabilitiesandtheflexibilitynecessarytomeetthe

desiredlevelsofperformanceinthesekeyareas.

AtDeloitte,weprovidethebestadvicetoCFOsinboth

theprivateandpublicsectorsonthecomplexfinancial

andbusinesschallengestheyface.Webringtogether

anunrivalledsetofservicesfromacrossthefirmto

supportfinanceleaderstotakethesedecisionsandto

supportanyresultingchangeortransformationintheir

financecapability.Thebreadthofservices,combined

withourabilitytoprovideindependentadviceandthe

capabilitytosupportbothstrategyanddeliverysetsus

apartinthemarket.

A note on methodology

ForthepurposeoftheCFOsurveyaround3,000

CFOsinSwedenwereapproached.TheCFOs

whorespondedrepresentcompaniesacrossall

industries,withanannualturnoverofSEK100

millionormore.Thesurveywascarriedoutasa

web-basedquestionnaireduringAugust2010.Intotal208CFOsrespondedtothesurvey,

representingaresponserateof7%.Given

thecharacteristicsofthetargetgroupthisis

consideredareasonableresponserate.

Inordertofurtherpositionourselvesasapre-eminent

advisortotheCFOcommunity,wealsoconductthe

DeloitteCFOsurvey–asurveyofCFOsandgroup

financedirectorsofmajorcompanies.Itcaptures

shiftsinCFOs’opinionsonvaluations,risksand

financing.Ithasbecomeabenchmarkforgauging

financialattitudesofmajorcorporateusersofcapital

incountriesaroundtheworld.Atpresent,14Deloitte

memberfirmsareconductingCFOsurveysoneithera

quarterlyorsemi-annualbasis.



Michael Bernhardtz

Partner,EnterpriseRiskServices

+46752463066

[email protected]

Lars FranckPartner,Tax

+46752462126

[email protected]

Peter Gustafsson

Partner,Audit

+46752464325

[email protected]

Andreas Marcetic

Partner,FinancialAdvisory

+46752462341

[email protected]

Anna Pontén

Partner,Consulting

+46752462389

[email protected]

Contacts



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Deloitte refers to Deloitte AB and its related entities. Deloitte is the Swedish national practice of Deloitte Touche Tohmatsu.

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© 2010 Deloitte AB.

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Deloitte CFO Survey - Sweden, Fall 2010. Recovery is materializing