The Deloitte/SEB CFO Survey Optimism soars...CFOs in Finland see organic growth as the most preferred strategy in the next 12 months (68%). From more defensive strategies, introducing

The Deloitte/SEB CFO SurveyOptimism soarsFall 2017

The Deloitte/SEB CFO Survey | 2

The Deloitte/SEB CFO Survey

We are excited to present the Fall 2017 results of the new Deloitte/SEB CFO Survey. The report uniquely combines perspectives from CFOs within large and midsized companies in Finland with viewpoints from SEB’s Nordic Outlook, SEB research team’s flagship report on key forecasts, and global economic trends.

The survey was conducted simultaneously in other European countries and thus we were able to make valuable comparisons between Finnish and other European CFOs. The European CFO Survey is part of a global cohort of surveys benchmarking the attitudes and future intentions of Chief Financial Officers, gathering views from over 1,500 CFOs based in 19 European countries.

Tuomo Salmi CFO Program Lead Deloitte

Mari Lappalainen Finance Lead Deloitte

Ville Lähde Financial Strategy SEB

The Deloitte/SEB CFO SurveyFall 2017

Fall 2017

Views were gathered from 1,500 CFOs in 19 European countries


SummaryThe Deloitte/SEB CFO SurveyFall 2017

Summary

Key findings

Business confidence has been improving throughout Europe in the past six months, but no other countries stand as strong in their optimism as France and Finland. Seventy-five percent of Finnish CFOs are more optimistic than they were in the spring.

The continued improvement in the sentiment is not unsubstantiated, Finnish exports are increasing and the economy has taken a clear turn for the better. Furthermore, compared to Europe, Finland has one of the highest number of companies expecting improvement in revenues and operating margins.

Financial performance is improving and uncertainty is falling, with Finnish CFOs getting even more ready to make domestic investments. Two-thirds also believe that this is a good time to take a risk on their balance sheet. Finland outshines its neighbor Sweden, where only one-fourth are ready to do the same.

Amid the economic growth, CFOs are growing increasingly uneasy with the lack of talent available, continuing to rise from the spring. Barring an unexpected economic turn, say, due to the geopolitical risks, there is still little CFOs believe will impede promising growth. How the lower focus on new product development in Finland compared to Germany and Sweden effects growth remains to be seen.

Optimism is at an all-time high,

net optimism at 73%. Falling short of only

France at 75%.

One-third of CFOs mention wage

moderation as the most important

way of ensuring competitiveness.

CFOs are more positive to hire in

Finland in the coming six months, with 27% hiring more (up from

19% last spring).86% of Finnish CFOs expect their

revenues to increase over the next 12 months, which is nine percentage

points more than in spring. The willingness to

invest in Finland is growing, a third of

companies are ready to invest in Finland, which

is 8% more than last spring.


SummaryThe Deloitte/SEB CFO SurveyFall 2017

Summary

Finland is among the top players

54%75% 62%are more optimistic than beforeAustriaFinland Portugal

78%France

50%55% 52%are ready to take more risk on the balance sheetBelgiumNetherlands Spain

63%Finland

81%89% 87%of companies see their revenues to increaseSwedenFinland Ireland

95%Belgium


Hot TopicChart 1. What do you expect will happen to interest rates in your country over the next 12 months? If interest rates were to rise in the next 12 months, which of the following strategies do you think is most appropriate for your business?

Only 38% of Finnish CFOs expect rates to rise in the next 12 months. That is less than the euro area average (56%) and only CFOs in Greece have lower interest rate expectations.

A large majority of Finnish CFOs (79%) are satisfied with their current strategies and do not see any need to change the strategy if rates rise. Non-Eurozone CFOs see more need to reduce debt or leverage ratio than their euro area colleagues in the event that rates rise.

Rates will go up

Interest rates


Hot Topic

Finland+38%

UK+92%

Russia+4%

Sweden+78%

Belgium+85%

Turkey+58%

Poland+42%

Germany+62%

Italy+53%

Ireland+49%

Portugal+49%

Netherlands+45%

Spain+45%

France+60%

Sweitzerland+42%

Austria+60%

Norway+36%

Greece+30%

Denmark+22%


Hot TopicChart 2. What are the main actions to be taken to boost the competiveness of the Finnish economy?

One-third of CFOs mention wage moderation as the most important way of ensuring competitiveness. Investments in digital business solutions, infrastructure and education and research are also ranked (13% each) as meaningful alternatives.

Competiveness of the Finnish economy


Hot Topic

Increase investments in infrastructure to secure

logistics for export industries

Private sector investments in digital business solutions

Increase public investments in education and in research

33%Wage moderation

13%

13%

13%

8%

8%

6%

Long term tax alignments

Public investments in digitalization

Improved tax incentives to encourage start up and new businesses

4%

Faster transition from school to work to secure availability

of proficient workforce


Business ConfidenceChart 3. Compared to six months ago, how do you feel about your company’s financial prospects?

Optimism in Finland is higher than ever during the history of this research, since the 2010s. Finland is ranked among the most optimistic countries in Europe (a net balance of 73%). Optimism is the highest in France (net optimism is 75%) and the average net optimism in Europe is 31%. Optimism is lowest in the UK.

Net optimism (difference between optimistic and less optimistic)

Financial prospects


Business Confidence

Finland+73%

France+75%

UK+0%

Austria+62%

Portugal+54%

Sweden+52%

Belgium+48%

Greece+45%

Russia+44%

Ireland+42%

Spain+40%

Norway+32%

Switzerland+27%

Poland+26%

Turkey+20%

Italy+20%

Denmark+20%

Germany+20%

Netherlands+9%


Prospects & ConcernsChart 4. What are the greatest concerns for your company in 2017?

The outlook and competitiveness of the Finnish economy have continued to improve, but those are still the biggest concerns. The next biggest concerns are the shortage of skilled professionals and increasing regulations.

Greatest concerns


Prospects & Concerns 29%Economic outlook/growth

20%Shortage of skilled professionals

14%Increasing regulations

13%Geopolitical risks

11%Reduction in demand (foreign/domestic)


Prospects & ConcernsChart 5. Assume a current cash surplus position. How would you prefer to use the money in the next 6 months?

The willingness to invest in Finland is growing, one-third of companies (29%) are ready to invest in Finland, which is eight percent points more than last spring. For the first time in the last sixteen months, the focus of strategic investment in Finland is greater than that of overseas.

(In brackets results from The Deloitte/SEB CFO Survey Spring 2017)

Most preferred way to use money


Prospects & Concerns 29% (21%)Strategic investment in Finland

19% (18%)Pay down debt

13% (5%)Dividend to shareholders

13% (23%)Strategic investment abroad

6% (14%)Financial investment in Finland

6% (4%)Financial investment abroad


Prospects & ConcernsChart 6. In your view, how are revenues for your company likely to change over the next 12 months?

86% of Finnish CFOs expect their revenues to increase over the next 12 months, which is nine percentage points more than in the spring. Finnish and Swedish (84%) companies are expected to perform better than the EU average where only 59% of CFOs see increasing revenues.

Net balance (difference between increase and decrease)

Change in revenues


Prospects & Concerns

Finland+86%

Belgium+95%

UK+28%

Sweden+84%

Ireland+77%

Netherlands+73%

Norway+66%

Germany+71%

Austria+77%

Turkey+60%

Greece+68%

Portugal+66%

Spain+61%

Poland+62%

Italy+51%

Sweitzerland+64%

France+57%

Russia+51%

Denmark+29%


Prospects & ConcernsChart 7. In your view, how are operating margins for your company likely to change over the next 12 months?

As with revenue expectations, the outlook for margins growth is broadly positive. CFOs in Belgium, Finland, and Sweden are most optimistic. Brexit is hitting UK companies hard and revenue expectations in the UK (-50%) are very negative.


Change in operating margins



Finland+68%

Belgium+80%

UK-50%

Sweden+59%

Netherlands+50%

Turkey+46%

Germany+29%

Russia+47%

Italy+49%

Norway+32%

Denmark+20%

France+25%

Spain+37%

Switzerland+13%

Austria+20%

Greece+21%

Ireland+16%

Poland+38%

Portugal+18%


Prospects & ConcernsChart 8. In your view, how are capital expenditures for your company likely to change over the next 12 months?

Capital expenditure expectations have continued to rise in the EU from +27% to +29%. In Finland, capex expectations are levelling off and net balance has fallen to 0% from +28%. Finland reported the biggest change in capex outlook.


Change in capital expenditures



Finland+0%

Ireland+58%

UK-21%

Russia+0%

Netherlands+45%

Austria+43%

Spain+41%

Belgium+48%

Denmark+17%

Germany+40%

Italy+35%

Greece+33%

Norway+28%

Poland+33%

France+44%

Portugal+44%

Sweden+33%

Switzerland+31%

Turkey+16%


Prospects & ConcernsChart 9. To what extent is each of the following business strategies likely to be a priority for your business over the next 12 months?

CFOs in Finland see organic growth as the most preferred strategy in the next 12 months (68%). From more defensive strategies, introducing new products and services and cost control are still important for Finnish CFOs.


Priorities in business strategies



68% (77%)Organic growth

36% (39%)Introducing new products/services

32% (40%)Cost reduction

25% (25%)Expanding by acquisition

24% (24%)Expanding into new markets


Prospects & ConcernsChart 10. During the next 12 months, in what region do you expect your company to have the best opportunities for growth?

The Nordic market is still the most important region (54%). The importance of Asia Pacific has increased nine percentage points and Russia’s importance for Finland remained the same.


Best opportunities for growth



America

9%(11%)

Other EMEA countries

9%(16%)

Nordics

54%(58%)

Russia

4%(4%)

Asia Pacific

18%(9%)

Other

7%(2%)


Prospects & ConcernsChart 11. In your view, how is the number of employees for your company likely to change over the next 12 months?

Finnish CFOs see a small positive change in the number of employees of Finnish companies in the next six months (net optimism 9% vs. 0%). Compered to six months ago also European CFOs are more positive (net optimism 19% vs. 11%).

Eurozone CFOs are still more optimistic about the employment outlook in their businesses than other European CFOs. 44% of Eurozone CFOs expect to hire more employees over the next 12 months.

*combined results from questions regarding employees abroad and employees in Finland


Expected change in number of employees



Finland+9%

Belgium+63%

UK-26%

Denmark+11%

Netherlands+18%

France+38%

Poland+45%

Turkey+32%

Sweden+22%

Portugal+25%

Germany+27%

Ireland+37%

Spain+31%

Greece+35%

Austria+13%

Switzerland+18%

Italy+19%

Russia+7%

Norway+8%


FinanceChart 12. How do you currently rate bank borrowing as a source of external funding for companies?

Bank borrowing is the most preferred source of funding for CFOs in Europe, with a net balance of 56% in the EU. The appetite for bank borrowing in the Nordics has fallen from the previous survey and the corporate debt market has become more attractive. In Finland the net balance has fallen to +37% from +55%.

Net balance (difference between attractive and unattractive)

Attractiveness of bank borrowing


Finance

Finland+37%

Austria+93%

Turkey-27%

Russia+4%

France+67%

UK+80%

Switzerland+54%

Belgium+60%

Norway+59%

Spain+72%

Germany+63%

Portugal+44%

Sweden+50%

Poland+49%

Denmark+29%

Netherlands+27%

Italy+14%

Ireland+21%

Greece-2%


FinanceChart 13. How do you currently rate corporate debt as a source of external funding for companies?

The ECB bond buying program is still supporting the corporate market in Europe and only one-fifth of CFOs don’t see corporate debt as an attractive source of funding. In Finland the net balance has risen from +34% to +41%.


Attractiveness of corporate debt


Finance

Finland+41%

UK+73%

Italy-46%

Turkey-39%

Belgium+55%Switzerland

+20%Sweden+49%

Norway+36%

Austria+50%

Spain+40%

Germany+34%

France+33%

Poland-3%

Portugal+38%

Greece+11%

Denmark+5%

Netherlands+32%

Ireland+31%

Russia-36%


FinanceChart 14. How do you currently rate equity as a source of external funding for companies?

Equity is again the least attractive source of funding for CFOs in Europe. The attractiveness among Finnish companies has fallen even further (net balance from -18% to -26%).


Attractiveness of equity


Finance

Finland-26%

Norway+36%

Italy-74%

UK+12%

Spain+4%

France+17%

Turkey+31%

Portugal+15%

Poland-1%

Germany+28%

Sweden-14%

Netherlands+32%

Greece+4%

Belgium+26%

Switzerland+24%

Russia-53%

Austria+36%

Denmark-7%

Ireland-5%


FinanceChart 15. How do you currently rate internal financing as a source of funding for companies?

Internal financing keeps its place as the second most attractive source of funding for CFOs in Europe with 48% viewing internal financing as attractive, compared to 14% who consider it is unattractive. In Finland, the net balance has risen from +13% to +26%.


Attractiveness of internal financing


Finance

Finland+26%

Austria+67%

Italy-11%

Portugal+51%

Russia+51%

Belgium+32%

Germany+57%

France+21%

Spain+41%

Switzerland+56%

Denmark+50%

Ireland+38%

UK+0%

Netherlands+0%

Poland+52%

Sweden+45%

Greece+44%

Turkey+25%

Norway+0%


FinanceChart 16. How is the lending attitude of financial institutions toward your company perceived?

External financing is available and Scandinavian banks have strong balance sheets which support lending activities. Lending attitudes have been very positive already for the past four years. Funding is still available, but there is a slight reduction in lending volatility. 74% of Finnish CFOs see that the lending attitude is either very favorable or favorable.


Lending attitude of financial institutions


Finance74%

(79%)

15% (14%) 11%

(7%)


FinanceChart 17. Is this a good time to be taking greater risk on your balance sheet?

Across Europe risk appetite is low (net balance -32%). In Sweden, Norway, and Denmark, net balance is lower than on average in Europe. Risk appetite has risen from +18% to +25% in Finland, the highest in Europe. 63% of the Finnish companies believe that it is a good time be taking greater risk.

Net balance (difference between yes and no)

Taking risks on your balance sheet


Finance

Finland+25%

Turkey-71%

France-28%

Greece-52%

Poland-33%

Spain+1%

Sweden-47%

Switzerland-23%

Belgium+5%

Germany-51%

Netherlands+9%

Italy-30%

Portugal-30%

Ireland-21%

Russia-20%

Austria-20%

Denmark-37%

Norway-44%

UK-53%


Macroeconomic ContextChart 18. Industry confidence indicators

Confidence indicators in manufacturing and in services have developed strongly during 2017. Construction industry has been more stable but still at notably higher level than some years ago.

Source: Macrobond

Confidence indicators


Macroeconomic Context

-80

-60

-40

-20

0

20

40

20172016201520142013201220112010200920082007200620052004

Services

Construction

Manufacturing


Macroeconomic ContextChart 19. Indexed GDP development

Despite positive trend for Finnish economy the gap to accumulated Euro zone GDP development is largely unchanged.

Source: Macrobond

GDP



Finland

Eurozone

80

100

120

2017201620152014201320122011201020092008

110

90

115

105

95

85

Germany

Sweden


Macroeconomic ContextChart 20. Yearly GDP growth estimates

Finnish GDP growth has reached and marginally bypassed the Euro zone level.

Source: Macrobond, SEB estimates

GDP estimates



2016

2017

2018

2019

1,9

2,52,2

3,2

2,8

1,92,1 2

1,82,1 2,2

2,4

1,82

Finland Sweden Germany Eurozone


Macroeconomic ContextChart 21. Largest export destinations as per cent of total exports

Exports to Russia has stabilised while Germany remains as biggest export destination.

Source: Macrobond

Exports



Germany

Sweden

United States

Russia

China

0

3

6

9

12

15

20172016201520142013201220112010200920082007200620052004200320022001


Macroeconomic ContextChart 22. Yields gap between Europe and US at historically high level

10 year US goverment yields never reached levels near zero unlike in Japan or in Eurozone.

Source: Macrobond

Yields



United States

Germany

Japan

-1

0

1

2

3

4

5

6

7

8

20172015201320112009200720052003200119991997


About the Survey

This is the third-quarter edition survey of Chief Financial Officers and Groups Finance Directors in Finland. The survey is carried out as a web-based questionnaire. 56 CFOs participated, including a good mix of privately held and publicly listed medium, large, and multinational companies across a broad range of industries. 87% of respondents are from companies that have an annual turnover of more than 100 million euros.

Just like last spring, CFO Survey was conducted simultaneously in other European countries. The European CFO Survey gathered opinions of over 1,500 CFOs in 19 European countries.

Writers & Contributors

The survey was produced by Tuomo Salmi, Partner, CFO Program Lead, Deloitte; Mari Lappalainen, Director, Finance Lead, Deloitte; and Ville Lähde, Financial Strategy, SEB.

The survey was written by Juha Lintula, Deloitte; Piia Inkinen, Deloitte and Ville Lähde, SEB. Visual design was made by Kristina Jalonen, Deloitte.

Please visit www.deloitte.fi or www.seb.fi for the latest and past copies of the survey and other publications.


About the Survey

Contacts

Tuomo [email protected]

Mari [email protected]

Ville Lä[email protected]

http://www.deloitte.fi

http://www.seb.fi

About DeloitteIn Finland, Deloitte Oy is the Finnish affiliate of Deloitte NWE LLP, a member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), and services are provided by Deloitte Oy and its subsidiaries. In Finland Deloitte is among the nation’s leading professional services firms, providing audit, tax, risk advisory, legal, consulting, and financial advisory services through 500 people in 3 cities. Known as an employer of choice for innovative human resources programs, Deloitte is dedicated to helping its clients and its people excel. For more information, please visit our website at www.deloitte.fi.

About SEBSEB is a leading Nordic financial services group. As a relationship bank, SEB in Sweden and the Baltic countries offers financial advice anda wide range of financial services. In Denmark, Finland, Norway and Germany, the bank’s operations have a strong focus on corporateand investment banking based on a full-service offering to corporate and institutional clients. The international nature of SEB’s businessis reflected in its presence in some 20 countries worldwide. The Group has about 16,000 employees. For more information, please visitwww.sebgroup.com.

© 2017 Deloitte Oy. Group of Companies

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The Deloitte/SEB CFO Survey Optimism soars...CFOs in Finland see organic growth as the most preferred strategy in the next 12 months (68%). From more defensive strategies, introducing