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CFO SignalsTM: 2011 Q2 Results

Growth headwinds are taking their toll on CFO confidence


Last quarter we posited that the fourth quarter of 2010 marked a turning point in the economic recovery. Findings from this quarter’s survey appear to provide further support for the idea that growth is the dominant focus and that the fastest recovery-generated gains are behind us. Revenue and earnings expectations remain in line with the tempered (but still positive) expectations that first showed up in 4Q10. Similar to last quarter, capital investment is still rising and employment gains are not expected to keep pace.

But something appears to have shifted substantially this quarter with respect to CFOs’ optimism. Despite continuing positive financial expectations, CFOs’ own-company optimism dropped markedly. Moreover, where past pessimism has been driven largely by deteriorating assessments of the macro-business environment, roughly half of the rising pessimism this quarter is driven by internal concerns.

One of the most notable findings from this quarter’s survey is that many CFOs say they are more concerned about both their level and quality of capital investments now than they were three years ago. And, many say the risks they’re most worried about have to do with their own ability to execute.

With growth at the heart of their most pressing challenges and concerns, companies are very concerned about government’s potential impacts on their growth plans, and they are increasingly concerned about inflation, rising input prices, and the possibility of longer-term economic malaise.

As companies wrestle with these challenges, CFOs and their finance organizations are clearly playing broader and deeper roles. 

CFOs’ heavy focus on their “steward” and “operator” roles a year ago has subsided, and “strategist” and “catalyst” roles are now dominating CFOs’ time. This quarter’s survey results may indicate, however, that the view from these forward-looking vantage points is increasingly troublesome

Both - summary and full report documents (PDF) are available for downloading, under "Attachments," at the bottom of this page

Expectations showing signs of weakness

Optimism falling as sales and earnings moderate

Optimism appeared to be rebounding or at least settling into a narrower range last quarter, but this quarter’s results show a shift toward declining optimism. 

CFOs’ optimism is being dampened by deteriorating assessments of both the macro-business environment and company-specific factors. 

Snags in the shift from recovery to growth

Policy concerns, economic fragility, competition, and input prices

As evident in previous surveys, the strategic focus of many companies has shifted strongly toward revenue growth and away from cost reduction. 

But several factors appear to be complicating the transition to growth. CFOs now indicate a heightened focus on pricing challenges, likely influenced substantially by recent jumps in input prices, and also by weak consumer demand and heightened competition in some sectors.

Consistent with last quarter, availability of the talent necessary for growth is a top concern.

Many CFOs report potential impediments to growth are related to government policy, and uncertainty in this area continues to be a major concern. Social policy is a top economy-level concern for more than half of CFOs, and roughly the same proportion now put environmental policy in their top three concerns. 

Trepidation and a preference for cash

CFOs worry about investing in the current economic environment

There is a common perception that, if companies don’t put their cash to use fairly soon, they will be pressured to give the money back to shareholders (through dividends and/or share buy-backs) or begin to be punished by equities markets (through declining valuations). While this quarter’s findings are somewhat in line with these perceptions, they appear to indicate that the pressures are not as strong as many might expect. 

Moreover, nearly two-thirds say they are in a position to use capital access as a competitive advantage—a finding that not only indicates cash’s strategic importance, but may also indicate that many large-company CFOs believe their capital conditions are superior to those of their (perhaps smaller) competitors.

Further fueling CFOs’ preference for cash and liquidity seems to be their trepidation over their companies’ current investments. 

Tempered expectations for a tough road

CFOs are playing a stronger role in addressing uncertainty

As their organizations become more focused on working through major structural changes, CFOs and their finance organizations are playing central roles in assessing business conditions, revisiting strategic choices, and spearheading change. As this process advances and organizations come to grips with the longer-term challenges of recovery and growth, the CFO optimism evident during the faster parts of the recovery seems to have hit at least a plateau—and possibly an inflection point.

To the extent CFOs are expressing concerns about the future of economic recovery, their views appear consistent with those of the equities markets. Despite corporate profits that are near record highs, market valuations are not following suit —a likely indication of broader expectations of a tempered economic future. 

In any event, the view from CFOs’ strategic vantage point appears increasingly influenced by many potential roadblocks to growth, and it also seems to portend a different future from the one CFOs foresaw just a quarter ago.

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All participating CFOs have agreed to have their responses aggregated and presented. 

Please note that this is a “pulse survey” intended to provide CFOs with quarterly information regarding their CFO peers’ thinking across a variety of topics; it is not, nor is it intended to be, scientific in its number of respondents, selection of respondents, or response rate – especially within individual industries. Accordingly, this report summarizes findings for the surveyed population but does not necessarily indicate economy- or industry-wide perceptions or trends. Except where noted, we do not comment on findings for segments with fewer than ten respondents. Please see the appendix in the attachment for more information about survey methodology. 

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, tax, legal, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decisions that may affect your business, you should consult a qualified professional advisor.

*All numbers with an asterisk are averages that have been adjusted to eliminate the effects of stark outliers.

As used in this document, 'Deloitte' means Deloitte LLP [and its subsidiaries]. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.Certain services may not be available to attest clients under the rules and regulations of public accounting. 

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