Australian CFOs prepare to shift gearsDOWNLOAD
29 January 2013: A third of Chief Financial Officers (CFOs) are more optimistic compared to last quarter according to the latest Deloitte Quarterly CFO Survey. Reduced interest rates, stronger growth in China and the increased price of iron ore have all combined to improve the outlook amongst the 73 ASX300 CFOs who took part in the research.
Deloitte’s Chief Operating Officer, Keith Skinner, “It seems most ASX300 CFOs have right sized their businesses, cleaned up their balance sheets and are adjusting to the new norm of a stronger Australian dollar (A$).”
“A solid 70% of CFOs expect to see positive revenue growth in the coming year and 63% expect an increase in cash-flow over the same period. These two key indicators have been steadily increasing over the past two quarters.”
“As the spike in heavy mining investment fades and the sector turns to the less capital intensive output phase, there will be more opportunities for the other 80% of the economy to take a greater share of investment dollars,” Mr Skinner said.
“This will improve the terms of trade and push the A$ back towards parity. In the next couple of quarters we predict a shifting of gears amongst Australia’s non-mining trade exposed businesses,” continued Mr Skinner. “We expect CFOs to move from the current holding pattern and adopt more proactive growth strategies. These might include increased capital expenditure and greater investment in business development activity.”
Boosted by falling interest rates
With two cuts to the official cash rate in the fourth quarter, over half (56%) of the respondents identified falling interest rates as having a positive impact on their levels of optimism. This also enhanced the attractiveness of bank borrowing, with 23% of CFOs saying that the cost of credit was cheap or very cheap. Almost two thirds (63%) of respondents expect the RBAs official cash rate to continue to fall below the current rate.
Hung up on politics
Mr Skinner said, “Lack of policy certainty continues to be a significant negative impact on the confidence levels of the majority (71%) of CFOs this quarter. For the vast majority of CFOs the forthcoming election cannot come soon enough, they continue to be frustrated by the policy intransience of a hung parliament.”
Although 79% of CFOs have some sort of productivity measure in place, around one in five (21%) of them fail to track this key efficiency and competitiveness indicator. When it comes to improving productivity the most popular areas of focus for CFOs was to increase their revenue from existing customers (85%), move into new markets or acquire new customers (75%), and invest in training and development of employees (72%).
Other key findings
The survey was carried out between 11 December 2012 and 14 January 2013
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