Preparing for a slow recovery
The first-quarter 2009 CFO Survey, released in April, reported the “first signs of optimism in times of uncertainty” and suggested that perhaps some indicators were signifying glimmers of hope. Our latest survey, carried out in June, shows that although CFO optimism strengthened somewhat in the second quarter, we are still very far off business as usual. We found a clear though not universal indication that the Belgian economy is not likely to recover within the next 12 months. Recovery will be slow and credit conditions will remain tough. Focus on cost control and reduced investment spend are signs of continued crisis management, and hardly suggest a rapid return to “business as usual”.
CFOs’ expectations on the timing of the Belgian economic recovery have been pushed back by 6 months
- Belgian CFOs have little hope for quick recovery of the economy. As compared to the first quarter survey, expectations on the timing of the recovery have been delayed with 6 months till the second semester of 2010.
- Around 80% of surveyed companies will further cut costs, reduce employee numbers and limit capital expenditures on top of actions that have been taken before. Crisis management remains almost universal in response to the recession, with continued focus on cost reduction.
- Confidence in the impact of economic policy making is low. With the results of the Belgian regional elections, 85% of CFOs do not expect significant improvement in effectiveness and efficiency of economic policy making. 35% is even pessimistic on the change. 50% of respondents see additional room for government action to stimulate the economy.
- Credit conditions remain tough but have slightly improved in the second quarter. 50% of CFOs however do not expect a significant improvement in credit conditions before the second half of 2010.
- Optimism related to the prospects of their own company has increased with 10% in June. 25% of CFOs expect free cash flow to decline in the next 12 months, compared to close to some 40% in the first quarter survey.
- Corporate debt is still the most attractive means of external financing, though bank borrowing has become slightly more attractive. Issuing equity is still out of favour.
- 85% of CFOs do not think it is a good time to take additional risk on the balance sheet. Some 40% of respondents feel corporate balance sheets are at present overleveraged.
- CFOs are positive about the outlook for mergers and acquisition activity. Sentiment has improved significantly in June.
- Some 75% of CFOs expect the Bel 20 Share index to be higher in 12 months time, not withstanding an increase of 16% in the second quarter.
In this edition
- Recovery in sight?
- No return to business as usual
- Credit conditions remain tough
- Optimism on M&A
- High hopes, low expectations on government policy-making
- Belgian CFOs compared to the Deloitte experience abroad
The second-quarter survey was conducted from June 9, when the Belgian regional election results were published, to June 30, when the coalition talks on the different regional governments began to take shape.
The value of the survey data increases with the ability to identify trends and possible turning points. We are looking forward to the 2009 third- quarter Deloitte Belgian CFO Survey. This next edition will be conducted in the second half of September.
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Thierry Van Schoubroeck
Deloitte CFO Services, Partner
Tel. + 32 2 749 56 04