Irish CFOs see corporate recovery in 2010 but wider economy to take longer

55% see improvement in profitability over the next 6 months

Nine out of 10 CFOs want stronger Government action on public finances

A majority of Chief Financial Officers (CFOs) of major Irish companies see revenues and profits stabilising or recovering, rather than falling further, over the next six months. However, they do not expect the Irish economy to rebound as quickly identifying the end of 2011 as a likely timeline for broader macro-economic improvement.

These are some of the key findings of the first quarterly CFO Survey by Deloitte. The survey, which looks to establish the views of CFOs in relation to financial markets, the economic outlook and business trends, found that Irish CFOs are beginning to see signs of an upturn within their own organisations. Asked how they saw their financial prospects now compared to six months ago, 37% were more optimistic compared to 27% who were less optimistic. Looking forward, 55% see profits rising over the next six months against 25% who believe profits will fall over the period. Almost half, 46%, see turnover rising in the period compared to 30% who see it falling.

However, this positive sentiment is not felt by Irish CFOs with regards to Ireland’s economy. Only one third of respondents expect economic recovery by the end of 2010. The two main reasons for this are firstly the state of the public finances and secondly the need to improve international competitiveness.

• 89% of CFOs surveyed are dissatisfied with the measures the Government has taken to date to resolve the crisis in the public finances and feel that more affirmative action is required to achieve long-term sustainable efficiency, including structural reform, review of employee numbers and benchmarking.
• Similarly, CFOs are concerned with issues impacting on international competitiveness - tax increases, emigration and a ‘brain drain’ are potential threats, and the lack of finance and credit availability experienced by businesses and individuals are not conducive to an environment of risk taking and entrepreneurship.

Shane Mohan, Partner in Deloitte said: “Most companies have addressed factors within their control - reducing employee numbers and related costs, consolidating businesses, cutting discretionary spend and postponing capital expenditure. The focus for the many Irish CFOs has now shifted to growing revenues and profits which is a very positive development. With the domestic economy remaining weak, growth is going to be export led in sectors such as pharmaceuticals, internationally traded services and “clean tech” energy. Nevertheless, the weakened domestic economy and competiveness will remain significant challenges”.

CFOs are more confident about the measures undertaken by the Government to repair the Irish banking sector. 55% of CFOs believe these measures have been either highly or quite effective; particularly with regards to restoring confidence in the financial sector and preventing further economic downturn.

However, despite NAMA and the recapitalisation of the banks, 70% of CFOs are not benefitting from an improvement in the availability of finance/credit.

The survey also shows that CFOs feel a sense of uncertainty around interest and exchange rates, and their potential impact on competitiveness. However, they are beginning to see a reduction in balance sheet risk with regards to the valuation of assets, which illustrates the ‘normalisation’ of asset values that is currently taking place in the marketplace.

“The main challenge identified by a quarter of CFOs in the survey was revenue maintenance/ growth. This is indicative of the stage they believe their companies are at – having focussed primarily on cost management for the past year, CFOs feel they have control over the internal issues that needed to be addressed and have positioned their organisations for growth. In order for this growth to be realised, they believe that further action must be taken to address the domestic economic environment. Our sense is that Irish CFOs await a definitive economic plan, particularly the 2010 Budget strategy, with a keen sense of anticipation. Only then will their organisations be fully able to capitalise on this growth potential.” concluded Mohan.

More details of the 2009 CFO survey here.

About the survey

This is the first in a series of quarterly surveys by Deloitte of Chief Financial Officers of listed companies, large private companies and Irish subsidiaries of overseas multi-national companies. The survey was conducted in late September and early October. The Deloitte CFO Survey is the only survey that seeks to establish the views of CFOs in relation to relation to the financial markets, economic outlook and business trends.

Deloitte Profile

Deloitte’s 1,100 people in Dublin, Cork and Limerick provide audit, tax, consulting, and corporate finance services to public and private clients spanning multiple industries. With a globally connected network of member firms in 145 locations, Deloitte brings world class capabilities and deep local expertise to help clients succeed wherever they operate.

Deloitte's 165,000 professionals are committed to becoming the standard of excellence. Deloitte's professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.

Legal disclaimer

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its Member Firms.

These materials and the information contained herein are provided by Deloitte & Touche and are intended to provide general information on a particular subject or subjects and are not an exhaustive treatment of such subject(s). Accordingly, the information in these materials is not intended to constitute accounting, tax, legal, investment, consulting or other professional advice or services. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. These materials and the information contained therein are provided as is, and Deloitte & Touche makes no express or implied representations or warranties regarding these materials or the information contained therein. Without limiting the foregoing, Deloitte & Touche does not warrant that the materials or information contained therein will be error-free or will meet any particular criteria of performance or quality. Deloitte & Touche expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security and accuracy.

Your use of these materials and information contained therein is at your own risk, and you assume full responsibility and risk of loss resulting from the use thereof. Deloitte & Touche will not be liable for any special, indirect, incidental, consequential or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence) or otherwise, relating to the use of these materials or the information contained therein.

Last Updated: