Prudence and optimism prevail from Central European CEOs

Bratislava, 24 September 2009 – The publication of the first index, which this year has been included in Deloitte's CE Top 500 report. The Deloitte Business Sentiment Index (DBSI) will provide on a regular quarter basis a barometer of perspective and sentiment in the Central Europe region and provide forecasts from those who influence not only their company's performance but also that of their local economies in Central Europe including Slovakia.

„We believe that companies may soon start to dispose of their non-core activities, pull out from countries or cut product lines in an effort to decrease their debt levels and, as a result, might soon generate M&A activity again.“

—Bela Seres,
Managing Partner, Financial Advisory, Deloitte Central Europe

The first index finds that company leaders in Central Europe remain very cautious about the general economic outlook. On a general outlook, around three quarters of those surveyed felt the economy in the next year was either going to get worse or remain the same – an unsurprising reaction after such a tumultuous year. Going against this trend for caution and pessimism the survey found that business leaders were conversely quite optimistic about the prospects for their individual enterprises, with only around 15% having negative views about the future.

Of the countries surveyed, Poland is the most bullish about its prospects – both in terms of its economy and from a company perspective. Poland has enjoyed continued consumer demand in comparison to other countries in the region. Croatia, on the other hand, is very pessimistic about the economy (89.7% of negative responses).

A quarter of respondents believe EU grants are fairly or easily available, but twice as many felt the grants were fairly or very hard to obtain. The worst availability of EU grants seems to be in Slovakia.

Initial Pessimism Is Replaced by Signs of Optimism

• Despite perceived credit issues globally, almost three fifths (57.9%) of respondents feel credit is still available to them if necessary, with almost a fifth feeling it is easily available.
• Over half believe payment terms are still safe, with over 45% thinking they are fairly safe.
• Almost half (45.3%) expect sales revenue to increase over the next 12 months.
• Over half are optimistic (with 44% fairly optimistic) of launching new products of services in the next year.
• Reflecting the trends globally, opinions about employment levels continue to be pessimistic, although over half (52.1%) expect levels to remain broadly unchanged, with 31.6% believing they will reduce somewhat.
• The likelihood of M&A activity is unsurprisingly very slim, with 60% thinking it unlikely for their company to entertain thoughts of takeovers at the moment.

Caution is the watchword

It's clear that economies all over the world are not going to quickly bounce back from such an enormous crash – and for many of the Central European countries and companies surveyed, it's a priority just to get back on their feet. After almost a decade of vigorous M&A activity in the region, when growth, gaining market share, or entering new countries were priorities for many companies, it is not surprising to find that two thirds of those interviewed would not contemplate any form of takeover activity in the next six to 12 months.

One consequence of this lull is that at some point there will have to be renewed interest in M&A opportunities as business cycles start again in earnest. Bela Seres, Managing Partner, Financial Advisory, Deloitte Central Europe says: "We believe that companies may soon start to dispose of their non-core activities, pull out from countries or cut product lines in an effort to decrease their debt levels and, as a result, might soon generate M&A activity again."

Executives were surveyed about the following issues:

• economic outlook
• company financial perspectives
• credit availability
• regulatory environment
• payment terms
• sales
• new product development
• employment
• investments
• M&A activity
• EU funds (extra question)

The almost 200 respondents were drawn from Poland, Hungary, the Czech Republic, Slovakia, Croatia and Romania and from the following sectors:

• automotive
• banking
• technology
• media and telecommunications
• consumer business and transportation
• insurance
• construction
• energy and resources.

Our Approach

• A series of 10 to 12 minute telephone interviews (95% of the sample) were conducted. We interviewed either CEOs and/or CFOs professionals in either their local language or english.
• Sample size: N=190
• Fieldwork administration: July 23rd - August 10th, 2009

For more details please visit: www.deloittece.com/bsi.

About Deloitte

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© 2009 Deloitte Slovakia.

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