The Deloitte/SEB CFO Survey Optimism soars

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1 Optimism soars

2 The Deloitte/SEB CFO Survey We are excited to present the results of the new Deloitte/SEB CFO Survey. The report uniquely combines perspectives from CFOs within large and midsized companies in with viewpoints from SEB s Nordic Outlook, SEB research team s flagship report on key forecasts, and global economic trends. The survey was conducted simultaneously in other European countries and thus we were able to make valuable comparisons between Finnish and other European CFOs. The European CFO Survey is part of a global cohort of surveys benchmarking the attitudes and future intentions of Chief Financial Officers, gathering views from over 1,500 CFOs based in 19 European countries. Tuomo Salmi CFO Program Lead Deloitte Mari Lappalainen Finance Lead Deloitte Ville Lähde Financial Strategy SEB Views were gathered from 1,500 CFOs in 19 European countries The Deloitte/SEB CFO Survey 2

3 Summary Summary Key findings Business confidence has been improving throughout Europe in the past six months, but no other countries stand as strong in their optimism as France and. Seventy-five percent of Finnish CFOs are more optimistic than they were in the spring. The continued improvement in the sentiment is not unsubstantiated, Finnish exports are increasing and the economy has taken a clear turn for the better. Furthermore, compared to Europe, has one of the highest number of companies expecting improvement in revenues and operating margins. Financial performance is improving and uncertainty is falling, with Finnish CFOs getting even more ready to make domestic investments. Two-thirds also believe that this is a good time to take a risk on their balance sheet. outshines its neighbor Sweden, where only one-fourth are ready to do the same. Amid the economic growth, CFOs are growing increasingly uneasy with the lack of talent available, continuing to rise from the spring. Barring an unexpected economic turn, say, due to the geopolitical risks, there is still little CFOs believe will impede promising growth. How the lower focus on new product development in compared to Germany and Sweden effects growth remains to be seen. One-third of CFOs mention wage moderation as the most important way of ensuring competitiveness. 86% of Finnish CFOs expect their revenues to increase over the next 12 months, which is nine percentage points more than in spring. Optimism is at an all-time high, net optimism at 73%. Falling short of only France at 75%. CFOs are more positive to hire in in the coming six months, with 27% hiring more (up from 19% last spring). The willingness to invest in is growing, a third of companies are ready to invest in, which is 8% more than last spring. The Deloitte/SEB CFO Survey 3

4 Summary is among the top players Summary 78% France 75% 62% Austria 54% Portugal are more optimistic than before 63% 55% 52% Netherlands Belgium 50% Spain are ready to take more risk on the balance sheet 95% Belgium 89% 87% Sweden 81% Ireland of companies see their revenues to increase The Deloitte/SEB CFO Survey 4

5 Hot Topic Hot Topic Interest rates Chart 1. What do you expect will happen to interest rates in your country over the next 12 months? If interest rates were to rise in the next 12 months, which of the following strategies do you think is most appropriate for your business? Only 38% of Finnish CFOs expect rates to rise in the next 12 months. That is less than the euro area average (56%) and only CFOs in Greece have lower interest rate expectations. A large majority of Finnish CFOs (79%) are satisfied with their current strategies and do not see any need to change the strategy if rates rise. Non-Eurozone CFOs see more need to reduce debt or leverage ratio than their euro area colleagues in the event that rates rise. Rates will go up Poland +42% Portugal +49% Austria +60% Russia +4% Greece +30% +38% Spain +45% Italy +53% France +60% Sweden +78% UK +92% Denmark +22% Sweitzerland +42% Ireland +49% Germany +62% Belgium +85% Norway +36% Netherlands +45% Turkey +58% The Deloitte/SEB CFO Survey 5

6 Hot Topic Hot Topic Competiveness of the Finnish economy Chart 2. What are the main actions to be taken to boost the competiveness of the Finnish economy? One-third of CFOs mention wage moderation as the most important way of ensuring competitiveness. Investments in digital business solutions, infrastructure and education and research are also ranked (13% each) as meaningful alternatives. 33% Wage moderation 13% 4% Faster transition from school to work to secure availability of proficient workforce 6% Improved tax incentives to encourage start up and new businesses 8% Public investments in digitalization Increase investments in infrastructure to secure logistics for export industries 13% Private sector investments in digital business solutions 13% Increase public investments in education and in research 8% Long term tax alignments The Deloitte/SEB CFO Survey 6

7 Business Confidence Business Confidence Financial prospects Chart 3. Compared to six months ago, how do you feel about your company s financial prospects? Optimism in is higher than ever during the history of this research, since the 2010s. is ranked among the most optimistic countries in Europe (a net balance of 73%). Optimism is the highest in France (net optimism is 75%) and the average net optimism in Europe is 31%. Optimism is lowest in the UK. Net optimism (difference between optimistic and less optimistic) Germany +20% Greece +45% UK +0% Netherlands +9% Turkey +20% Poland +26% Norway +32% Ireland +42% Sweden +52% Austria +62% France +75% Italy +20% Switzerland +27% Russia +44% Portugal +54% +73% Denmark +20% Spain +40% Belgium +48% The Deloitte/SEB CFO Survey 7

8 Greatest concerns Chart 4. What are the greatest concerns for your company in 2017? The outlook and competitiveness of the Finnish economy have continued to improve, but those are still the biggest concerns. The next biggest concerns are the shortage of skilled professionals and increasing regulations. Economic outlook/growth 29% Shortage of skilled professionals 20% Increasing regulations 14% Geopolitical risks 13% Reduction in demand (foreign/domestic) 11% The Deloitte/SEB CFO Survey 8

9 Most preferred way to use money Chart 5. Assume a current cash surplus position. How would you prefer to use the money in the next 6 months? The willingness to invest in is growing, one-third of companies (29%) are ready to invest in, which is eight percent points more than last spring. For the first time in the last sixteen months, the focus of strategic investment in is greater than that of overseas. (In brackets results from The Deloitte/SEB CFO Survey Spring 2017) Strategic investment in 29% (21%) Pay down debt 19% (18%) Dividend to shareholders 13% (5%) Strategic investment abroad 13% (23%) Financial investment in 6% (14%) Financial investment abroad 6% (4%) The Deloitte/SEB CFO Survey 9

10 Change in revenues Chart 6. In your view, how are revenues for your company likely to change over the next 12 months? 86% of Finnish CFOs expect their revenues to increase over the next 12 months, which is nine percentage points more than in the spring. Finnish and Swedish (84%) companies are expected to perform better than the EU average where only 59% of CFOs see increasing revenues. Net balance (difference between increase and decrease) France +57% Sweitzerland +64% Netherlands +73% UK +28% Italy +51% Spain +61% Greece +68% Austria +77% Sweden +84% Belgium +95% Denmark +29% Russia +51% Poland +62% Norway +66% Germany +71% Ireland +77% +86% Turkey +60% Portugal +66% The Deloitte/SEB CFO Survey 10

11 Change in operating margins Chart 7. In your view, how are operating margins for your company likely to change over the next 12 months? As with revenue expectations, the outlook for margins growth is broadly positive. CFOs in Belgium,, and Sweden are most optimistic. Brexit is hitting UK companies hard and revenue expectations in the UK (-50%) are very negative. Net balance (difference between increase and decrease) Austria +20% Norway +32% Turkey +46% UK -50% Portugal +18% France +25% Spain +37% Italy +49% Sweden +59% Belgium +80% Switzerland +13% Ireland +16% Greece +21% Germany +29% Russia +47% +68% Denmark +20% Poland +38% Netherlands +50% The Deloitte/SEB CFO Survey 11

12 Change in capital expenditures Chart 8. In your view, how are capital expenditures for your company likely to change over the next 12 months? Capital expenditure expectations have continued to rise in the EU from +27% to +29%. In, capex expectations are levelling off and net balance has fallen to 0% from +28%. reported the biggest change in capex outlook. Net balance (difference between increase and decrease) Sweden +33% Spain +41% Portugal +44% UK -21% +0% Turkey +16% Norway +28% Greece +33% Germany +40% France +44% Ireland +58% Russia +0% Denmark +17% Switzerland +31% Italy +35% Austria +43% Belgium +48% Poland +33% Netherlands +45% The Deloitte/SEB CFO Survey 12

13 Priorities in business strategies Chart 9. To what extent is each of the following business strategies likely to be a priority for your business over the next 12 months? CFOs in see organic growth as the most preferred strategy in the next 12 months (68%). From more defensive strategies, introducing new products and services and cost control are still important for Finnish CFOs. (In brackets results from The Deloitte/SEB CFO Survey Spring 2017) Organic growth 68% (77%) Introducing new products/services 36% (39%) Cost reduction 32% (40%) Expanding by acquisition 25% (25%) Expanding into new markets 24% (24%) The Deloitte/SEB CFO Survey 13

14 Best opportunities for growth Chart 10. During the next 12 months, in what region do you expect your company to have the best opportunities for growth? The Nordic market is still the most important region (54%). The importance of Asia Pacific has increased nine percentage points and Russia s importance for remained the same. (In brackets results from The Deloitte/SEB CFO Survey Spring 2017) 9% (11%) America 9% (16%) Other EMEA countries 54% (58%) 4% (4%) Russia 18% (9%) Asia Pacific 7% (2%) Other Nordics The Deloitte/SEB CFO Survey 14

15 Expected change in number of employees Chart 11. In your view, how is the number of employees for your company likely to change over the next 12 months? Finnish CFOs see a small positive change in the number of employees of Finnish companies in the next six months (net optimism 9% vs. 0%). Compered to six months ago also European CFOs are more positive (net optimism 19% vs. 11%). Eurozone CFOs are still more optimistic about the employment outlook in their businesses than other European CFOs. 44% of Eurozone CFOs expect to hire more employees over the next 12 months. *combined results from questions regarding employees abroad and employees in Net balance (difference between increase and decrease) +9% Netherlands +18% Germany +27% Greece +35% UK -26% Russia +7% Austria +13% Sweden +22% Spain +31% Ireland +37% Belgium +63% Denmark +11% Italy +19% Portugal +25% Turkey +32% France +38% Poland +45% Norway +8% Switzerland +18% The Deloitte/SEB CFO Survey 15

16 Finance Attractiveness of bank borrowing Chart 12. How do you currently rate bank borrowing as a source of external funding for companies? Bank borrowing is the most preferred source of funding for CFOs in Europe, with a net balance of 56% in the EU. The appetite for bank borrowing in the Nordics has fallen from the previous survey and the corporate debt market has become more attractive. In the net balance has fallen to +37% from +55%. Net balance (difference between attractive and unattractive) Finance Ireland +21% Portugal +44% Norway +59% Turkey -27% Russia +4% Denmark +29% Switzerland +54% Germany Spain +63% +72% Austria +93% Greece -2% Italy +14% +37% Poland +49% France +67% UK +80% Netherlands +27% Sweden +50% Belgium +60% The Deloitte/SEB CFO Survey 16

17 Finance Attractiveness of corporate debt Chart 13. How do you currently rate corporate debt as a source of external funding for companies? The ECB bond buying program is still supporting the corporate market in Europe and only one-fifth of CFOs don t see corporate debt as an attractive source of funding. In the net balance has risen from +34% to +41%. Net balance (difference between attractive and unattractive) Finance Turkey -39% Ireland +31% Norway +36% Italy -46% Poland -3% Greece +11% Netherlands +32% Spain +40% Austria +50% UK +73% Russia -36% Denmark +5% Switzerland +20% France +33% Germany +34% +41% Portugal +38% Sweden +49% Belgium +55% The Deloitte/SEB CFO Survey 17

18 Finance Attractiveness of equity Chart 14. How do you currently rate equity as a source of external funding for companies? Equity is again the least attractive source of funding for CFOs in Europe. The attractiveness among Finnish companies has fallen even further (net balance from -18% to -26%). Net balance (difference between attractive and unattractive) Finance Ireland -5% Greece +4% Switzerland +24% Turkey +31% Italy -74% Sweden -14% Poland -1% Portugal +15% Belgium +26% Norway +36% Russia -53% -26% Denmark -7% Spain +4% UK +12% Germany +28% Austria +36% France +17% Netherlands +32% The Deloitte/SEB CFO Survey 18

19 Finance Attractiveness of internal financing Chart 15. How do you currently rate internal financing as a source of funding for companies? Internal financing keeps its place as the second most attractive source of funding for CFOs in Europe with 48% viewing internal financing as attractive, compared to 14% who consider it is unattractive. In, the net balance has risen from +13% to +26%. Net balance (difference between attractive and unattractive) Finance Spain +41% Denmark +50% Italy -11% Netherlands +0% Turkey +25% Belgium +32% Greece +44% Russia +51% Switzerland +56% Austria +67% UK +0% +26% Ireland +38% Sweden +45% Portugal +51% Germany +57% Norway +0% France +21% Poland +52% The Deloitte/SEB CFO Survey 19

20 Finance Lending attitude of financial institutions Chart 16. How is the lending attitude of financial institutions toward your company perceived? External financing is available and Scandinavian banks have strong balance sheets which support lending activities. Lending attitudes have been very positive already for the past four years. Funding is still available, but there is a slight reduction in lending volatility. 74% of Finnish CFOs see that the lending attitude is either very favorable or favorable. (In brackets results from The Deloitte/SEB CFO Survey Spring 2017) Finance 74% (79%) 15% (14%) 11% (7%) The Deloitte/SEB CFO Survey 20

21 Finance Taking risks on your balance sheet Chart 17. Is this a good time to be taking greater risk on your balance sheet? Across Europe risk appetite is low (net balance -32%). In Sweden, Norway, and Denmark, net balance is lower than on average in Europe. Risk appetite has risen from +18% to +25% in, the highest in Europe. 63% of the Finnish companies believe that it is a good time be taking greater risk. Net balance (difference between yes and no) Finance Germany -51% Poland -33% Switzerland -23% Turkey -71% Greece -52% Norway -44% Portugal -30% Austria -20% Belgium +5% +25% Sweden -47% Denmark -37% France -28% Russia -20% Spain +1% Netherlands +9% UK -53% Italy -30% Ireland -21% The Deloitte/SEB CFO Survey 21

22 Macroeconomic Context Confidence indicators Chart 18. Industry confidence indicators Confidence indicators in manufacturing and in services have developed strongly during Construction industry has been more stable but still at notably higher level than some years ago. Source: Macrobond Macroeconomic Context Services Construction Manufacturing The Deloitte/SEB CFO Survey 22

23 Macroeconomic Context GDP Chart 19. Indexed GDP development Despite positive trend for Finnish economy the gap to accumulated Euro zone GDP development is largely unchanged. Source: Macrobond Macroeconomic Context Germany Eurozone Sweden The Deloitte/SEB CFO Survey 23

24 Macroeconomic Context GDP estimates Chart 20. Yearly GDP growth estimates Finnish GDP growth has reached and marginally bypassed the Euro zone level. Source: Macrobond, SEB estimates 3,2 2,8 Macroeconomic Context 1,9 2,5 2,2 2,4 2,1 2,1 2,2 1,9 2 1,8 1,8 2 Sweden Germany Eurozone The Deloitte/SEB CFO Survey 24

25 Macroeconomic Context Exports Chart 21. Largest export destinations as per cent of total exports Exports to Russia has stabilised while Germany remains as biggest export destination. Source: Macrobond Macroeconomic Context Germany Sweden Russia China United States The Deloitte/SEB CFO Survey 25

26 Macroeconomic Context Yields Chart 22. Yields gap between Europe and US at historically high level 10 year US goverment yields never reached levels near zero unlike in Japan or in Eurozone. Source: Macrobond Macroeconomic Context United States Germany Japan The Deloitte/SEB CFO Survey 26

27 About the Survey This is the third-quarter edition survey of Chief Financial Officers and Groups Finance Directors in. The survey is carried out as a web-based questionnaire. 56 CFOs participated, including a good mix of privately held and publicly listed medium, large, and multinational companies across a broad range of industries. 87% of respondents are from companies that have an annual turnover of more than 100 million euros. Just like last spring, CFO Survey was conducted simultaneously in other European countries. The European CFO Survey gathered opinions of over 1,500 CFOs in 19 European countries. Writers & Contributors The survey was produced by Tuomo Salmi, Partner, CFO Program Lead, Deloitte; Mari Lappalainen, Director, Finance Lead, Deloitte; and Ville Lähde, Financial Strategy, SEB. The survey was written by Juha Lintula, Deloitte; Piia Inkinen, Deloitte and Ville Lähde, SEB. Visual design was made by Kristina Jalonen, Deloitte. About the Survey Please visit or for the latest and past copies of the survey and other publications. Contacts Tuomo Salmi tuomo.salmi@deloitte.fi Mari Lappalainen mari.lappalainen@deloitte.fi Ville Lähde ville.lahde@seb.fi The Deloitte/SEB CFO Survey 27

28 About Deloitte In, Deloitte Oy is the Finnish affiliate of Deloitte NWE LLP, a member firm of Deloitte Touche Tohmatsu Limited ( DTTL ), and services are provided by Deloitte Oy and its subsidiaries. In Deloitte is among the nation s leading professional services firms, providing audit, tax, risk advisory, legal, consulting, and financial advisory services through 500 people in 3 cities. Known as an employer of choice for innovative human resources programs, Deloitte is dedicated to helping its clients and its people excel. For more information, please visit our website at About SEB SEB is a leading Nordic financial services group. As a relationship bank, SEB in Sweden and the Baltic countries offers financial advice and a wide range of financial services. In Denmark,, Norway and Germany, the bank s operations have a strong focus on corporate and investment banking based on a full-service offering to corporate and institutional clients. The international nature of SEB s business is reflected in its presence in some 20 countries worldwide. The Group has about 16,000 employees. For more information, please visit Deloitte Oy. Group of Companies