The Deloitte CFO Survey Optimistic summer

Transcription

1 The Deloitte CFO Survey Optimistic summer Summer 2017

2 Summary and key findings of the Swiss CFO Survey Themes this quarter 04 Prospects for the economy and for companies 05 Corporate indicators The Summer 2017 Swiss CFO Survey shows that CFOs are predominantly upbeat, with a majority optimistic about the prospects both for the country s economy and for their own company. Their expectations for revenues are also positive, with an improvement in expectations for operating margins: slightly more CFOs expect margins to increase compared with those who expect them to decrease. In addition, there is an improvement in expectations for their company s investments and number of employees. Nevertheless, geopolitical risks continue to cause concern, particularly the risks represented by the UK and the US. Chart 1. Positive and negative indicators this quarter 06 (Digital) investments 07 Uncertainty 08 Risks and monetary policy 09 Appendix: Additional charts 10 Macroeconomic context 12 About the Deloitte CFO Survey 13 Contacts and authors Negative indicators Increasing political risk from the UK and the US Rise in concerns about competition, digital transformation and internal risks Positive indicators Optimism about Switzerland s economic prospects Optimistic expectations for CFOs own companies Very positive expectations for revenues Improved expectations for operating margins Higher investment and employee numbers expected Uncertainty slightly lower Decreasing political risk from Germany and France No increase in impact of negative interest rates since Q

3 An optimistic economic and corporate outlook 71% 6 pp 38% rate the prospects for the Swiss economy over the next 12 months as positive. Swiss CFOs remain optimistic about the country s economic outlook. 71% rate the prospects for the economy over the next 12 months as positive, with 66% rating their own company s prospects as positive. Operating margin expectations now positive 13 pp rate the financial prospects for their own company over the next 12 months as positive. Expectations for revenues continue to improve: more than three-quarters of CFOs now rate these as positive over the next 12 months. Expectations for operating margins have also improved, with a majority expecting margins to increase (38% compared with 28% who expect them to decrease). In addition, there is an improvement this quarter in CFOs expectations for their own company s investments and number of employees. Greater political uncertainty in the UK and US Digitalisation as an investment priority 71% 11 pp 80% rate political uncertainty in the US as high. CFOs still perceive uncertainty as high, but their rating has fallen to the lowest level since the exchange rate floor with the euro was removed. There is however a geographical divide in perceptions of political risks: CFOs perceive France and Germany as representing a smaller risk than in Q1 2017, whereas the perceived risk represented by both the UK and the US has increased over the same period. see digitalisation as an investment priority. The importance of digitalisation has increased markedly over recent years, and four in every five CFOs (80%) report that their company is prioritising investment in this area. The second most important area for investment is in employees digital skills. In most cases, digitalisation is used to develop and manage internal processes, but many businesses are also prioritising digitalisation of sales channels, products and services, and development of digital business models. 3

4 Sustained optimism Swiss CFOs expectations for the country s economic prospects over the next 12 months have improved further and are currently at their highest level since mid % rate Switzerland s economic prospects as positive as against just who rate them as negative. CFOs expectations for their own company s financial prospects over the next 12 months remain high but largely unchanged. Two-thirds of CFOs continue to rate them as positive, although there is a slight increase in those rating them as negative, to 14%. There has also been an improvement in CFOs expectations compared with three months ago. For the last seven quarters, in fact, a majority of CFOs have reported an improvement in their own company s prospects compared with three months ago. The net balance is now 18%, unchanged from Q Chart 2. Economic outlook Net balance of CFOs rating Switzerland s economic prospects over the next 12 months as positive/negative 100% 80% 68% 60% 58% 20% 0% 20% 60% 80% 100% Positive More optimistic Negative Chart 3. Financial outlook for the next 12 months How do you rate your company s financial prospects over the next 12 months? Chart 4. Financial outlook for companies compared with the previous quarter Net balance indicating how CFOs rate their company s financial prospects compared with three months ago 60% Less optimistic Q Q Q Q Q Q Q Q Q Q Q Positive 20% 0% -20% - -60% 2009 Negative Net balance Neutral % 18% % 26% 32% 54% 14%

5 Major improvement in corporate indicators There is a particularly marked improvement in individual corporate indicators. Expectations for revenues have been largely positive for the last two years and are up again this quarter. 76% of CFOs currently expect revenues to increase over the next 12 months compared with 11% who expect them to decrease (the lowest level since Q3 2015). The remaining 1 expect revenues to remain unchanged. Chart 5. Revenue expectations Percentage of CFOs who expect their company s revenues to increase/decrease over the next 12 months 56% 58% 64% 59% 64% 66% 69% 76% 19% 20% 18% 25% 22% 18% 17% 2 20% 20% 16% 1 16% 14% 15% 11% Q Q Q Q Q Q Q Q Increase No change Decrease Expectations for operating margins are less optimistic than those for revenues but have also improved from Q1. For only the second time in two years, a majority of Swiss CFOs expect operating margins to increase 38% compared with 28% who expect them to decrease. However, the impact of pressure on margins has not affected all Swiss companies in the same way: while many continue to feel the impact, others have been able to counteract such pressure to a certain extent. Chart 6. Operating margin expectations Percentage of CFOs who expect their company s operating margins to increase/decrease over the next 12 months 32% 28% 39% 26% 28% 26% 24% 31% 36% 44% 3 37% 25% 38% 34% 35% 41% 38% 31% 31% 34% 28% Q Q Q Q Q Increase No change Decrease Q Q Q Improved revenue expectations are also reflected in CFOs expectations for a range of expenditure categories. CFOs expect spending to increase across the board, with positive net balances. Expectations for discretionary spending are 15 percentage points higher than in Q1 (a net balance of 5%), while a significant majority expect the number of employees in their company to increase over the next 12 months (a net balance of 2). Chart 7. Discretionary spending and number of employees Net balance of CFOs who expect their company s discretionary spending and number of employees to increase/decrease over the next 12 months Increased Decreased -8% 2% -10% 11% -8% 1% -17% 1 12% -9% -6% 17% -10% 2 5% -3 Q Q Q Q Discretionary spending Q Q Q Number of employees Q

6 Growing investment appetite Expectations for investments over the next 12 months are also substantially higher, particularly for new investments (a net balance of 44%). Chart 8. Investment expectations Net balance of CFOs who expect new investments and replacement investments to increase/decrease for their company over the next 12 months 44% Increased Decreased 1-4% Q % 25% 20% 18% 1 10% 9% Q Q Q Q Replacement investments New investments There has been a clear trend in investment priorities over recent years. Investment in digital technologies is a priority for four in every five Swiss companies (80%). This is a significantly higher proportion than for German companies, 56% of which are prioritising investment in digital technologies, according to responses to the same question in the German CFO Survey. This also means a high priority for investment in employees digital skills. Chart 9. Investment priorities How have your company s investment priorities changed over recent years? (multiple answers possible) We invest more in IT technology We invest more in the digital skills of our employees (Development and training) We invest more in R&D / innovation We spend more on brand / marketing Our business model has become more service orientated and therefore less capital intensive We are utilising leasing options for machines and / or vehicles more than before as an alternative to classical investments We invest less in capital goods and fixed assets Uncertainty because of technological change is influencing our investment decisions We have invested less in general since the financial crisis because of international uncertainty No change 11% 1 2% 12% 8% 12% 8% 6% 2% 7% 17% 37% 27% 28% 24% 56% 5 Source: Swiss and German CFO Surveys (2016) Switzerland Germany 80% The development and management of internal processes remains a priority in terms of digitalisation in both Switzerland and Germany. Digitalisation of sales channels, products and services and development of digital business models are also priorities for many companies. Digital sales channels are particularly important to Swiss companies, with 50% of CFOs seeing this area as a priority compared with 3 of German CFOs. Only a very small proportion of companies report that digitalisation is not important just in Switzerland and 2% in Germany. 6 Chart 10. Priorities for digitalisation What are your company s priorities in the area of digitalisation? (multiple answers possible) Better transparency and higher control through 50% 60% digitalisation of our internal processes 52% Connecting workflow and production processes 47% Improved competencies in data analytics 41% 44% Complementing existing products with digital services 38% Creating digital business models 38% 36% Increasing utilisation of digital channels 3 50% Enabling mobile working 32% Adapting to digital value chains of important suppliers or customers Developing new digital services Digitalisation is not a priority for our company 2% 3 29% 27% 30% 27% Switzerland Germany Source: Swiss and German CFO Surveys (2016)

7 Uncertainty high but decreasing There has been a gradual decrease in CFOs perceptions of uncertainty over recent quarters, despite a very small increase in Q1. Perceived uncertainty in the economic and financial environment is now at its lowest since the removal of the exchange rate floor in early Although perceived uncertainty is still slightly higher than in Q4 2014, it is markedly lower than the record level recorded in Q (81%). Chart 11. Uncertainty How do you rate the current level of uncertainty in the economic and financial environment? 1% 1% 0% 1% 1% 2% 5% 2% 8% 47% 19% 22% 25% 27% 30% 32% 36% 37% 50% 81% 75% 75% 7 69% 67% 6 58% 59% 52% While Swiss CFOs overall perception of political uncertainty is decreasing, the picture is more fragmented with regard to the risk represented by Switzerland s major trading partners. There has been a decrease in uncertainty since the Spring 2017 CFO Surveys for Germany and France attributable in France to the outcome of the presidential elections but CFOs perceptions for Italy remain largely unchanged. In contrast, the perceived uncertainty represented by the US and the UK is much higher as a result of actions taken by the US administration, and the General Election outcome and Brexit negotiations in the UK. CFOs continue to see the US as representing the highest level of uncertainty of all Switzerland s trading partners: just 1% rate uncertainty in the country as low, compared with 71% who rate it as high. (For detailed figures, see the Additional charts in the Appendix.) Q Q Q Q Q Q Q Q Q Q Q Chart 12. Risk represented by trading partners How do you rate the current level of political uncertainty for your company represented by the following major Swiss trading partners? Germany US France Italy UK China High Normal -54% Low uncertainty -37% Low -17% -12% -6% -1% -9% -8% -12% -1-5% -6 % 8% 8% % 36% 39% 49% 51% 60% 61% 71% Q Q High uncertainty These decreasing levels of uncertainty and risk are also reflected in company balance sheets. Following removal of the exchange rate floor in early 2015, the proportion of companies taking greater risk on to their balance sheet reached record levels and then fell. In Q2 2017, the majority of CFOs report a decrease in risk for the second successive quarter (a negative net balance). This, coupled with the improved economic prospects, may have contributed to a greater willingness to invest (see Chart 8). Chart 13. Level of financial risk How has the level of financial risk on your balance sheet changed over the past 12 months? (net balance) Increased Decreased 20% 0% -20% - -10% -9% -60%

8 Risks and monetary policy As in previous quarters, Swiss CFOs are primarily concerned about geopolitical risks and the strength of the Swiss Franc, but there has been a shift in their concerns about other risks. A year ago CFOs were concerned about economic and monetary risks, whereas now they more focused on internal corporate risks such as operating margins (For a full list of the reported risks, see the Additional charts in the Appendix.) This shift in focus is the result of an improving economic outlook for Switzerland and its major trading partners as well as ongoing adaptation to external risks. There has also been a marked increase in the perception of digitalisation as a risk, with CFOs citing both the challenges of new, digital business models and cyber security. Chart 14. Risks What do you see as the greatest internal and/or external risks to your company over the next 12 months? (up to three responses possible) Bigger risk Smaller risk Q Q Q Q Geopolitical risks Strength of the Swiss Franc Internal company problems Digitalisation/technical change Domestic demand Monetary policy/interest rates Following moves in the US to increase interest rates, the European Central Bank has now taken initial, if minimal, steps towards ending quantitative easing. Against this backdrop, when might Switzerland increase its interest rates? Most CFOs expect rates to happen relatively soon in 2018 or 2019 but their expectations for the timescale have shifted since Q4 2015, when this question was last asked. Then, just 17% of Swiss CFOs expected a return to positive interest rates in three years or so. Now almost twice as many (30%) believe this will be the case. In the current climate, any interest rate increase in Switzerland would have to follow an increase in the eurozone, so expectations seem to have risen that this is still considerably in the future. Chart 15. Interest rate expectations When do you expect key interest rates to increase in Switzerland? 45% 34% Within next 2 years Q % 36% Within 2-3 years Q % 15% Within 3-4 years 10% 15% Later than that CFOs assessment of the impact of negative interest rates has remained largely unchanged over the last 12 months. Most continue to report that their company is negatively affected, although the majority (47%) is now slightly smaller than in Q2 2016, when the question was last asked. Slightly more CFOs now report that either their company is not affected (4) or that the impact has been positive, although at just 10%, this is by far the smallest group. Chart 16. Impact of negative interest rates Is your company currently affected by the impact of negative interest rates on deposits or borrowing? If so, is this impact positive or negative overall? 39% 44% 54% 46% 7% 10% Not affected Positively affected Negatively affected 8 Q Q2 2017

9 Appendix: Additional charts Risk represented by trading partners How do you currently rate the level of political uncertainty for your company represented by the following major Swiss trading partners? Risks What do you see as the greatest internal or exeternal risks to your company over the next 12 months? (up to three responses possible) Germany US France Italy UK China 8% 29% 71% 2 45% 39% 61% 19% 56% High Normal 54% 9% 14% 1% 15% 17% 14% 39% 8% 14% 17% 5% 16% 6% 20% Low Not relevant Rank Q Rank Q Risk factor 1 1 Geopolitical risks 2 2 Strength of the Swiss Franc 3 4 Internal company problems 4 11 Digitalisation/technical change 5 5 Regulation 6 3 Pressure on margins and prices 7 10 Skills shortage 8 9 Pressure from competitors 9 8 Foreign demand 10 7 Monetary policy/interest rates 11 6 Domestic demand Problems in the financial system Raw materials prices Trade barriers Swiss tax policy Inflation expectations What inflation rate do you expect in two years time as measured against the Swiss Consumer Price Index? Cost and availability of credit How would you rate the current overall cost and availability of new credit for corporates? (net balance) 2.5% 2.0% 1.5% 1.0% 1.1% 1.1% Credit is cheap / available 80% 60% 57% 54% 50% 4 0.5% 20% 0.0% Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q Credit is costly / hard to get 0% -20% Credit cost Credit availibility 9

10 Macroeconomic context The growth forecast issued by the Swiss State Secretariat for Economic Affairs (SECO) remains positive although the figure has recently been revised downwards. SECO currently expects GDP to grow by 1.4% in 2017 and by 1.9% in Economic growth continues to be bolstered by exports, not least because forecasts for global growth are positive. Chart 17. Prospects for the Swiss economy remain positive GDP growth compared with preceding year 15% 10% 5% Exports 0-5% -10% p 2018p Investments Consumer spending -15% Source: SECO The trend since 2016 has been marked: while indicators appear to be heading in the right direction in continental Europe, the opposite is true in the UK and the US. There have been unpleasant surprises in both countries, particularly in the political area (for example, questions over market access following Brexit), and these are having an impact on potential growth. Nevertheless, commentators widely assume that there will be positive growth in the world s three largest economic blocs the US, the eurozone and China as well as as well as the global economy overall. Chart 18. Recovery in the global economy GDP growth compared with preceding year 15% 10% 5% 0-5% Forecast -10% China World US Eurozone Source: IMF There seems no doubt that interest rates are headed upwards in the US, but the Federal Reserve recently took the controversial decision to increase rates further, is keen to reduce its own balance sheet, and is considering a higher target inflation rate to create more leeway during the next recession. A similar move still seems to be some considerable way off in Switzerland. Chart 19. Higher interest rates in the US Key interest rates 7% 6% 5% 4% 2% 1% 0-1% EСB SNB FED Bank of England Source: Swiss National Bank

11 However, inflation has made a return to Switzerland: the rate of price increase has been positive since the beginning of the year. The Swiss National Bank now forecasts inflation of 0. in 2017 and 2018, and 1.0% in Chart 20. Inflation returns to Switzerland Consumer price inflation, year on year 1.5% 1.0% 0.5% 0% -0.5% -1.0% -1.5% Source: Swiss National Bank (May 2017) Political risks are at the forefront of everyone s mind at the moment and rightly so but what people often forget is that the economic outlook has improved markedly, both for the global economy and for Switzerland s major trading partners. Despite dramatic headlines and sometimes unfavourable circumstances, we can therefore expect Switzerland s economic recovery to be sustained. Dr. Michael Grampp Chief Economist and Head of Research 11

12 2012 Q2 results July 2012 Switzerland Audit. Tax. Consulting. Corporate Finance. Q Results July 2014 Switzerland Audit. Tax. Consulting. Corporate Finance Q2 Results July 2011 Switzerland Q results July 2013 Switzerland Audit. Tax. Consulting. Corporate Finance. Q Results July 2015 Switzerland Audit. Tax. Consulting. Financial Advisory. The Deloitte CFO Survey Optimistic summer About the Deloitte CFO Survey The Deloitte CFO Survey gauges the attitudes of Chief Financial Officers and Group Financial Directors of major companies in Switzerland towards the outlook for business, financing, risks and strategies, and is designed to identify trends and key themes in the Swiss corporate sector. The Swiss CFO Survey is the only survey of its kind in Switzerland and has been conducted quarterly since Q The 32nd quarterly survey, the Summer 2017 CFO Survey, was conducted between 29 May and 26 June A total of 101 CFOs took part, representing listed companies as well as privately owned firms from every major sector of the Swiss economy. The Deloitte CFO Survey Risk up, optimism down The Deloitte CFO Survey is written and produced by Dr. Michael Grampp, Chief Economist, and Dennis Brandes, Senior Economic Analyst, Deloitte Research. Audit. Tax. Consulting. Corporate Finance. A note on the methodology Some of the charts in the Survey show results as an index value (net balance). This is calculated by subtracting the percentage of respondents giving a negative response from the percentage giving a positive response; responses that are neither negative nor positive are deemed to be neutral. Because of rounding, percentages may not add up to 100. To improve readability, only questions related to the current financial and economic situation have been included in the published Survey. If you would like to receive information about unreported questions, please contact us. The Deloitte CFO Survey Uncertainty dominates The Deloitte CFO Survey Recovery continues The Deloitte CFO Survey Sustained optimism despite increasing risks The Deloitte CFO Survey The rocky road to recovery The Deloitte CFO Survey External environment dominates CFOs concerns Summer

13 Contacts and authors Contacts Jamie Schmidt Partner Audit Jan-Dominik Remmen Partner Financial Advisory Authors Dr. Michael Grampp Chief Economist and Head of Research Follow me on Dennis Brandes Senior Economic Analyst Markus Zorn Director Finance Transformation Consulting Acknowledgement We would like to thank all participating CFOs for their support in completing the Survey. The Deloitte CFO Survey is supported by the CFO Forum Schweiz, the independent association of Chief Financial Officers in Switzerland. Participating in our Survey and accessing previous surveys If you would like to take part in our Survey or would like to receive further copies of this report, please contact us at You can find all the survey results since Q on our website at 13

14 Notes Abb. 18. Zukünftige Relevanz von digitalen Technologien V2 Wie beurteilen Sie die zukünftige Relevanz der folgenden digitalen Technologien für Ihre Finanzfunktion? Blockchain 30% 39% 31% Robotic Process Automation 4 31% 27% Cognitive Computing 31% 49% 19% In Memory Computing 41% 45% 14% Cloud Computing 71% 18% 11% Specific business apps 72% 2 5% Hoch Normal Niedrig Hoch Normal Niedrig Abb. 19. Heutiger Einsatz digitaler Technologien V2 Wie ist der aktuelle Arbeitsstand in Bezug auf die zukünftige Nutzung digitaler Technologien innerhalb der Finanzfunktion? Blockchain 1% 4% 35% 54% Robotic Process Automation 9% 1% 5% 3 50% Cognitive Computing 6% 2% 4% 38% 48% In Memory Computing 10% 4% 6% 32% 45% Cloud Computing 12% 4% 12% 30% 30% 1 Specific business apps 16% 11% 1 27% 2 10% Planungsphase Pilotphase Implementierungsphase Betriebsphase Wichtigkeit erkannt, aber noch nichts unternommen Nicht relevant Planungsphase Pilotphase Implementierungsphase Betriebsphase Wichtigkeit erkannt, aber noch nichts unternommen Nicht relevant 14

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