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Video Introduction

Executive Summary

We are excited to present the fall 2016 results of the Deloitte/SEB CFO Survey and hope that you find our accompanying analysis both stimulating and valuable.

The fall 2016 CFO Survey reveals a more negative sentiment than before at large Swedish companies. The overall CFO index fell for the second time in a row from 55.3 per cent in spring 2016 down to 54.1. This is the lowest level since spring 2013, although still indicating expansion (index above 50). Unlike in the spring survey, when all four sub-indices fell, in the current survey business climate and financial position continued falling while lending willingness and counterparty risk showed improved values. The largest drop of all areas relates to financial position, where the percentage of CFOs who deem their company’s financial position as very favourable or favourable is down 28 points to 44 per cent, compared to one year ago. It is clear to us that CFOs take into account more unstable markets and weaker demand when valuing their own company’s balance sheet and funds needed for the future, since key indicators such as equity ratio or level of external debt have generally not changed significantly. Also an increasing number of CFOs say it is not a good time to take on additional risks in their balance sheet.

The divergence between sectors is still evident, meaning domestically focused companies are more optimistic than internationally focused companies. Real estate generally continues to stand out as the most optimistic sector, but CFOs in consumer-oriented businesses report increased worries about margin pressures.

Order intake (bookings) remains the main concern among CFOs, closely followed by macro/politically related factors. While one theme among CFOs in the spring survey was “wait and see”, they now show slightly more activity within their corporate priorities. CFOs remain cautious about the future, but some activities such as reducing costs – and surprisingly in a weak market – introducing new products and services are both rated as more attractive to pursue than six months ago.

In the previous survey, there was a clear indication that the level of merger and acquisition (M&A) activity was expected to stabilise over the next twelve months. In the fall 2016 survey, the number of CFOs who believe there will be a somewhat increased level of activity has risen significantly, which partly contradicts their unwillingness to take on further risks in the balance sheet. In the current survey we asked the CFOs to elaborate on how they view the impact from increased digitisation on their role and organisation. From the CFOs’ responses, we see a clear tendency towards the belief that increased digitisation will generally lead to process efficiency gains as well as an opportunity to replace transactional tasks within their CFO office to value-adding ones. This is acknowledged in all sectors.

We also asked CFOs how the Brexit negotiations between EU and the UK will impact their business. A large majority of respondents expect no or only a slightly negative impact. The primary concern is for increased complexity and costs due to introduction of of different regulatory requirements.

To sum up, although Swedish CFOs are still among the most optimstic in the EU, they have become increasingly worried about what the near future may bring.

Please send us your feedback, including any suggestions for improvements, to help us ensure that the Deloitte/SEB CFO survey remains an essential resource for your work.

Henrik Nilsson
Partner
Audit, Deloitte
henilsson@deloitte.se

Karl Steiner
Senior Strategist
Research & Strategy, SEB
karl.steiner@seb.se

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Hot Topics (Selection)

How is the CFO role/finance organisation affected in an environment of increasing digitisation? It is a clear tendency towards expectations among CFOs that increased digitisation will lead to process efficiency gains as well as an opportunity to shift from transactional tasks to value-adding ones. This is acknowledged within all sectors.
When it comes to the potential impact on their business model, CFOs in the Consumer business sector and the Real estate sector tend to view this as more of a game changer than those in the manufacturing sector and the other sectors such as financial services. The requirement of a different skillset in the finance function is viewed as important but with less clarity among the CFOs. With regard to the (broad) question about the general impact on the CFO role, there is a general agreement that their role will definitely be impacted.
Expectation of how the Brexit negotiations between the EU27 and the UK will impact CFO’s business: The most common expectation among the companies (46%) was that there would not be an impact on their business. If an impact was expected, there was a large tilt to the negative side (36%), while no one saw a very positive impact and only 4% a somewhat positive impact.
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Business conditions and outlook

BUSINESS OUTLOOK AND FINANCIAL POSITION Business conditions deteriorated once again, though the change was modest. Contrary to the two prior surveys, this one showed a pull toward the middle – with both fewer companies expecting favourable and fewer expecting unfavourable business conditions. The financial position index fell the most of all four indices and is at a historical low. However, we believe that is more a result of increased uncertainty and thus demand for larger financial flexibility than an actual major deterioration in financial ratios.
PROSPECTS AND CONCERNS Geopolitical and macroeconomic concerns reveal continued negative sentiment among CFOs. However, the waiting game seems to be partly over, as more clear actions emerge regarding corporate priorities.
FINANCING AND RISK The attitude towards lending to major Swedish companies remains favourable, and the risk of counterparty default has decreased somewhat. Companies still favour bank loans, while the attractiveness of corporate bonds has decreased. More companies than previously view external uncertainty as high, and even fewer than previously view this as a good time to take on further risk in their balance sheets.
STRATEGIC OPPORTUNITIES Deleveraging by paying down debt seems rational in an environment with negative repo rates and moderate growth expectations.
Spring 2016 Fall 2016
Increasing cash flow as a corporate priority for the coming year 37   44
Financial position 45   40
Unchanged number of employees 57   56
Spring 2016 Fall 2016
Lending attitude 70   73
M&A activity 28   40
Probability of counterparties default 78   75
Investments in Sweden 28   32
Hover the text above for more information on each area.
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Download the report

CFO Survey We are proud to present our CFO Survey website in Sweden, an initiative of the Deloitte CFO Program. This website provides a snapshot of the key findings from the Survey. We hope that it will provide insights into changes over time in CFOs' attitudes to risk, financing and M&A, and reports trends and turning points for you and your business. Download the pfd to read the full survey.

Download the report >

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About the Survey

The CFOs who responded represent a selection of the 200 largest companies in Sweden across industries. The survey was carried out as a web-based questionnaire in September 2016. Given the broad range of industries and organisations that responded, the trends observed and conclusions made are considered representative of the wider Swedish CFO community.

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