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Video Introduction

Executive Summary

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

The spring 2016 CFO Survey reveals that large Swedish companies remain in good shape. However the Swedish CFO index fell for the first time in 1½ years, albeit rather marginal to 55.3 from 55.9 in the 2015 fall survey. All four sub-indices − business climate, financial position, lending willingness and counterparty default risk − came in lower. It is evident that the increased CFO worries identified in previous surveys are starting to materialise, since there are signs that global macroeconomic concerns are gradually imposing real effects on some of these companies’ performance. In the current survey, CFOs still note growth expectations but on a more moderate level and order bookings (“intake”) are a major concern. We also see a greater divergence between sectors; more domestic-oriented sectors such as consumer business and transport as well as real estate generally have a more positive outlook, especially compared to manufacturing companies with a global presence and financial services with their heavy regulatory agenda and a digitisation trend that is putting pressure on business models and pricing power.

Among corporate priorities, it is clear that more than previously, CFOs prefer to “wait and see” and not to engage in change activities until the situation becomes clearer. Notably, there is still more to do within “reducing costs” and then specifically within “process efficiency improvements” – likely areas that are perceived as owned by the company and thus easier to control than other areas.

Compared to the fall 2015 survey, the M&A outlook is less aggressive, lending willingness has fallen and excess cash will be used to pay down debt to a larger extent – despite strong balance sheets and record-low interest rates.

To sum up, it is evident that Swedish CFOs are increasingly worried about the future, but in comparison with their peers elsewhere in Europe, external financial and economic uncertainty is still perceived as much lower.

Please send us your feedback together with any suggestions for improvement 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)

CFOs priorities among cost reduction activities It is fairly clear that “process efficiency improvements” are the number one cost reducing activity among the CFOs. Process efficiency improvements are of course interconnected to the other alternatives, as steps in this direction often begin with layoffs or reduction of overhead costs. A vast majority of the participating CFOs view process efficiency improvements as the most important cost-cutting area. This is also an area which is under the direct control of the company, which is why it might tend to be the most attractive alternative. Process efficiency improvements Material/input cost Overhead cost Labor cost Financing cost
CFOs view on what would have the most negative impact on current M&A activity Increased target company valuations is the most often picked alternative, which is expected since higher transaction prices increase the risk for the acquiring party. It might also be connected to the fact that CFOs view current valuations as already high. This has been underscored by stronger stock market valuations in recent months, although they fell around year-end 2015. A weaker economy and lack of attractive targets are tied as the second most often picked alternatives, whereas more expensive funding is the least often picked alternative. This indicates that access to capital is not viewed as a major hurdle, which is consistent with the companies’ view of their financial position and the lending attitudes of financial institutions.
7%   22%   37%   13%   22%
More
expensive
funding
  Lack of
attractive
target
companies
  Increasing
target
company
valuations
  Geopolitical
uncertainty
  Weaker
economy
More expensive funding 7%
Lack of attractive target companies22%
Increasing target company valuations 37%
Geopolitical uncertainty 13%
Weaker economy 22%
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Business conditions and outlook

BUSINESS OUTLOOK AND FINANCIAL POSITION Business conditions deteriorated for the first time in 1½ years. The large discrepancies between companies observed in the previous survey widened but are explained by differences’ between sectors. The CFOs’ confidence in their financial position is still generally positive but has retreated somewhat, as worries mentioned in the previous survey now generally spill over into less favourable views.
PROSPECTS AND CONCERNS Geopolitical and macroeconomic concerns have increased, whereas the high level of uncertainty is tending to result in decreasing preferences for expansion strategies. Reducing cost, with a clear focus on process efficiency improvements, continues to dominate as the top priority for CFOs during the coming 12 months.
FINANCING AND RISK CFOs of large corporations generally continue to perceive a favourable lending attitude from financial institutions, though there is a few more seeing an unfavourable attitude. This goes hand in hand with a skew among CFOs towards viewing external uncertainty to be higher than usual and a majority not regarding this as a good time to add risk to the balance sheet. When ranking sources of external financing, bank borrowing is by far the most attractive in the eyes of Swedish CFOs – just as for their EU counterparts.
STRATEGIC OPPORTUNITIES In an uncertain economic environment, paying down debt seems more rational than an appetite for increased investments.
Fall 2015 Spring 2016
Increasing cash flow as a corporate priority for the coming year 52   37
Business conditions 37   38
Financial position 60   45
Unchanged number of employees 58   57
Fall 2015 Spring 2016
Lending attitude 72   70
M&A activity 43   28
Probability of counterparties default 80   78
Investments in Sweden 34   28
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 March 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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