The Deloitte/SEB CFO SurveyThe Deloitte/SEB CFO Survey | 3 Summary The biannual Deloitte SEB CFO survey draws a picture of Finnish companies’ short-term intentions that is more ·

The Deloitte/SEB CFO SurveySpring 2016

The Deloitte/SEB CFO Survey | 2

The Deloitte/SEB CFO SurveySpring 2016 The Deloitte/SEB CFO Survey

We are excited to present the spring 2016 results of the new Deloitte/SEB CFO Survey. The report uniquely combines perspectives from CFOs within large and midsized companies in Finland with viewpoints from SEB’s Nordic Outlook, the 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 1,400 CFOs in 17 European countries.

Tuomo Salmi CFO Program Leader Deloitte

Mari Lappalainen Finance Leader Deloitte

Ville Lähde Financial Strategy SEB

Views were gathered from over 1,400 CFOs in 17 European countries

Spring 2016


Summary

The biannual Deloitte SEB CFO survey draws a picture of Finnish companies’ short-term intentions that is more courageous and optimistic than the spirited debate around the competitiveness of Finnish economy might suggest. The survey data from Finnish chief financial officers aggregates a sentiment that companies based in Finland are increasingly willing to hire more employees (24% hiring more) and continue to make strategic investments at an equal level both in Finland (20%) and abroad (21%). The survey suggests that the willingness to make investments will be translated into action, as 33% of the Finnish CFOs are pushing for more capital expenditure, leading to an increase from the 20% figure in half a year.

The CFO survey – functioning as a barometer of corporates’ sentiment and strategies in 17 European countries including Finland’s most important trade partners – indicates that Finnish CFOs are “The Hopefuls”. They stand out as some of the most optimistic ones in surveyed countries. The financial prospects of Finnish companies have remained in the top-tier every spring since 2014. The spring of 2016 is no exception, as the optimism surpasses that of Germany, Italy, UK and Netherlands, among many others. However, the survey results from Finland are below Sweden and Ireland, who are also among the countries that will be able to reap the benefits from the possibly forthcoming TTIP treaty.

Hiring on the rise

The change for better will be slow in Finland, as the growth of the global economy remains uncertain. The sample companies in Finland are mostly relying steady, yet slow, organic growth (71% list organic growth as the highest priority) and this growth relies on the development of the Finnish and Nordic economies (the primary growth market for 55% of the companies). Furthermore, this spring is not seen as a great moment for taking more risks on companies’ balance sheets according to 64% of Finnish CFOs.

Altogether, the barometer indicates that, although the optimism is high and the financial performance is improving (capital expenditure, operating margins and revenues are incrementally increasing), the high level of uncertainty is forcing companies to continue to push initiatives that are mostly defensive in nature. Companies are controlling their costs and focusing on the Nordic markets, which are the most familiar to them. According to the findings, the fatigue of the Finnish economy will continue, although the push for economic reform at the government level and the change in the global economic climate can quickly turn the tide as companies are willing to invest and hire.

Companies are controlling their costs and focusing on the Nordic markets, which are the most familiar to them.


Summary


SummaryHiring on the rise

Impacts of the TTIP treaty:

• Only 21% of the respondents’ companies in Finland will benefit from the Transatlantic Trade and Investment Partnership (TTIP), making the fourth lowest in the surveyed European Union countries, trailed only by the Netherlands, France and Poland.

• Sweden ranks the highest. 42% will be positively impacted by the treaty, followed by Belgium at 37%, Portugal at 36%, Germany at 33% and Italy at 29%.

Optimism:

• CFOs in Finland remain hopeful about the future. 36% are optimistic about their financial position, continuing from the previous two spring surveys, 2014 and 2015.

• Finland is behind Sweden, where 62% are more optimistic than before.

• Finland notably surpasses Germany (19%), Italy (28%) and the United Kingdom (17%).

Investments:

• Strategic investments in Finland and abroad remain top priorities. 20% of companies are ready to make strategic investments in Finland and 21% abroad.

• Prioritizing financial investments in Finland is still dropping, now a priority for 2%. However, the willingness to invest is translating into action as 33% of the companies are increasing capital expenditure.

• Paying dividends to shareholders is increasing steadily, being the most preferred use of money for 12% of the companies.

Uncertainty:

• 56% of CFOs in Finland consider the level of uncertainty to be high. The greatest concerns are demand among 70% of Finnish companies and outlook of Finnish economy amongst 69%.

Other key findings:

For the first time in two years (since Q1/2014), Finnish companies have reached a break-even point in hiring. There are now more companies hiring more employees than there are companies cutting their workforce: 25% are expecting an increase in the number of employees while 17% are expecting a decrease.

Highlight:


Summary


Hot Topic

5%RU

30%IE

8%NO

21%FI

42%SE

18%NL

27%

TR

33%DE

13%FR

36%PT

23%ES

27%

AT

16%

PL

29%

IT

14%

CH

37%

BE

Chart 1. How would your company be impacted by the formation of a Transatlantic Trade and Investment Partnership (TTIP) between the EU and US?

This spring, we asked CFOs how they thought the Translantic Trade and Investment Partnership between the US and the EU would impact their business. CFOs in Sweden are most enthusiastic about the potential deal, with 42% saying they would stand to benefit from TTIP. Correspondingly, in Finland only 21% of CFOs said they would benefit from the deal.

The biggest disadvantages are seen in Russia and Turkey – countries that lie outside the EU and would thus not be part of the treaty.

Percentage of companies saying they would benefit from TTIP


Hot Topic

Lack of enthusiasm


Business Confidence

-4%RU

-15%UK

39%IE

-26%NO

24%FI

50%SE

6%NL

10%

TR

0%DE

-19%FR

-1%PT

33%ES

-6%

AT

21%

PL

20%

IT

10%

CH

8%

BEChart 2. Compared to three/six* months ago, how do you feel about the financial prospects for your company?

A net balance of +2% of CFOs are more optimistic about the financial prospects for their businesses compared to six months ago. Eurozone countries are once again more optimistic than their non-euro peers.

*In Finland, Norway, Spain and Sweden, the question specified a six-month period.

Net optimism (difference between optimistic and less optimistic)

Financial prospects


Business Confidence


Foreign competition

Country risk Russia

Cost of raw material/commodities 24% (15%)

Cost of labour

Outlook of Finnish economy and competitiveness 69% (61%)

Prospects & Concerns

Demand

Chart 3. What are the greatest concerns for your company in 2016?

In the recent surveys, the greatest overall concern in Finland has consistently been anxiety concerning demand. Now the concern for demand has become equally rivaled by concerns regarding the outlook and competitiveness of the Finnish economy.

(In brackets results from The Deloitte/SEB CFO Survey Fall 2015)

70% (69%)

41% (35%)

21% (29%)

15% (36%)

Greatest concerns




Financial investment in Finland

Financial investment abroad

Dividend to shareholders 12% (10%)

Pay down debt

Strategic investment in Finland 20% (22%)


Strategic investment abroad

Chart 4. Assume a current cash surplus position. How would you prefer to use the money in the next 6 months?

In a current cash surplus position, Finnish CFOs have become more willing to distribute the excess money to shareholders. However, strategic investments still remain the most preferred way to use money in a cash surplus position: 20% of the CFOs would mostly prefer strategic investments in Finland and 21% would prefer strategic investments abroad.

(In brackets results from The Deloitte/SEB CFO Survey Fall 2015)

21% (21%)

16% (10%)

4% (2%)

2% (4%)

Most preferred way to use money





37%RU

41%UK

61%IE

12%NO

44%FI

65%SE

28%NL

61%

TR

55%DE

30%FR

39%PT

65%ES

28%

AT

68%

PL

74%

IT

46%

CH

48%

BEChart 5. In your view, how are revenues for your company likely to change over the next 12 months?

Expectations for revenue growth have fallen marginally over the last six months. The proportion of CFOs who believe they will achieve revenue growth over the next 12 months has fallen 2 percentage points to 63% this quarter. In Finland altogether 60% of CFOs expect their revenues to increase over the next 12 months.

Net balance (difference between increase and decrease)

Revenues





21%RU

21%UK

19%IE

5%NO

38%FI

52%SE

6%NL

43%

TR

2%DE

3%FR

7%PT

39%ES

-13%

AT

28%

PL

69%

IT

-14%

CH

32%

BEChart 6. In your view, how are operating margins for your company likely to change over the next 12 months?

This quarter’s survey shows that margin pressure is a theme for CFOs in most countries. The outlook on margins has deteriorated in all but 5 of the 17 countries surveyed. In Finland altogether 51% of CFOs expect their operating margins to increase over the next 12 months.


Operating margins





11%RU

-18%UK

47%IE

6%NO

33%FI

3%SE

14%NL

21%

TR

22%DE

6%FR

12%PT

31%ES

49%

PL

55%

IT

10%

CH

34%

BEChart 7. In your view, how are capital expenditures for your company likely to change over the next 12 months?

There has been a softening of capital expenditure (capex) intentions in the last six months, with a 10 percentage point overall decline in capex appetite since Q3 2015. In Finland altogether 44% of CFOs expect their capital expenditure to increase over the next 12 months.


Capital expenditures





67%RU

83%UK

48%IE

-3%NO

49%FI

33%SE

69%NL

63%

TR

92%DE

48%FR

63%PT

59%ES

45%

PL

43%

IT

68%

CH

44%

BEChart 8. How would you rate the overall level of external financial and economic uncertainty facing your business?

Perceptions of external financial and economic uncertainty remain elevated among the CFOs across our panel. With the exception of those based in Norway, a majority of CFOs in each participating country report higher than normal levels of uncertainty.

Net balance (difference between high level of uncertainty and low level of uncertainty)

External financial and economic uncertainty

41%

AT




Expanding into new markets

Expanding by acquisition

Cost reduction 30%

Introducing new products/services

Cost control 67%


Organic growth

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 Finland and across Europe favour defensive business strategies over expansionary ones. In Finland, organic growth and cost control are the top two strategic priorities over the next 12 months.

71%

36%

27%

23%

Business strategies





14%

America

12%

Other EMEA

countries

55%

Nordics

2%

Russia

12%

Asia Pacific

5%

Other

Chart 10. During the next 12 months, in what region do you expect your company to have the best opportunities for growth?

Most of the CFOs in Finland are relying on the markets they are most acquainted with, such as the Nordic countries.

Best opportunities for growth





-5%RU

-11%UK

52%IE

-11%NO

8%FI

3%SE

-3%NL

18%

TR

13%DE

10%FR

3%PT

28%ES

-6%

AT

21%

PL

37%

IT

11%

CH

28%

BEChart 11. In your view, how is the number of employees in your company likely to change over the next 12 months?

European CFOs are relatively optimistic about the employment outlook in their businesses. When asked about the potential change in the number of employees in their business over the next 12 months, 34% of CFOs on average expect an increase while 24% expect a decrease. The biggest layoffs will most likely be seen in Norway, where 37% of CFOs expect the number of employees to decline.


Number of employees




Finance

-10%RU

83%UK

7%IE

59%NO

36%FI

72%SE

65%NL

2%

TR

65%DE

68%FR

42%PT

76%ES

63%

AT

54%

PL

21%

IT

54%

CH

79%

BEChart 12. How do you currently rate bank borrowing as a source of external funding for companies?

Bank borrowing remains the most popular form of financing for CFOs throughout Europe. Across our cohort, it is viewed favourably by 67% of CFOs and unfavourably by just 12%. In Finland bank borrowing is viewed attractive by 57% of CFOs.

Net balance (difference between attractive and unattractive)

Bank borrowing


Finance


Finance

-12%RU

59%UK

7%IE

-30%NO

41%FI

21%SE

3%NL

-27%

TR

21%DE

45%FR

31%PT

38%ES

18%

AT

17%

PL

-38%

IT

25%

CH

65%

BEChart 13. How do you currently rate corporate debt as a source of external funding for companies?

CFOs report that corporate debt is a less attractive form of financing than it was six months ago. This is largely reflected by strong declines in the attractiveness of corporate debt in Europe’s larger economies, such as the Netherlands, Germany, and the UK. In Finland corporate debt is viewed attractive by 52% of CFOs.


Corporate debt


Finance


Finance

-32%RU

-4%UK

7%IE

16%NO

0%FI

-3%SE

-9%NL

31%

TR

-5%DE

-19%FR

9%PT

1%ES

-4%

AT

7%

PL

-50%

IT

-14%

CH

15%

BEChart 14. How do you currently rate equity as a source of external funding for companies?

Across Europe, equity issuance is generally not viewed as an attractive source of funding for companies (-11% net balance), with CFOs in 9 out of the 17 countries surveyed viewing it negatively. In Finland equity is viewed attractive by 27% of CFOs.


Equity


Finance


Finance

70%RU

54%IE

14%FI

26%SE

31%

TR

54%DE

42%FR

48%PT

38%ES

57%

AT

25%

PL

-2%

IT

52%

CH

42%

BEChart 15. How do you currently rate internal financing as a source of funding for companies?

Raising funds internally is generally viewed as an attractive form of financing for CFOs across Europe, with a GDP-weighted average of 51% of CFOs considering it attractive. However in Finland internal financing is viewed attractive only by 36% of CFOs.


Internal financing


Finance


Finance

Chart 16. How is the lending attitude of financial institutions toward your company perceived?

In Finland, the lending attitudes of financial institutions towards companies have taken a slight negative turn according to the CFOs. In general, larger companies seem to enjoy good access to financing, while smaller ones have more difficulties.

67%

20%

Favourable Average

13%

Unfavourable

Lending attitude


Finance


Finance

-40%RU

-50%UK

-23%IE

-55%NO

-29%FI

-22%SE

-50%NL

-88%

TR

-68%DE

-42%FR

-70%PT

-8%ES

-64%

AT

-56%

PL

18%

IT

-58%

CH

-25%

BEChart 17. Is this a good time to be taking greater risk onto your balance sheet?

71% of European CFOs do not believe it is currently the right time to take greater risk onto their balance sheets. On a GDP-weighted basis, risk appetite has fallen 9 percentage points in the last six months. In Finland, over 60% of CFOs felt that it is not a good time to be taking greater risks on their balance sheets.

Net balance (difference between yes and no)

Taking risks


Finance


Finance

Chart 18. Over the next 12 months, how do you expect levels of corporate acquisitions and divestments in Finland to change?

The M&A-market is expected to stay active and should continue to grow. Over 60% of Finnish CFOs expect the activity increase within the next 12 months.

63%

21%

Increase No change

9%

Decrease

Corporate acquisitions and divestments


Finance


Macroeconomic ContextIndexed GDP development

Chart 19. Finland’s GDP growth is lagging behind the eurozone, Germany and Sweden. Compared to others with improving trend, Finland has gone sideways.

Index 100 = 2008/Q1Source: Macrobond

120

100

Germany

Sweden

Eurozone

Finland

20152014201320122011201020092008

90

110


Macroeconomic Context


Macroeconomic ContextYearly GDP growth estimates

Chart 20. Growth in Finland is recovering but still far behind its main trade partners and the eurozone.

Yearly change in per centSource: Macrobond

-0,5

0,0

0,5

1,0

2,0

3,0

4,0

EurozoneGermanySwedenFinland

2017

2014

2016

2015




Macroeconomic ContextUnemployment rate, Aged 15–74, seasonally adjusted

Chart 21. The unemployment rate in Finland peaked later compared to others and the improvement has been only modest so far.

Per cent, thousandsSource: Macrobond

3

6

9

12

15

2016201520142013201220112010200920082007

Germany

Sweden

Eurozone

Finland




About the Survey

This is the first-quarter edition survey of Chief Financial Officers and Groups Finance Directors in Finland. The survey is carried out as a web-based questionnaire. 45 CFOs participated, including a good mix of privately held and publicly listed medium, large, and multinational companies across a broad range of industries. 76% of respondents are from companies that have an annual turnover of more than 100 million euros.

Just like last fall, the CFO Survey was conducted simultaneously in other European countries. The European CFO Survey gathered opinions of over 1,400 CFOs in 17 European countries.

Writers & Contributors

The survey was produced by Tuomo Salmi, Partner, CFO Program Leader, Deloitte; Mari Lappalainen, Director, Finance Leader, Deloitte; and Ville Lähde, Financial Strategy, SEB.

The survey was written by Juha Lintula, Deloitte; Mari Nikitin, Deloitte and Ville Lähde, SEB. Graphic design by Kristina Jalonen, Deloitte.

Please visit www.deloitte.fi, www.deloitteresearchemea.com or www.sebgroup.com for the latest and past copies of the survey and other publications.

Contacts

Tuomo [email protected]

Mari [email protected]

Ville Lä[email protected]


About the Survey

www.deloitte.fi

www.deloitteresearchemea.com

www.sebgroup.com

About DeloitteDeloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. Witha globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities andhigh-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s morethan 200,000 professionals are committed to becoming the standard of excellence. In Finland, Deloitte is among the nation’s leadingprofessional services firms, providing audit, tax, consulting, and financial advisory services through more than 400 people in four 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 www.deloitte.fi.

About SEBSEB is a leading Nordic financial services group. As a relationship bank, SEB in Sweden and the Baltic countries offers financial advice anda wide range of financial services. In Denmark, Finland, Norway and Germany, the bank’s operations have a strong focus on corporateand investment banking based on a full-service offering to corporate and institutional clients. The international nature of SEB’s businessis reflected in its presence in some 20 countries worldwide. The Group has about 16,000 employees. For more information, please visitwww.sebgroup.com.

© 2016 Deloitte & Touche Oy. Group of Companies

Documents

The Deloitte/SEB CFO SurveyThe Deloitte/SEB CFO Survey | 3 Summary The biannual Deloitte SEB CFO survey draws a picture of Finnish companies’ short-term intentions that is more ·