Outlook Determining the Euro Size

Transcription

1 onditions remain tough with decreasing optimism going forward The Deloitte/SEB FO Survey Fall 2012 results

2 ontents Introduction 3 Good resilience, but economic slowdown also likely in Hot topic - Outlook on the Euro situation 6 Business conditions and outlook 7 Prospects and concerns 8 Financing 9 Strategic opportunities 10 An international outlook - Uncertainty takes its toll on optimism 11 ontacts 12 2

3 Welcome to the new edition of the Deloitte/SEB FO Survey! We are excited to present the fall 2012 results of the Deloitte/SEB FO Survey. In this edition we have included a hot topic relating to the potential situation where the Euro ceases to exist in its present form and explored FOs actions and precautions in this matter. We sincerely hope that you find the analysis insightful as well as thought-provoking. Please share your thoughts and comments on how we can continuously improve our efforts so that the Deloitte/SEB FO Survey can be an essential resource for your daily work. Andreas Marcetic Partner Financial Advisory, Deloitte amarcetic@deloitte.se Johan Lindgren redit Strategist redit Strategy, Trading Strategy, SEB johan.y.lindgren@seb.se 3

4 Good resilience, but economic slowdown also likely in 2013 The Swedish economy is resisting the euro zone crisis relatively well but a weak international development is putting production and exports under pressure. Due to the very strong preliminary GDP figure for the second quarter, SEB:s growth forecast has been revised upward to 1.3 per cent for Since other and more recent indicators do not fully support such a strong development, the forecast takes into account a partial reversal during the second half of The overall Deloitte/SEB index supports the view of a weakening economy with a drop to 48.3 in September compared to 50.5 in February. The ever-widening economic downturn in Europe and the deceleration in emerging market countries contribute to only a slight improvement to 1.5 per cent GDP-growth in During 2014 growth will be somewhat faster and we expect GDP to grow by 2.5 per cent. Swedish FO Index 65 Indexvärde Sep -06 Feb -07 Aug -07 Feb -08 Sep -08 Feb -09 Sep -09 Feb -10 Aug -10 Feb -11 Aug -11 Feb -12 Sep -12 The Swedish FO index for September 2012 has a value of 48.3, which reflects slightly negative expectations. The index is based on four components; business conditions, financial position, lending willingness and counterparty default risk. The four components are ranked 42, 52, 55 and 44 respectively. Manufactureres have lowered production Despite Affärsklimat rising GDP in Sweden, manufacturing activity Business decelerated climatenoticeably during the first half of Both merchandise exports and industrial production fell compared to the second half of The Deloitte/SEB FO survey index has dropped 70 to below 50 and indicators for the manufacturing industry, such as PMI and NIER:s Business onfidence Indicator, has also fallen lately. This suggests 65 that manufacturing is moving sideways or falling 60 slightly while the domestic economy is growing at sub-trend rate. 55 SEB:s main scenario is that Swedish exports will benefit 50 from relatively robust demand in major northern European export markets but recent signs 45 are pointing at a more marked slowdown. Looking ahead, however, the stronger krona will lead to a further slowdown in Swedish exports. According to historical estimates, a 10 per cent krona appreciation leads to per cent lower exports, with a lag of about one year. Krona appreciation will slow export growth by 1-2 percentage points during 2012 and Service exports have performed more strongly than expected, but it is unusual for merchandise and service exports to move in completely different directions. Service exports are expected to slow during the second half of SEB expects that overall exports will increase by 1 per cent this year, followed by a modest recovery to 3 per cent in 2013 and 4 per cent in

5 Business climate Somewhat tighter financial position 55 Actions by central banks have been instrumental 50 during the last years to provide liquidity and to reduce 45 uncertainty. In our survey, there is a continued 40 drop in financial officers' perception of their financial 35 position. The survey also indicates that the 30 situation for companies differ with an increasing number of companies saying that the situation is t so at the same time as there are more respondents stating that the situation is or Favourable. Financial position 70 Finansiell ställning Financial position Sep -06 Feb -07 Aug -07 Feb -08 Sep -08 Feb -09 Sep -09 Feb -10 Aug -10 Feb -11 Aug -11 Feb -12 Sep Gradual weakening in the labour market Like growth, the labour market has provided upside surprises lately. The jobless rate has been around 7.5 per cent since mid In the Deloitte/SEB Survey there are more companies stating that they will decrease employment compared to the February survey. Other short-term indicators such as newly registered vacancies and lay-off notices have gradually continued 35 to weaken, but their levels signal continued job growth for the next 3-4 months. Unemployment will eventually climb slightly and that job creation will fall a bit. Our previous forecast that unemployment will climb to about 8 per cent is intact, though we now expect the upturn to begin late in Business conditions Affärsklimat Business climate Sep -06 Feb -07 Aug -07 Feb -08 Sep -08 Feb -09 Sep -09 Feb -10 Aug -10 Feb -11 Aug -11 Feb -12 Sep -12 Deloitte/SEB inde Sep -06 Feb -07 Aug -07 Feb -08 Sep -08 Feb -09 Sep -09 Feb -10 Aug -10 Feb -11 Aug -11 Feb -12 Sep Sep -06 Feb -07 Aug -07 Feb -08 Sep -08 Feb -09 Sep -09 Feb -10 Aug -10 Feb -11 Aug -11 Mixed capital spending signals Due to weaker economic conditions, industrial companies continue to cut back on their capital spending plans. According to the latest survey from Statistics Sweden (SB) in May, capital spending is expected to be unchanged this year. apital spending is expected to be in line with the SB-survey, but with a downside risk if demand comes in weaker than expected. As the initial level of spending is low however, major declines can probably be avoided. Housing are nevertheless expected to decline. Overall, this means that capital spending will increase by 2 per cent this year and then accelerate slightly during 2013 and Households are continuing to consume Households have maintained their consumption relatively well during the slowdown. There are many indications that consumption will continue to climb. After a slump late in 2011, both consumption expenditures and household confidence have recovered. Rising real wages will provide relatively good income growth. The fall Deloitte/SEB FO-survey indicates that rising labour costs are only a marginal concern for companies ahead. SEB also assume that fiscal stimulus will contribute to somewhat higher income both in 2013 and Uncertain economic conditions and eventually rising unemployment however point to slower consumption growth ahead. Our forecast is thus that consumption will grow more slowly than income both in 2012 and Feb -12 Sep -12 Riksbank will cut key interest rate once more Finansiell ställning The Riksbank lowered the Repo-rate by 25 basis Financial position points in September to 1.25 per cent and SEB expect another 70 cut in December 2012 to 1.0 per cent. There are arguments for a lower Repo-rate such as low inflation pressure, a shaky labour market, continued 64 financial market turbulence and slower increase in 62 lending to households. Expansionary monetary policies 58 in other countries are also helping make Swedish 60 monetary policy appear more restrictive. This, in turn, is instrumental in reinforcing appreciation 52 pressure on the krona, pushing down inflation and 50 growth. Low key interest rates internationally are an argument for low Riksbank key interest rates as well. SEB expect the Repo-rate to remain at 1.00 per cent during Sep -06 Feb -07 Aug -07 Feb -08 Sep -08 Feb -09 Sep -09 Feb -10 Aug -10 Feb -11 Aug -11 Krona breaking new ground The recent strength of the krona confirms its reclassification into a less cyclically sensitive currency. SEB:s assessment is that the krona is now being traded close to its equilibrium level and expect that the krona will strengthen further in the near term. At the end of 2012 the EUR/SEK exchange rate will be at 8.00 before heading towards 8.10 by the end of Also the USD/SEK rate will also drop in the near future. Given our forecast of gradual dollar appreciation against the euro, this movement will however be small. In trade-weighted terms, the krona will continue downward to a TW index low around 112 this autumn before gradually weakening up to 115. The Deloitte/SEB Survey shows that the EUR/SEK budget rate for the financial year 2012 is 9.00, clearly above the present level. Also, the Survey points at increased FO concern for the exchange rate, although demand is still the greatest concern. Feb -12 Sep -12 5

6 Hot topic - Outlook on the Euro situation Judging from the limited number of companies that have adjusted their operations, responding FOs do currently not seem overly concerned about the impact of a potential situation where the Euro does not exist in its present form. Whether this is a sign that FOs believe that the Euro will not exist in its present form, the companies will not be affected by any changes, or simply that risk assessments have not yet been performed and this issue not adequately considered by the FOs, remains a speculation. hart 13a Has your company performed any kind of stress test regarding a situation where the Euro does not exist in its present form? hart 13b Has your company adjusted its operations to a situation where the Euro does not exist in its present form? Has your company performed any kind of of stress test regarding a a situation where the Euro does not exist in in its its present form? Has your company adjusted its its operations to to a a situation where the Euro does not exist in in its its present form? Yes One out of four of the FOs answered that their companies had performed some kind of stress test regarding a situation where the Euro does not exist in its present form. Hence, a fair conclusion is that several companies in fact are worried for a collapse of the most important currency for Swedish export. This is probably related to the increased worries for increased interest rates, i.e. macro oriented uncertainties. Yes Whereas 25% of the surveyed companies having performed a stress test, only 7% of the companies have currently adjusted their operations to a situation where the Euro does not exist in its present form. Only 7% have taken action, which could suggest that companies in general consider the risk of a situation where the Euro does not exist in its present form as fairly low. Another possibility is of course that adjusting operations is impossible or very costly. The pessimistic reader thus could interpret the results as 93% of the companies currently not being prepared for a changed Euro scenario. 6

7 Business conditions and outlook s in The positive trend from February 2012 has in September turned slightly negative. In line with the second quarter results, companies seem to expect more difficult times ahead. EUR/SEK However, companies have yet hart not seen 5 the effects of the weakening sentiment. 6 able Average t so un Favourable Average t so What is your EUR/SEK budget rate for the financial year un 8,20 8,00 3 7, hart 5 What is your EUR/SEK budget rate for the financial year 2012? 1. Business conditions for your company in the are seen as: 5 9,00 hart 2012? 1 8,80 In February business conditions improved notably 6 Business conditions versus the previous survey. The current sentiment has 8,60 3 for your company in 5 again turned more negative with a the larger next 6 relative months share 8,40 of 2 FOs finding Business conditions not so favorable 1 (34% in September versus 23% in February). The trend corresponds with the current slowdown in Swedish economy, forecast to continue also into ,40 9,20 Jul -11 Oct -11 Jan -12 Apr -12 9,40 9,20 9,00 8,80 8,60 8,40 8,20 8,00 7,80 Jul -12 Oct -12 Jul -11 SEB forecast FOs budget rate (median estimate) Oct -11 Jan -12 Apr -12 Jul -12 hart 9 EUR/SEK SEB forecast How has the level of financial risk FOs on budget your rate (median estimate) balance sheet changed hart over the 5 last What is your EUR/SEK budget rate for the financial year 2012? Oct ,40 3 9,20 2 9,00 8,80 1 8,60 8,40 8,20 8,00 H fi b c l I si l 2. The overall financial position of your company is seen as: hart 6 How do you expect hart 2 The overall financial position of your company hart 6 How do you expect Favourable Average t so un 3. How do you expect in your company to 5 hart 10 Assume a current cash surplus position. How would you prefer to use the money in the next 6 months? hart 6 How do you expect 7, A c p y m m Pa able Average t so 13a pany y kind of arding a re the t e exist in m? Favourable Average t so un hart and divestments 3in Sweden to change? The lending attitude of financial institutions toward your company un The overall outcome of the September survey is that the financial position of surveyed companies largely is unchanged compared to February. s in the hart 13b response alternatives favorable (48%) and average (34%) are likely related to the weakening business 10 Has your company adjusted its operations condition sentiment and might highlight to a hart situation a where possible 7 8 the Euro does not time 5 lag and correlation between lower business exist Over in its the present next 12 activity and negative financial consequences. form? months how do you 6 expect levels of corporate acquisitions FOs with a view that the overall financial position is very 3 favorable has decreased in the last year and is currently below 4%. Yes 2 1 than 1 by 0-1 hart 7 Remain unchanged from current levels by by 0-1 more than 1 by by 0-1 more than 1 Swedish FOs remain positive about the cash flow expectations for Favourable the next twelve Average months t soeven though un at slightly more moderate levels than in the spring 2012 survey. A majority (56%) of FO respondents continue to expect cash flow to increase and 9% of FOs expect a double digit improvement over the 10 next twelve months (versus 63% in February). In Over the next 12 general months the September how do you results anticipate slightly lower 6 expect levels of cash flows corporate than acquisitions the spring survey but still remain high and divestments in in a historical Sweden to perspective. change? The most notable change from the spring survey is the decrease in respondents 2 expecting 2 a double digit improvement 2 which could be a sign of deteriorating market conditions Yes Remain unchanged from current levels by 0-1 than 1 hart 11a employees working in Sweden for your hart 7 Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to change? T e S c n able Average t so Favourable Average t so un un 2 1 somewhat change Decrease somewhat Decrease somewhat change Decrease somewhat Decrease hart 11b 2 1 Favourable Average t so un employees working abroad for your 6 5 T e a c n hart 8 How do you currently rate valuation of Swedish 6 hart 8 How do you currently rate valuation of Swedish

8 1 2 2 hart 11a employees working in Sweden for your Prospects and concerns Be unchanged rease ficantly EK recast budget rate an estimate) v 2011 b 2012 p 2012 ov 2011 ery eb 2012 rvalued ep 2012 hart 11b hart 9 employees working abroad How for has your the level of company financial is, risk in on the your next balance 6 months sheet changed over the last hart 12 What are the greatest concerns for your company in 2012? hart 10 Assume a current cash surplus position. How would you prefer to use the money in the next 6 months? As in previous surveys, demand is still the greatest concern for Swedish FOs. Other factors as access to capital, competition and cost of materials remain in line with previous survey results. A growing concern for exchange rates is however seen over the 6 hart 13a last survey. ompanies seem to have underestimated the pace at which the Krona has 5 Has your company 10 5 performed any kind of strengthened against key currencies. Furthermore, concerns interest rates have risen in the September survey What are the greatest concerns for your company in 2012? 2 2 As before, demand (slightly more than 5), as well over exchange rates and interest rates are noted. The 1 1 as access to capital (with the share of responses in increasing concern over exchange 2 rates is most likely line with the February survey), are still the greatest a result of the strengthening Krona against the Euro d d Decreased Decreased slightly change Be unchanged slightly concerns for FOs. However, increasing concerns and US Dollar (the first and second most Yes important foreign currencies for Swedish companies). The 8 increasing concern over interest rates is interesting, since current interest rates are at very low levels from 7 a historical perspective. One explanation might be 6 that FOs fear future inflationary driven interest rate 7 increases, stemming from economic easing activities. 5 6 As forecasted by SEB key interest rates (i.e. the Reporate) 5 will however remain at low levels throughout stress test regarding a situation where the Euro does not exist in its present form? 8 6 hart Has your com adjusted its op to a situation the Euro does exist in its pres form? than 1 1 tions ny in ths ov 2011 eb 2012 ep hart 11a employees working in Sweden for your 1 1 Pay down debt Demand Strategic abroad Access to capital Financial Strategic Financial Dividend to abroad Exchange in Sweden Interest in Sweden Foreign shareholders Skilled rates rates competition labour shortgage 5. employees in your company in Sweden is, in the, expected to: hart 5 What is your EUR/SEK budget Feb rate 2012 for the financial year 2012? Labour cost 6. What is your EUR/SEK budget rate for 2012? 9,40 9,20 9,00 8,80 8,60 8,40 8,20 8,00 Other ost of raw material/ commodities EUR/SEK SEB forecast FOs budget rate (median estimate) h How h financ balanc chang last 12 Decrease 2 ncial r hart 11b employees working abroad for your Favourable Average t so Be unchanged un 44% of FOs answered that the number of employees in their companies will decline in the next six months and the trend over the last surveys seem to accelerate. The share of FOs that believe the number of employees will be unchanged increased to 51%. Just as in February, 6 this is in line with the Swedish unemployment figures hart 6 How do you expect 7,80 5 budgeted for a EUR/SEK ratio remaining at v the level and hence overestimated the actual level. The 3 leaving exporting companies with a mismatch and 2 Jul -11 Oct -11 Jan -12 Apr -12 Jul -12 Oct -12 The median EUR/SEK value is 9 and since the average of the ratio during 2012 until early September came in at 8.83, FOs have clearly overestimated the ratio. The average EUR/SEK level during 2011 was 9.0 and the SEB forecast was a strengthening Swedish Krona during However, the companies apparently relied on historical values more than the forecast, Krona has strengthened during 2012, most likely losses. h Assum cash s positio you p mone month 8 1 hart 12 Favourable Average 8 t so Be unchanged 1 Remain

9 Favourable Average t so un 5 Financing hart 2 The overall financial position of your company 5 hart 6 How do you expect hart 6 How do you expect 5 3 Favourable Average t so un 2 by 0-1 The lending attitude of financial institutions is in general seen as favorable to average, than 1 which is unchanged from the latest survey. A larger 1 share of FOs now forecast the probability for counterparties default as unchanged, despite current market challenges and Favourable Average t so generally weakening sentiment. un Remain unchanged from current levels by 0-1 than The lending attitude of financial institutions toward your company is seen as: 5 As seen from the graph, the extreme alternatives are 5 capital requirements Over the next 12 and regulatory standards rather months how do you pretty much unchanged from the past surveys where a than the expect macro levels environment. of Hence, some companies small increase in very favorable and a corresponding fund themselves corporate acquisitions in the bond market rather than using and divestments in 3 small decrease in not so favorable hart are noted. 3 Altogether, the lending attitude of financial institutions bank credit Sweden lines. to change? The lending attitude towards companies is now seen as of favorable financial (37%) 2 and average (37%) and is hence back institutions at toward the same 1 your company 1 levels as in vember FO has chosen the 3 very unfavorable alternative. Favourable Average t so un What is not reflected in this question is the squeezed 2 spread levels in the credit market, making it possible for certain companies to issue bonds at favorable 1 terms. This is likely related to the banks increased hart 7 Favourable Average t so somewhat un change hart 7 Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to change? Decrease somewhat Decrease The probability for counterparties default in the is expected to: EUR/SEK SEB forecast FOs budget rate (median estimate) hart 9 How has the level of financial risk on your balance sheet changed over the last hart 4 9. How has the level of financial risk on your balance sheet changed over the last 5 3 hart 8 How do you currently rate valuation of Swedish companies? 6 5 hart 13a Has your company performed any kind of stress test regarding a situation where the Euro does not exist in its present form? hart n a pany y kind of arding a re the t exist in m? Apr Jul Oct -12 The probability for counterparties default in the next 6 months hart 13b Be unchanged Has your company adjusted its operations to a situation where the Euro does not exist in its present form? Despite the weakening sentiment, 95% of the FOs 8 believe that the probability for counterparties default in the will be unchanged. In September 6 the number was 79%. 8%-units less than in February believe that the probability will increase hart respectively 10 decline. This is most likely related to the FOs having Assume a current cash surplus 2 a notion of companies adapting to position. the macro- How would and fi- you prefer to use the money in the next 6 as a positive months? Feb Yes factor nancial environment and if so, it might be interpreted d d slightly change Decreased slightly overvalued Decreased Somewhat overvalued The majority of the FOs still believe that balance sheet risk has not changed over the last twelve months. However there has been a shift in sentiment where 36% believe that balance Be unchanged sheet risk has increased over the past twelve months versus 19% with the opinion that risk decreased. This indicates that uncertainties remain, despite the improvement noted 5 in the spring survey. Indeed, the Swedish Riksbank noted Yes the considerable uncertainty in economic markets in its July policy report. At fair value How do you currently rate valuation of Swedish companies? Somewhat undervalued undervalued v 2 1 Pay down debt Strategic abroad Financial abroad Strategic in Sweden Financial in Sweden Dividend to shareholders Remain unchanged from current levels by 0-1 than 1 hart 11a 9 7

10 ery ourable ery ourable hart 6 hart 5 5 Strategic How do you expect opportunities 6 9,40 What is your EUR/SEK EUR/SEK budget rate 9,20 hart 9 5 SEB forecast for the financial year 9,40 9, ? 5 3 9,20 FOs budget rate How has the level of 8,80 (median estimate) financial risk on your 9, balance sheet changed over the 8,60 last 8,40 8,80 2 8,60 8,401 8,20 8,00 7, How has the level of 1 financial risk on your balance sheet changed over the last Jul -11 than 1 hart 9 hart 7 Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to change? hart 8 hart 10 Oct -11 How do you currently rate valuation of Swedish companies? Favourable Average t so by 0-1 Remain unchanged from current levels Favourable Average t so 5 overvalued somewhat 3 change 10. Assuming a current cash surplus position, how would you prefer to use the money in the? 5 3 The trend from previous years continues How do you expect 5 Assume a current with the 7 2 cash surplus largest share (slightly more than ) in your of company FOs to preferring 3 to pay down debt in the next 6 you months, prefer to use assuming the position. How would 6 1 money in the next 6 5 a cash surplus position. This share months? is pretty much 3 2 unchanged since February but differs from vember 2011, when credit spreads were wider and the OMXS30 was well below today s level. Today, 2 1 some FO s would however prefer to do financial Decrease Decrease 1 abroad somewhat and in change Sweden, which somewhat in February hart 11b Remain apparently was not an option. A possible interpretation un Pay by down more Strategic by 0-1 Financial unchangedstrategicby 0-1 Financial by Dividend more than debt The 1 number of from6 than 1 to is that companies currently are on hold and park their abroad abroad current levels in Sweden in Sweden shareholders money safely rather than expand strategically in order 5 to grow. 11. How do you currently rate valuation of Swedish companies? hart 11a Somewhat un overvalued 5 Assume a current 7 cash surplus position. How would 6 2 you prefer to use the money in the next months? Be unchanged by 0-1 than 1 At fair value hart 10 6 The hart number of 7 employees working in Sweden for your Over the next 12 company months how is, in do the you next expect 6 months levels of corporate acquisitions and divestments in Sweden to change? Somewhat undervalued undervalued The new survey indicates that most Swedish FOs, 45%, Decrease still believe Decrease companies are fairly valued which is somewhat a decrease from the spring survey hart when 55% 11b thought prices were at equilibrium. On 31 August 2012 the OMX Stockholm 30 index was approx. employees 7% working lower relative to the latest survey in February abroad for your The most significant change since the spring next survey 6 months is that 24% of FOs, d an increase from 11%, Decreased consider hart Decreased the 8valuation slightly change slightly of Swedish companies somewhat overvalued. This How do you could indicate that the FOs consider currently the rate outlook to valuation of Swedish be more challenging than the market companies? would suggest. The uncertainties in the market reflect this change in sentiment where some companies are more affected by the challenging conditions than others, which may not have been appropriately priced by the v market , Over the next 12 months how do you expect levels of corporate acquisitions 2 and divestments in Sweden to change? hart 10 Assume a current cash surplus position. How would you prefer to use the money in the next 6 months? Jul -11 overvalued Oct -11 employees working abroad for your Jan -12 Somewhat overvalued Apr Jul -12 Pay down debt At fair Somewhat value undervalued EUR/SEK SEB forecast FOs budget rate (median estimate) Oct -12 Strategic abroad 8,00 2 Remain According 7,80 to by the 0-1 survey, unchanged companies by 0-1 prefer parking their money to taking strategic Favourable Average t than so1 from than 1 1 un current levels actions. FOs give a mixed picture on valuations and the quantity of deals involving a Swedish target remains below the five year average. d hart Acquisition d 11a opportunities Decreased might Decreased slightly change slightly 7 emerge as valuations reach more attractive levels and overall the survey still suggests employees working in Sweden for your 6 that the M&A environment will improve over the next company twelve is, in the months. 5 Jan -12 Apr Jul -12 d Oct -12 hart 12 What are the greatest concerns for your company in 2012? hart What are the greatest concerns for your company in 2012? Be unchanged hart 13a Decrease Decrease Has your company somewhat change 10 somewhat performed any kind of 3 stress test regarding a FOs situation continue where the to anticipate 8 a higher level of M&A Euro does not exist in 2 its present form? 6 slightly weaker compared to the 1 spring 2012 results. undervalued Financial abroad 6 Demand Access Exchange involving a Swedish target remains below the to capital five rates 5 year average. Based on the recent survey results any Be unchanged activity over the next twelve months. Net sentiment is It is helpful to keep in mind that the quantity of deals significant changes would be unexpected as uncertainties remain in the market overall. However, acquisition opportunities might emerge as valuations reach Yes 6 more attractive levels. twithstanding the magnitude of 5 static predictions, the survey still suggests that the M&A environment will improve over the next twelve months. Be unchanged Be unchanged Ho fin ba ch las Strategic in Sweden As ca po yo m m Th em Sw co ne hart Has your comp adjusted its ope to a situation w the Euro does Th n exist in its prese em form? ab co ne Interest rates N F S W co co

11 An international outlook Uncertainty takes its toll on optimism Below we have compiled key points from the most recent Deloitte FO Surveys in UK/Europe, rth America, and Asia Pacific (performed in Q2 2012) as well as some highlights from Deloitte s Q outlook on hina. UK/Europe On average, in Q2 UK FOs saw roughly a onein-two chance of the recession continuing to the end of 2012 or for the economy to hit a triple-dip recession. FOs expectations for the Swiss economic outlook improved in Q2 compared to previous quarters; there was a positive net 5% balance of sentiment when looking at the next twelve months. Dutch FO optimism about the financial prospects of their own company improved since last quarter, but hovered around the zero mark in Q2, meaning FOs were almost equally positive and negative about their companies financial prospects. ompared with a year ago, UK FOs are more focussed on reducing leverage and disposing of assets and less likely to be making acquisitions or undertaking capital expenditure. The risk appetite of Dutch FOs dropped in Q2 to the low levels last seen in the third quarter of 2011 and early Only 8% of Dutch FOs thought it was a good time to be taking greater balance sheet related risks. Although the availability of credit in the UK has deteriorated, the overall credit conditions for large corporates did not seem to be especially stringent in Q2. In Q2, Swiss FOs believed there was an average probability of 55% that at least one of the current members will have to leave the Eurozone within the next five years. In the UK, FOs saw a 36% probability of one or more countries leaving the single currency, relative to 26% in February of rth America In the Q2 survey, nearly half of all rth American FOs mentioned a slowing economy a top concern, generally this sentiment has worsened since Q FO optimism in rth America was still positive in Q2 but sequentially decreased on a net basis to +11 points from +48 points in the preceding quarter. This means that optimistic FOs outnumbered pessimistic FOs by 11% of the sample. Despite the global economic concerns and declining optimism, rth America FOs continued to enjoy rising expectations for their companies sales performance over next 12 months in Q2. Indeed, sales growth expectations for the next twelve months increased to +6.6% YoY, from +5.9%, but earnings expectations narrowed slightly to +10.5% YoY, from +12.8%. FOs capital investment growth expectations over the next 12 notched down to +11.4% YoY, from +12% YoY, but are still higher than growth expectations for R&D, marketing, and dividends. About 7 of FOs reported substantial cost-saving changes to their supply chains in Q2 mostly through reconfigured and renegotiated sourcing arrangements. Despite challenging sales volumes, a remarkable 65% of all FOs reported having raised prices in Q2 of 2012 (82% in Manufacturing, 9 in Retail/ Wholesale), and 42% say further price increases are coming. Asia/Pacific hina has seen its fifth consecutive quarter of declining GDP growth and People s bank of hina cut interest rates in June and July of However factories in hina s large coastal cities still have trouble fulfilling their labour needs, due to a change in migration trends. Efforts to boost growth have been targeted on tax incentives for consumer spending on automobiles and appliances, as well as loans to small businesses. Stimulus for bigger projects, such as those initiated in the 2008 stimulus efforts, has been largely avoided. The Indian government is walking a tight rope as it attempts to contain inflation while retaining growth and the credit rating agencies have started to view the future more negatively. It is not surprising that in the Q2 survey 46% of Indian FOs expected the GDP growth rate to taper further. Indeed, 31% of FOs were optimistic about the performance of their organisations in Q2, relative to 47% in the prior survey. In Australia business uncertainty hit its highest level in more than a year with 87% of FOs saying uncertainty was above normal. The most significant factors facing companies financial prospects are the European sovereign debt issues, Australian government policy uncertainty, and the potential slowdown in hina. Still, the tough times have driven companies there to innovate: two-thirds of Australian FOs say it is a priority to introduce new products and services or expand into new markets. 11

12 ontacts Deloitte Andreas Marcetic Partner, Deloitte Financial Advisory Peter Ekberg Partner, Deloitte Audit Jan Bäckman Partner, Deloitte onsulting Lars Franck Partner, Deloitte Tax SEB Johan Lindgren redit Strategist redit Strategy, Trading Strategy, SEB Daniel Bergvall Economist Economic Research, SEB About the survey The FOs who responded represent Swedish companies across all industries. The survey was carried out as a web-based questionnaire in August Given the broad range of industries and organisations that responded, the trends observed and conclusions made are considered representative of the wider Swedish FO community. Respondents with no opinion on specific questions have not been included in the charts or analyses. SEB is a leading rdic 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, Finland, rway 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. At 31 December 2011, the Group's total assets amounted to SEK 2,363 billion while its assets under management totalled SEK 1,261 billion. The Group has around 17,000 employees. Read more about SEB at Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte s approximately 195,000 professionals are committed to becoming the standard of excellence. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms Deloitte AB