Growth expectations improving. The Deloitte/SEB CFO Survey. Spring 2014 results

Transcription

1 Growth expectations improving The Deloitte/SEB CFO Survey Spring 2014 results

2 Contents Introduction 3 Lower unemployment as growth exceeds trend in Hot topic Impact of emerging market concerns 6 Business conditions and outlook 7 Prospects and concerns 8 Financing 9 Strategic opportunities 10 An international outlook Easing uncertainty improves optimism 11 Contacts 12 2

3 Welcome to the latest edition of the Deloitte/SEB CFO Survey! We are excited to present the spring 2014 results of the Deloitte/SEB CFO Survey and hope you find our accompanying analysis both stimulating and valuable. Please send us all feedback together with any suggestions for improvement to help us ensure the Deloitte/SEB CFO Survey remains an essential resource for your daily work. Tom Pernodd Partner Financial Advisory, Deloitte Johan Lindgren Credit Strategist Credit Strategy, Trading Strategy, SEB 3

4 Lower unemployment as growth exceeds 70 trend in Swedish GDP accelerated in the final quarter last year confirming the upturn signalled 55 by forward looking indicators. The Deloitte/SEB indicator increased to 56.2 in February , its highest level since May However, despite improvements in the domestic 45 economy, for example in terms of employment and consumer confidence, export performance remains sluggish. SEB forecasts GDP growth of 2.7 per cent in 2014 and per cent in Feb -07 Aug-07 Feb -08 Sep -08 Feb -09 Feb -14 Swedish CFO Index Feb -07 Aug -07 Feb -08 Sep -08 Feb -09 Feb-14 The Swedish CFO index for February 2014 is 56.2, which reflects positive expectations. The index is based on four components; business climate, financial position, willingness to lend and counterparty default risk. The four component indices increased in February 2014 to 50.8, 58.5, 66.7 and 48.9, respectively. Mixed signals from manufacturing Despite rising sentiment indicators since the first half of 2013, industrial production and merchandise exports have remained weak. This may be due to the unusual combination of a strong krona and poor global demand, making it difficult for manufacturers to keep pace with international expansion. However, surveys from the NIER and Statistics Sweden show that manufacturing capacity utilisation has increased. Also, the Deloitte/SEB indicator has continued to trend higher. Further, manufacturers plan relatively expansionary capital spending this year. We believe special circumstances explain why official export and production figures for the second half of 2013 exaggerate the underlying weakness, a view supported by the slight improvement in exports reported at the beginning of this year. SEB expects total exports to increase by 3.5 per cent in 2014 and 6 per cent in With demand picking up, capital spending is very likely to begin rising again, an assessment corroborated by the latest Statistics Sweden survey. There are also many indications that the upturn in residential construction will continue this year. Residential are expected to increase by around 20 per cent both in 2014 and 2015, contributing approximately half a percentage point annually to total GDP growth. At the same time, it is difficult to see how a substantial rise in new construction of owner-occupied housing can be consistent with the Riksbank s aim to prevent increases in household debt. Overall the Deloitte/SEB CFO survey comes to the same conclusion; business conditions are regarded as either average or ; more companies plan to raise (three times more intend to increase than decrease spending); and almost 50 per cent of firms expect to boost capacity utilisation. Financial position improves The survey continues to show that companies regard their financial positions and banks willingness to lend as positive. As before, the two sub-indices have the highest readings of the index s four components. In particular, the Financial Conditions Index increased to 58.5 in February from 56.4 last September, while the Lending Willingness Index rose to 66.7 from Some 90 per cent of companies see lending attitudes as either or very which, together with improvements in cash flow, supports higher. At the same time however, firms also say they prefer to use surplus cash to pay down debt or invest strategically overseas. 4

5 ug -10 Financial position Consumption drives growth There are relatively clear signals that consumption is set to accelerate. Consumer confidence has trended upward since mid-2013 and is now above its historical average, despite a setback at the beginning of this year. An increasingly strong labour market, together with rapidly rising wealth and incomes, suggests that the upturn will continue this year. Retail sales of cyclically sensitive durable goods, in particular, are now growing faster than at any time since Tax cuts equivalent to nearly 1 per cent of income and rising real wages are producing relatively large increases in income. SEB forecasts that consumption will rise by 3 per cent both in 2014 and 2015, while the current historically very high household savings ratio will decrease slightly. The risk of weaker consumption growth remains linked to a fall in house prices. Although the downturn in prices in rway has increased uncertainty, SEB expects Swedish house prices to increase by around five per cent this year before stabilising in Feb -07 Feb -07 Aug-07 Feb -08 Aug -07 Sep -08 Feb -14 Feb -08 Feb -09 Sep -08 Feb -09 Unemployment declines Job creation has continued to exceed expectations, though sharply rising labour supply has helped prevented falls in unemployment. Labour supply is being driven both by strong population growth and rising labour force participation. However, there are many signs that unemployment will begin to fall early this year, due to a combination of stronger job growth and slower expansion in the labour force. According to the NIER s Business Tendency Survey, hiring plans have become increasingly bullish over the past 5-6 months. Due to rapid population growth, labour supply looks set to continue rising rapidly. SEB expects unemployment to fall to 7.6 per cent at the end of 2014 and to 6.8 per cent at the end of Risks of increased wage pressure over the next couple of years are small. Significantly, even the lowest unemployment rate in the past 20 years (around 5.7 per cent) had no significant effect on inflation. Inflation well below target Price pressures have remained very low, with CPIF inflation (CPI excluding interest rates) below 1 per cent and CPI close to zero. Further, the combination of historically small collective pay agreements for the next 2-3 years and weak international price pressure indicates continued low inflation in While decreasing downward pressure from previous krona appreciation and slightly higher pay rises suggest inflation will increase slightly during the second half of 2014, SEB expects CPIF to remain well below the Riksbank s target throughout our forecast period. It also forecasts that CPI inflation will rise above 2 per cent during 2015, as expected Riksbank key interest rate hikes inflate mortgage interest costs. The main risk of higher Feb-14 Feb -14 inflation is that a stronger global economy will result in higher prices for energy and other commodities. With wages and salaries likely to increase at rates well below the historical average for the next couple of years, and with trends clearly exerting downward pressure on many commodities a key factor for CPI, downside inflation risks dominate both in 2014 and Business conditions Inflation target regains lost ground Stronger economic growth and falling unemployment suggest that December s key interest rate cut was the last in this cycle, although we still see a 35 per cent probability of a further reduction. We assume that continued low inflation and poor resource utilisation will delay key rate hikes until spring 2015 and that the Riksbank will hike twice, bringing the repo rate up to 1.25 per cent at the end of Feb -07 Aug -07 Feb -08 Sep -08 Feb-14 Feb -09 The minutes of the central bank s last monetary policy meeting (December 2013) indicate a paradigm shift, with long-term low inflation becoming the centre of attention at the expense of financial stability. We expect low inflation to remain in focus. This implies that the central bank will continue to signal a downside risk to its repo rate forecast during most of this year. It is also likely that one or more board members will argue in favour of more interest rate cuts and eventually dissent from a decision to leave the key rate und. Krona continues to appreciate The krona has strengthened by around 3 per cent in trade-weighted terms since the Riksbank cut its key rate on December 17. With the EUR/SEK ex rate appreciating rapidly from 9.10 to 8.80, there is a risk that Swedish inflation will prove lower than estimated in coming months, provoking expectations of further rate cuts and causing foreign investors to sell SEK. However, as SEB s main scenario is that CPIF will bottom out and the Riksbank will leave its key rate und, it expects the krona to benefit from relatively strong economic conditions. In addition, increasing expectations about new ECB measures will exert general downward pressure on the euro against most other currencies. The krona should benefit from rising global growth. We therefore reiterate our forecast EUR/SEK rate of 8.50 at the end of 2014, and raise our estimate slightly to 8.40 at the end of next year. We project a USD/SEK rate of 6.64 at the end of this year and 6.72 at the end of Feb -07 Aug -07 Feb -08 Sep -08 Feb -14 Feb -09 Feb -14 5

6 during the coming 12 ased antly 1 Hot topic Impact of emerging Lesser Und d market concerns Chart 14 How will your company its capacity utilization and production plans during the coming 12 While most CFOs fully share current market concerns over developments in emerging markets, they still plan to raise and expect capacity utilisation to improve over the next six months. Although the increase will occur from an abnormally low level, it nevertheless indicates greater self-confidence and better prospects going forward. 1 ncial tments road Chart 15 Do you think financial market concerns relating to emerging markets are: Lower/decrease Und Higher/increase Do you think financial market concerns relating to emerging markets are: Chart 13 How will your company s investment plans with respect to plants and personnel during the coming 12 How will your company s investment plans with respect to plants and personnel during the coming d d 1 d slightly d slightly doverstated d Fair Understated slightly d slightly d Chart 13 A very high proportion of CFOs surveyed say they regard emerging market concerns as justified. For How will your some time, unease has resulted in low company s. investment plans with The current Russian-Ukrainian crisis, respect countries to plants and to which several Swedish companies are personnel during Chart the coming exposed, further illustrates the serious and less easily Sep 2012 foreseen risks involved. In view of current concerns Feb 2013 over developments in emerging markets, we asked Sep 2013 CFOs for their views on and production capacity over the next 12 months. How will your company its capacity utilization and production plans during the coming Lesser Und d Approximately 60 per cent of CFOs questioned replied that they expect no in their company s investment plans for plant and personnel over the next 12 months, while around 30 per cent believe they will increase spending. This is interesting, given the large production deficit in recent years. More in plant and personnel imply greater production and higher output going forward, as well as a higher inflation rate and increased interest rates. Lesser Und d Pay down debt Pay down debt Strategic Strategic Dividend to shareholders Dividend to shareholders Strategic in Sweden Strategic in Sweden Financial in Sweden Financial in Sweden Financial Financial How will your company its capacity utilization Do you and think production financial plans market during concerns the coming relating 12 to emerging markets are: Lower/decrease Und Higher/increase How will your company its capacity utilisation and production plans during the coming 12 The CFOs surveyed answer this question consistently with their replies to the last. They emphasise Chart that 14 companies are preparing to raise output, Chart not at some 15 indefinite point in the future but within the next 12 months. This is clearly a positive development, suggesting increased momentum and a further improvement in market sentiment. Lower/decrease Und Higher/increase Overstated Fair Understated Be und f raw rial/ dities Foreign competition Access to capital Other Chart Do you think financial market concerns relating to emerging markets are: 8 6 Sep 2012 Feb 2013

7 Business conditions and outlook Overall, CFOs are increasingly positive towards current and prospective business conditions. Most companies are generally optimistic on the prospects for the rest of this year. Respondents regard their financial positions as, while most expect to improve their s Average t so Favourable Average t so un Chart 5 Chart 1 un 8 9,20 7 9,00 6 8,80 8,60 8,40 8,20 1 8,00 Chart 5 1. Business conditions for your company in the next 6 months are seen as: Since our last update in September, business conditions have continued to improve, according What is your EUR/SEK Business budget rate conditions for to the CFOs financial year 2014? surveyed. Today, approximately 40 per for your cent company of CFOs in the next 6 months (an increase of 10 percentage points compared to last September) regard business conditions during the next six months as. Probably, the increase is attributable to a more positive attitude among those who regarded them as only average last fall. This development may correlate very closely with surprisingly positive Q4 GDP data reported in February. 9,40 Jul-12 Oct -12 What is your EUR/SEK budget rate for the financial year 2014? Jan -13 Apr -13 Jul -13 9,40 9,20 9,00 8,80 8,60 8,40 8,20 8,00 Jul-12 Oct -13 Oct -12 Jan -14 Favourable Average t so EUR/SEK SEB forecast CFOs budget rate (median estimate) Jan -13 Apr -14 Jul -14 un Apr -13 Jul -13 Oct -13 Chart 9 Chart 5 EUR/SEK How has the level of financial risk on SEB your forecast balance What is sheet your EUR/SEK d CFOs budget rate budget rate over for the (median the estimate) last financial 12 year 2014? Jan -14 Apr -14 Jul -14 9,40 9,20 9,00 8,80 8,60 1 8,40 8,20 8,00 Jul The overall financial position of your company is seen as: Chart 6 Chart How do you expect 2 The in your overall company financial to position over of your the company next How do you expect in your company to over the next Chart 6 How do you expect in your company to over the next 12 1 Chart 10 Assume a current cash surplus position. How would you prefer to use Chart the money in 6 the next 6 How do you expect in your company to over the next Average 6 1 Average t so t so Favourable Average t so un Favourable Average t so un un The overall financial position of companies has improved, with just over 55 per cent (an increase of 10 percentage points since last September) of CFOs surveyed regarding their position as. While a limited number of CFOs (amounting to only Chart 3 a few per cent) believe the financial position of their Over the next 12 company has worsened, on average companies months how do you now The expect lending levels attitude of see a brighter financial future than last of corporate financial September. acquisitions This view may reflect the general stabilisation institutions and divestments toward of in the your Sweden company to? European financial environment, as well as persistently low interest rates. CFOs surveyed have expressed increasing concern over interest rates going forward. Altogether, we conclude that companies are financially sound and the outlook increasingly positive. This is a key finding of our survey. Feb 2013 Sep 2013 Feb 2014 un than 1 Remain Remain und by 0-1 by 0-1 und Favourable from current Average than t than 1 so 1 from current levels un levels by 0-1 Swedish CFOs retain positive cash flow expectations for the next 12 months, although they are not as wholly optimistic as they were in our survey last fall. Today, some 51 per cent of respondents expect cash flow to increase, signaling a still very positive outlook. However, following higher s in 8 8 recent quarters, Over the next it is 12 hardly surprising companies months how do you forecast a expect more levels stable of development going forward. 6 corporate acquisitions 6 A total of and 15 divestments per cent in of CFOs believe operating cash Sweden to? flows will decline, which is surprisingly high given the current overall positive outlook. 1 Favourable Average t so un by 0-1 than 1 Chart 11a employees working in Sweden for your next 6 months Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to? Chart 11b employees working for your next 6 months

8 1 Prospects and concerns Be und O Chart 11b ast get rate stimate) employees working for your next 6 months Chart 9 How has the level of financial risk on your balance sheet d over the last 12 6 As in our previous surveys, demand remains the greatest concern for Swedish CFOs. However, they are becoming more worried about the threat of rising interest rates following the recent prolonged period during which they have remained low. Respondents are Chart 13 How will your 6 company s increasingly concerned about the cost and availability of investment skilled plans labour, with a development respect to plants and that usually signals improving market conditions. Positively, personnel CFOs are more confident of during the coming 12 increased 1 employment in Sweden and. Sep 201 Feb 201 Sep 201 ul -14 Chart 12 What are the greatest concerns for your company in 2013? Chart 10 Assume a current cash surplus position. How would you prefer to use the money in the next 6 4. What are the greatest concerns for your company in 2014? Be und As in previous surveys, demand is the greatest concern for CFOs. However, we see increasing worries d d d over interest rates, slightly suggesting that higher slightly interest 10 rates are of real concern. Given the low interest rate 6 d environment over the past few years, CFOs may think rates may slowly return to pre-crisis levels, although Lesser this view is inconsistent with near-term consensus central bank rate forecasts. It is certainly unlikely to occur this year. Swedish, German and US government yields are however projected to rise during Ex rates are also a growing problem, as are increased labour costs. Other factors (probably company or sector specific problems) are also of growing concern. Chart 14 How will your company its capacity utilization and production plans during the coming 12 1 Und 1 1 Pay down Demand Strategic Interest rates DividendEx Strategic rates Labour Financial cost debt to shareholders in Sweden in Sweden Financial Skilled labour shortage Cost of raw material/ commodities Foreign competition Access to capital Other Lower/decrease Und n Chart 11a employees working in Sweden for your next 6 months 5. employees in your company in Sweden is, in the next 6 months, expected to: Chart 5 What is your EUR/SEK budget rate for the financial year 2014? 6. What is your EUR/SEK budget rate for the financial year 2014? 10 9,40 9,20 9,00 8,80 8,60 8,40 8,20 Chart 15 Do you think financial market concerns relating to emerging markets are: 8 6 EUR/SEK SEB forecast CFOs budget rate (median estimate) Overstated Fair Be und Favourable Average t so un 8,00 Jul-12 Oct -12 Jan -13 Apr -13 Jul -13 Oct -13 Jan -14 Apr -14 Jul -14 n 6 8 Chart 11b employees working for your next 6 months The percentage of CFOs believing their workforce in Sweden will remain und over the next six months has increased slightly to just over 60 per cent, 6 while the share of respondents that think they will fall has declined by approximately 10 percentage points. Probably, the reflects a larger Chart proportion 6of CFOs that expect the workforce to increase, How do you a expect view endorsed by 20 per cent of respondents. operating Nearly cash flow 40 per in your company to cent also stated they expected employment over the to next 12 increase. 1 Be und The median EUR/SEK budget rate is 8.7, representing the average (or median) of the SEB 2014 forecast. This is significant as CFOs polled in previous surveys have tended to overestimate the actual EUR/SEK Sep 2012 rate, and the speed at which the krona has appreciated. Feb 2013 This probably caused several companies to suffer Sep 2013 in previous periods. w, CFOs have apparently prepared their budgets based on the forecast, which implies that they are seeking to minimise the possibility of incurring currency related losses.

9 2 ncial r 6 Financing Chart 2 The overall financial position of your company 6 Chart 6 How do you expect in your company to over the next 12 Chart 6 How do you expect in your company to over the next Favourable Average t so un 1 than 1 Favourable Average t so by 0-1 The attitude of financial institutions to lending has continued to improve since our survey last September to stand at new record highs, strongly signaling increased confidence un and financial stability. Currently, such institutions appear more focused on growth, than on balancing restrictions and new regulations on lending. 1 Remain und from current levels by 0-1 than 1 1 itude ard 6 Chart 3 months how do you 7. The lending attitude of financial institutions toward your company is 7 seen as: Also the perceived lending attitude The towards lending attitude companies surveyed has improved. Almost 90 per cent of of financial institutions toward CFOs regard the lending attitude of your financial company institutions toward their company as or very, 1 compared with around 75 per cent last September. Probably, this also reflects the fact that interest rates are lower now than in September. Favourable Average t so un 6 1 Over the next 12 expect levels of corporate acquisitions and divestments in Sweden to? Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to? Favourable Average t so un 4 8. The probability for counterparties default in the next 6 months is expected to: Chart 9 9. How has the level of financial risk on your balance sheet d over the last 12 Chart 8 Chart 13 for ext EUR/SEK SEB forecast CFOs budget rate (median estimate) How has the level of financial risk on your balance sheet d over the Chart 4 last 12 The probability for counterparties default in the next 6 months How do you currently rate valuation of Swedish companies? 1 How will your company s investment plans with respect to plants and Chart personnel 8 during the coming 12 How do you currently rate valuation of Swedish companies? 6 1 Jul -13 Oct -13 Jan -14 Remain und Apr -14 Jul -14 In our last survey, there was little difference between present and historical values. Also currently, the perceived probability of counterparties defaulting in the next six months is thought slightly Chart positive. 10 Some 13 per cent of CFOs surveyed believe Assume default a current will become cash surplus less likely, with 87 per cent saying the risk will remain position. How und. We regard the overall would positive you prefer sentiment to use the money in shown by the survey as a sign of stability the next 6 and recovery, with almost no outright concerns expressed regarding defaults by counterparties. d d slightly d slightly overvalued d Somewhat overvalued Most CFOs believe financial risk on their balance sheets has continued to decrease over the last 12 Remain und months. Respondents report an ongoing improvement in conditions affecting their exposure to financial risk. 7 Overall, sentiment has become increasingly positive since our fall survey. Most companies are seen as 6 financially stable, while market conditions have generally improved. At fair value Somewhat undervalued undervalued Chart 14 How will your company its capacity utilization and production plans during the coming Pay down debt Strategic Dividend to shareholders Strategic in Sweden Financial in Sweden Financial main hanged current vels by 0-1 than 1 Feb 2013 Sep 2013 Feb 2014 Chart 11a employees working in Sweden for your 7 6 Chart 15 Do you think financial 9 market concerns relating to emerging markets are:

10 ble ble 8 7 9,40 6 9,20 9,00 8,80 8,60 1 8,40 8,20 8, Jul-12 1 than 1 Strategic Chart 6 opportunities Chart 5 Chart 9 Oct -12 How do you expect in your company to over the next 12 Jan -13 Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to? by 0-1 Favourable Average t so Chart 8 How do you currently rate valuation of Swedish companies? 10. Assuming a current cash surplus position, how would next 6 months you prefer to use the money in the next 6 Chart Chart Changes since last September are Assume less dramatic a current than 7 7 How do you expect those that have occurred since last cash spring. surplus During the 6 position. How 6 Q4 reporting season, companies were would in your more prefer company interested to to over the 1 use the money in in paying dividends to shareholders, the next as 612 forecast in our last survey. w, following the announcement of generous 2013 dividends, firms have refocused elsewhere, preferring instead to pay down debt, with 1 nearly 40 per cent of CFOs ranking it their top priority. Significantly, some 35 per cent of CFOs would 1 Chart 11b prefer to invest strategically, with 8 per cent Pay down Strategic Dividend Strategic Financial Financial debt The number of Remain to 6 choosing overseas financial, an increase un employees by 0-1 working shareholders und in by Sweden 0-1 in by Sweden more of 4 percentage points since the last survey. than 1 from current than 1 for your 11. How do you currently rate valuation of Swedish companies? 1 employees working in Sweden for your next Over 6 months the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to? levels 12. Over the next 12 months how do you expect levels of corporate acquisitions and 1 divestments in Sweden to? Jul-12 Oct -12 Chart 10 Assume a current 7 cash surplus position. How 6 would you prefer to use the money in 9,40 the next 6 What is your EUR/SEK EUR/SEK budget rate for the 9,20 SEB forecast EUR/SEK financial year 2014? How has the level of CFOs budget rate 9,00 SEB forecast financial risk on your (median estimate) balance sheet 8,80 CFOs budget rate d over the (median estimate) 1 last 12 8,60 1 8,40 Pay down Strategic debt Responses received confirm expectations of increased 8,20 M&A activity. We see a further Favourable Average Remain recovery in by 0-1 such und transactions by 0-1 over the next 121 8,00 months, with several large deals occurring t than so1 from current than 1 un levels at the start of this year. CFOs with current cash surpluses still prefer to make strategic d d d d slightly slightly Apr -13 Jul -13 Remain und from current levels Oct -13 by 0-1 than Jan -13 Apr -13 Chart 11a and to pay down debt, confirming a slightly more positive view of future 7 prospects. Jan -14 Apr -14 Jul -14 Chart 11a employees working in Sweden for your next 6 months Chart 12 What are the greatest concerns for your company in 2013? Jul -13 Oct Jan -14 Apr -14 Be und Jul -14 Dividend to shareholders Stra inves in Sw Be und Be und Favourable Average t so overvalued Remain und Somewhat un overvalued At fair value Somewhat undervalued undervalued Interestingly, CFOs now regard Swedish companies as slightly overvalued, an appreciable compared to the fall survey. The OMX Stockholm 30 employees working Index surged to record highs at the beginning for your of this year, both by index value and price next to 6 months earnings ratio. However, with low interest rates and abundant market capital, the stock market may develop more positively than fundamentals indicate. Dividends Chart and yields 8 remain at reasonable levels. How do you currently rate valuation of Swedish companies? Chart 12 Chart 11b What are the greatest concerns for your company in 2013? overvalued Somewhat overvalued At fair value Somewhat undervalued undervalued Demand Interest rates fall survey. Some 68 per cent of CFOs now forecast 8 M&A activity has continued to increase in recent quarters with further improvements expected. Respondents are even more optimistic concerning numbers of M&A transactions compared to the increased activity. While M&A volumes remain well below historical levels, based on current developments, more companies are actively screening the market for potential acquisitions. We therefore still expect more transactions over the next 12 months, a view supported by respondents increasing interest in strategic and Be und their positive view concerning the lending attitudes of financial institutions. Feb 2013 Sep 2013 Feb 2014 Ex rates Labour co

11 An international outlook Easing uncertainty improves optimism The most recent Deloitte CFO surveys in the UK/ Europe, rth America, and Asia Pacific (conducted in Q4 2013) included the following findings: Europe Across much of Europe, positive sentiment concerning local economies and business prospects has become more certain this quarter, while uncertainty has eased considerably. Some 80 per cent of Swiss CFOs are optimistic about their country's economic outlook, the highest share since March An overwhelming 96 per cent of Irish CFOs believe their economy has either returned to growth already or will do so in Dutch CFOs are more optimistic about their prospects than they have been since Q In the UK, a record 57 per cent of CFOs say this is a good time to take risk onto the balance sheet, with business optimism higher than at any time in the last three-and-a-half years. The largest UK companies regard financing conditions as benign, as shown by the low cost and high availability of credit. In addition, CFOs expect all forms of capital raising issues of bonds and equity, and bank borrowing to increase in In Belgium, credit availability continued to increase in Q4 2013, and is still thought cheap by the average CFO. UK CFOs also place greater emphasis on capital spending, with 88 per cent expecting M&A activity to increase over the next 12 months. The Corporate Expansion Index has reverted to levels last seen in early 2011, when the UK looked set for sustained recovery. Dutch CFOs are still positive towards the M&A market. Meanwhile, they regard the private equity market bullishly, posting their most optimistic score (86 per cent) since Q Some 92 per cent of CFOs expect the corporate M&A market to improve over the next 12 months. rth America CFOs in rth America were generally optimistic in 2013, with strong Q4 results bringing the year to a positive end. Some 54 per cent believe their companies prospects are improving (up from 42 per cent last quarter), while 21 per cent are more pessimistic, down from 24 per cent. While 82 per cent of CFOs expect increased sales, on average they expect a rise of only 4.1 per cent this year, the slowest rate since Q Nevertheless, some 55 per cent of CFOs expect the economy to be stronger in a year, while only 7 per cent think it will be worse (up from 2 per cent). Monetary policy concerns have escalated, with more CFOs expressing worries over the effects of "quantitative easing" and its eventual wind-down. Some 17 per cent of CFOs say their boards have faced pressure to return cash, while the same proportion of respondents state they are concerned by the actions of activist investors. Capital spending growth expectations fell sharply to just 4.9 per cent during the third quarter of last year, before recovering to 6.4 per cent in Q Still, this is well below the survey average of 8.6 per cent (though manufacturing is relatively positive at 8.4 per cent). Asia/Pacific CFOs in Asia Pacific are cautiously optimistic this quarter. Overall, 44 per cent of respondents in Southeast Asia say they were more optimistic in Q than in the previous quarter. However, public companies are slightly more pessimistic, due to various macroeconomic factors including financial and economic uncertainty. Almost 60 per cent of Indian CFOs consider a slowdown in the domestic economy as an economic concern, followed by rupee depreciation and volatility. In Australia, CFOs regard issuing equity as far less attractive than the previous quarter. Meanwhile, 44 per cent of respondents see credit as either slightly or very cheap (compared to 42 per cent in Q3), while 78 per cent describe credit as moderately or easily available (up from 76 per cent in Q3). In Southeast Asia, CFOs are currently much more involved in risk management practices than 12 months ago. Due to s in external and internal environments faced by companies, some 72 per cent of CFOs polled say they are more engaged in risk management than they were a year ago, while only 6 per cent claim to be less involved. The outlook for Australian M&A activity has improved since respondents were last polled. At the end of last year, some 30 per cent of CFOs said their companies had more important matters to address than M&A activity. 11

12 Contacts Deloitte Tom Pernodd Partner, Deloitte Financial Advisory Christina Bergman Partner, Deloitte Consulting Peter Ekberg Partner, Deloitte Audit Lars Franck Partner, Deloitte Tax SEB Johan Lindgren Credit Strategist Credit Strategy, Trading Strategy, SEB Daniel Bergvall Economist Economic Research, SEB 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 February 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. 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 other 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. On December 31, 2013, the Group's total assets amounted to SEK 2,485 billion while its assets under management totalled SEK 1,475 billion. The Group has about 16,000 employees. Read more about SEB at 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 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 and territories, Deloitte brings world-class capabilities and highquality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte s more than 200,000 professionals are committed to becoming the standard of excellence. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the Deloitte Network ) is, by means of this communication, rendering professional advice or services. entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication Deloitte AB