U.S. Mid-Market CFOs More Positive on U.S. Economy and Business Performance in First-Quarter GE Capital Survey
April 13 2012 - 12:19PM
Business Wire
U.S. chief financial officers (CFOs) of middle-market companies
have grown more positive about the state of their industries and
businesses as well as the state of the domestic economy over the
last six months, according to the latest middle-market CFO survey
by GE Capital.
In terms of potential threats to the U.S. economy in 2012,
concern over European fiscal conditions spiked in the first
quarter, matching worries over the U.S. budget deficit and ahead of
concern about U.S. unemployment levels. The two biggest threats
cited to business performance over the next 12 months were
healthcare and raw materials costs.
The survey, which took place during the first quarter of 2012,
included responses from 495 CFOs of companies with an average
revenue of $143 million operating across seven major industries,
including: metals, mining and metals fabrication; food, beverage
& agriculture; general manufacturing; healthcare; retail;
technology & business services; and transportation.
“Mid-market CFOs are more optimistic than six months ago,
despite the European fiscal crisis and inconsistent job growth,”
said Dan Henson, president and CEO of GE Capital, Americas. “A
larger majority sees top-line growth and stable or better profits
this year, and more will be hiring. These companies have access to
affordable capital, which in 2012 is most likely to be targeted for
investment to finance growth and to purchase equipment.”
“This outlook is generally consistent with what we are seeing in
our own, mid-market financing businesses, as our total financing
activity was up 15 percent in 2011 and our pipeline of new business
is up 16 percent at the end of the first quarter. We’re also seen
consistent improvement over the last three years in the companies
in our loan portfolio, with average customer EBITDA (pretax cash
flow) up 10 percent again this year.”
Current Views on Health of Economy and Industry
CFOs’ sentiment on the current health of the U.S. economy grew
stronger after a significant dip during the third quarter of 2011.
However, views on the strength of the global economy fell again, as
concerns rose about Europe.
CFOs expressed more positive sentiment than in last year’s third
quarter about their own industry. Food, beverage & agriculture
CFOs were the most positive, and healthcare companies had the least
favorable views.
2012 Growth and Profit Expectations
Looking forward, CFOs are more optimistic than six months ago
about growth in the U.S. economy, in their own industry, and about
the outlook for their own company.
- Ninety-four percent expect the US
economy to grow or be stable this year, up 14 points, with 23
percent shifting to a growth outlook.
- Eighty-seven percent anticipate their
industry to grow or be stable this year, even with 6 months ago,
with 9 percent shifting to a growth outlook.
- Ninety-one percent expect company
revenues to grow or be stable this year, with 67 percent seeing an
increase, up 5 points.
- Eighty-one percent expect company
profits to grow or be stable in 2012, up 8 points.
Confidence Indicators: Cost Structure, Hiring and Capital
Expenditures
- The large majority of respondents (83
percent) said they plan to maintain or increase their overall cost
structure in 2012, up 1 point from the last survey.
- The hiring outlook also improved, with
74 percent of CFOs planning to hire this year, a 6-point increase.
The average projected workforce increase in 2012 is 5 percent.
- Seventy-six percent expect to grow or
maintain total capital expenditure spending over the next 12
months, down four points from the last survey, with metals &
mining and transportation companies the most likely to increase
CAPEX spending.
Other Top Findings:
- Credit Availability/Cost – CFOs
say credit availability has remained stable over the last 12 months
(63 percent), an increase of six-points since the last survey, and
59 percent of CFOs believe the cost of capital will remain the same
throughout 2012.
- Pricing Outlook – More than half
(51 percent) of CFOs expect to raise prices on their company’s
products or services this year, down from 59 percent a year
ago.
- Biggest Internal Challenges –
Implementing service-process improvements was the most commonly
cited internal challenge for 2012 (55 percent). The need for talent
and leadership development showed the most increase since the last
survey, up four points to 42 percent.
For additional survey data, including detailed industry-level
findings, contact Ned Reynolds at 203-229-5717. For an executive
summary including industry highlights, visit
gecapital.com/cfosurvey.
GE Capital supports the middle market with more than just
financing. In 2011, in partnership with the Fisher College of
Business at The Ohio State University (OSU), GE Capital founded the
National Center for the Middle Market (NCMM). The Center is the
leading source of knowledge, leadership, and innovative research on
the U.S. middle market economy. Through research, executive
education, and student engagement, the NCMM is dedicated to
promoting job creation and growth in the middle market as well as
driving the dialogue on this vital economic segment. The NCMM has
produced foundational research on the size and contributions of the
U.S. middle market, and is funding and overseeing additional
projects in this area. For more information, visit
middlemarketcenter.org
Editors’ Note
Among the CFO surveys published in the U.S., the GE Capital
Middle-Market CFO Survey is one of the few that examines businesses
across distinct sectors, providing a more comprehensive picture of
how financial executives view the world today and their outlook for
the months ahead. CFOs surveyed were from an independent Dun and
Bradstreet source of middle-market companies with revenue between
$50 million and $1 billion, and average revenue of $158 million
with the exception of the transportation industry respondents.
About GE Capital
GE Capital offers consumers and businesses around the globe an
array of financial products and services. For more information,
visit gecapital.com or follow company news via Twitter
(@GECapital). GE (NYSE: GE) is an advanced technology, services and
finance company taking on the world’s toughest challenges. For more
information, visit ge.com.
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