2009 CFO Outlook: A Survey of Manufacturing Company CFOs
|May 11 2009|
This is the 11th annual survey of manufacturing company CFOs commissioned by Bank of America Business Capital. The purpose of this proprietary research is to better understand how CFOs view the U.S. and world economy, and gauge the outlook for revenue, financing, M&A activity and involvement in foreign markets.
From August 13, 2008 through October 16, 2008, an independent market research firm completed phone interviews with 604 top financial decision-makers drawn from a random sampling of U.S. manufacturing companies (NAICS Codes 31-33) with annual revenues between $25 million and $2 billion.
The titles of these individuals varied from company to company (e.g., Chief Financial Officer, V.P. Finance, Director of Finance, Controller, etc.). For convenience, all participants are referred to as CFOs throughout the report. The statistical range of error for the total sample is plus or minus 4%.
The Major Findings:
■ Only 31% of all manufacturing company CFOs believe the U.S. economy will expand in 2009, down from 44% in 2008 and representing the lowest level of optimism in the history of the survey.
■ Consistent with this negative view, only 25% of CFOs forecast expansion in the manufacturing sector in 2009, down from 30% in last year’s survey. The remaining CFOs are almost evenly split between no change (38%) and contraction (36%).
■ Thirty percent of CFOs surveyed believe that the U.S. economy will outperform the world economy in 2009, a significant increase from 22% in 2008, but a decline from 39% in 2007, 46% in 2006 and 58% in 2005.
■ Ninety-two percent of CFOs believe the credit crisis will have the greatest impact on the economy in 2009. This is followed closely by the impact of the housing market, oil prices and the strength of the U.S. dollar, all at 85%.
■ There does appear to be some increased confidence in Fed actions with 64% of CFOs believing that the actions taken by the Federal Reserve Board are helping the economy. This is up from 58% in last year’s survey.
■ Nearly four in ten CFOs (38%) surveyed report that the current state of the U.S. economy will cause them to delay or cancel their growth plans, primarily due to financial market conditions. Only 9% plan to accelerate their growth plans and 52% say that the state of the economy will have no impact on their growth plans.
■ Fifty percent of CFOs surveyed expect revenue growth in 2009, down considerably from 70% in 2008. Thirty-seven percent are expecting an increase in profit margins compared to 45% in 2008.
■ Only 20% of CFOs expect their level of capital expenditures to increase in 2009, the lowest percentage in seven years.
■ Twenty-three percent of CFOs expect their borrowing needs to increase in 2009, up slightly from 21% in 2008. The majority of CFOs (57%) report that their level of borrowing will stay the same in 2009.
■ With the considerable tightening in the credit markets, it is not surprising that 42% of CFOs forecast an increase in the cost of capital, up significantly from 26% in last year’s survey.
■ Fifty-nine percent of manufacturing companies are considering financing in 2009, on par with 58% in last year’s survey. The top reasons for financing are capital expenditures (31%), working capital (30%), U.S. expansion (17%) and acquisition (15%).
■ Fifty-four percent of manufacturing company CFOs plan to use internal sources as a means of financing in 2009. Other types of commonly-used financing include cash flow financing (45%), asset-based financing (42%) and leasing (31%).
■ Of the various products and services offered by lenders, Cash Management (63%) and Letters of Credit (59%) continue to be the most used by manufacturing companies. These are followed by Foreign Exchange (36%) and Retirement Plan Services (36%).
■ Thirty-two percent of CFOs report that their lender has restricted credit availability, up significantly from 10% in last year’s survey.
Labor Costs and Product Pricing
Mergers and Acquisitions (M&A)
PDF format, 473KB, 39Pages.
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|Last Updated ( May 11 2009 )|
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