Mid-Market CFOs See Expansion Opportunities

   NORWALK, Conn. - (BUSINESS WIRE) - 9/27/2012 - U.S. chief financial officers (CFOs) of middle-market companies surveyed this summer remain generally positive about the state of their own industries and continue to see measured growth over the next three years, according to the latest GE Capital Mid-Market CFO Survey.
  CFOs’ sentiment on the state of the U.S. economy and their respective industries declined slightly since the first quarter survey but remained above the levels of a year ago. Their view on the current health of the world economy continued to deteriorate.
  A majority of CFOs expect to grow their revenues in 2012, and nearly two-thirds of CFOs still plan to hire in the next 12 months, although both figures fell from six months ago.
   The survey, which was conducted during the third quarter of 2012, included responses from 500 CFOs of companies with average revenues of $124 million operating across seven distinct industries including: food, beverage and agribusiness; general manufacturing; healthcare; metals, mining and metals fabrication; retail; technology and business services; and transportation.
   “Middle-market CFOs still see expansion opportunities over the next three years, but remain cautious as concerns about the business environment and uncertainties in areas such as tax and healthcare policy persist,” said Dan Henson, president and CEO of GE Capital, Americas. “From our perspective as a provider of capital, we see positive year over year growth in both lending and leasing. Economic sentiment, while still positive, is slightly more guarded than we saw in the last survey. In the meantime, the credit markets are very healthy, providing extremely attractive terms for borrowers as credit facilities come up for renewal and as acquisition or other investment opportunities develop.”
2012 Growth and Profit Expectations
   CFOs’ expectations for their industries shifted from an expansion phase to a more stable outlook. Moving forward, CFOs continue to project moderate growth for their companies, even amid a more measured sentiment for the U.S. economy.
   Eighty-five percent expect the U.S. economy to grow or be stable in the next 12 months, down 11 percentage points since the first quarter, but higher than a year ago.
Eighty-eight percent expect their industry to grow or be stable during the same time period.
   Revenue expectations for 2012 remain positive but have diminished, with 54 percent projecting increases, down 13 percentage points since the last survey.
   Seventy percent expect profits to remain the same or increase this year compared to last, down 11 percentage points.
   Healthcare and raw materials costs continue to be cited as the top threats to business performance in the next 12 months.
   “This data reinforces what we have heard from our clients. Over the last several years, middle-market companies have focused on right-sizing to manage through a lower growth environment and have maintained disciplined approaches to growth — and they now have cash on hand that they are looking to use wisely, including purchasing new equipment and making strategic hires,” said Henson.
   Confidence Indicators: Hiring, Cost Structure and Capital Expenditures
   Forty-six percent of CFOs plan on increasing their cost structure in 2012. Eighteen percent expect to decrease their cost structure in 2012, up from 15 percentage points since the last survey.
Sixty-two percent of CFOs plan to hire in the next 12 months, down 12 percentage points from the last survey. Transportation companies are the most bullish in their hiring plans, with 79 percent expecting to hire.
   Layoffs continue to decline, down to 24 percent from 27 percent a year ago.
   Expectations for greater capital expenditure spending increased slightly to 28 percent. Retail companies are the most likely to increase their cap-ex spending.
Other Top Findings
   Top threats to health of the economy – Domestic unemployment numbers and global fiscal concerns continued to weigh heaviest on CFOs.
   Pricing outlook – For the first time since the third quarter of 2010, less than half (44 percent) of CFOs expect to raise prices on their company’s products or services this year, down from 51 percent in the first quarter of 2012.
   Credit availability/cost – Sixty-five percent of CFOs state that credit availability from their current lender has stayed the same, an increase of eight points from a year ago. Seventy-two percent believe the cost of capital will remain the same in the next 12 months, with only 18 percent predicting an increase.
Internal challenges – Reducing employee benefit costs and implementing service process improvements were cited as the most common internal challenges faced by middle market CFOs today.
   For an executive summary including industry highlights, visit www.gecapital.com/cfosurvey