The financial outlook is showing a significant improvement since this past spring, and even though optimism about future business opportunities is lower than during last autumn’s survey, it is considerably higher than when it hit a low point during the spring. External uncertainty has risen to its highest level in four years, and it’s hardly surprising that companies’ top priority is to continue cutting costs.
The CFO Survey is conducted twice a year and aims to highlight changes in sentiment among Swedish CFOs and compare these with the trend in the rest of Europe.
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This past spring we decided to not publish the period’s CFO survey, as it was conducted in the midst of the initial phase of the pandemic in March. As a result, the range of responses was extremely large between companies that had responded at the start of the survey period and those that responded at the end of the period.
“Now looking back it is interesting to see how companies’ views of future business opportunities in early March were perceived as being somewhat better than in the autumn of 2019, while during the third week of March they fell to the lowest level we have ever measured,” says Marcus Widén, economist at SEB. “In other words, you could basically see in real time how the sentiment among large corporates developed when the pandemic took hold with full force.”
Strong improvement compared with three months ago
In this autumn’s survey we can see a strong turn towards the positive with respect to how CFOs view the financial outlook compared with three months ago. The upswing is strong in the sectors that were initially hardest hit by the crisis: Manufacturing and Business & Professional Services. The reversal seen in the Swedish market is considerably stronger than the general trend in the EU.
Continued focus on cost-cutting
“It is hardly surprising that cutting costs continues to be the top priority among companies, but at the same time we see that expectations for organic growth have grown in importance since last autumn’s survey,” says Henrik Nilsson, partner at Deloitte.
Worries about a continued economic decline are great. The survey shows that the challenge that is decreasing most in importance is the shortage of qualified personnel, which can surely be explained by the many layoffs that have taken place during the pandemic. CFOs also indicate that their plans going forward are to continue looking over staffing, even though they indicate a slightly lower reduction than the average in the EU.
Higher dividends in 2021 and investments in Sweden
A full 48% of CFOs in the survey expect to increase the level of acquisitions and divestments in the coming 12 months, which is the highest percentage since 2014. The responses to how their companies plan to use their surplus liquidity are highly interesting. A full 58% responded that it will be used for investments in Sweden, while only 6% say they are planning on investments abroad. This is in contrast to the autumn of 2019, when 42% said they would be investing in Sweden and 24% said they would be investing abroad.
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“This clearly shows that companies have a more national focus at the moment,” says Nilsson.
In addition, the share that say that they will be using their surplus liquidity for shareholder dividends doubled to 15%, compared with 6% last autumn.
Covid-19 a source of continued strong concern for most companies in 2021 and 2022
This autumn’s survey included two specific questions about Covid-19. What is positive to note is that one in three CFOs already assess that their companies are back at the same level of profit generation as before the pandemic.
“On the negative side, however, a full 60% believe that this will not be achieved until 2021 or 2022,” says SEB’s Marcus Widén.
The survey also shows that, owing to Covid-19, their companies have increased their investment plans related to improvements in organisational and business processes as well as IT, but cut back on the same in land, real estate and equipment.
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