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CFO ServicesSecond quarter edition 2014

Deloitte Belgian CFO SurveyConcern over government policies clouds current optimism Benchmarking corporate financial attitudes

CFOs are above all concerned about the long-term success of business in Belgium. Policital stability and regulatory predictability are key.

Key points 4

Looking Back: Business confidence through the financial and economic cycle (2009-2014) 6

Short term prospects improving, but concerns about the future success of business in Belgium 8

Positive highlights 10

Current Focus Areas 17

Attention points 21

Profile Q2 survey participants 25

Content

4

Key points from the 2014 Q2 Belgian CFO survey

•CFOoptimismhaseasedslightlythisquarter,butcontinuestorunwellaboveitslong-termaverage.Only10%ofCFOsarepessimistictoday,downfrom40%ayearago

•Thepositivesentimentisincreasinglybeingreflectedinthenumbers:70%ofsurveyrespondentsreportfinancialperformanceattheendofthesecondquarterisinlinewith–orfor40%above–thebudget.

•Levelsoffinancialandeconomicriskhavefallensharplyinthelastyearandcompetitivenesshaseclipsedworriesabouttheeconomy.SafeguardingthecompetitivepositionoftheircompaniesistheCFOs’mainconcern.

•Defensivestrategieswithfocusonefficiencyandcostreductionremaintopoftheagenda,andexpansionarystrategiesgainlittleground.Forthecurrentyear,toplinegrowthexpectationsareambitious,notwithstandinglowgrowthprojectionsforBelgiumandEurozoneeconomies.

•CFOsareaboveallworriedaboutthelongtermsuccessofbusinessinBelgium.Politicalstabilityandregulatorypredictabilityarekeyfactorstoinvestmentandexpansionarystrategies.Currentpolicymaking-acrossallareas-isinappropriateforthelongtermsuccesofbusiness.

•Longgovernmentformationprocessesswillleadtolowerhiring,delayedcapitalspendingandreducedforeigninvestment.

Key points

Deloitte Belgian CFO SurveySecondquarter20145

Macro-economic backdrop to the second quarter CFO surveyGlobalequitymarketsrose4.2%inthesecondquarterandyieldsontheUSandGermanbondsfell.Growthforecastsforemergingeconomiesedgedloweronamixofgeopolitical,financialandeconomoicconcerns.TheUSeconomyshrankinthefirstquarter,althoughtheeffectsofanunusuallyharshwinterandbusinessinventoryrestockingappeartobetemporary.PortugalexiteditsbailoutprogrammeandGreecesuccessfullyraisedmoneyinthemarkets,butconcernsaboutdeflationandlowgrowthpromptedtheEuropeanCentralBanktocutinterestrates.IntheUK,inflationsoftenedandoutputroseby3.1%intheyeartoQ12014,thestrongestperformanceinthedevelopedworld.

Ian Stuart, Chief Economist Deloitte UK

6

Looking Back: Business confidence through the financial and economic cycle (2009-2014)

Mor

e O

ptim

istic

Less

Opt

imis

tic

Q2 2009 “Preparing for a slow recovery”

Q1 2009“First signs of optimism in

uncertain times”

Q3 2009 “Financial

conservatism is back”

Q4 2009“Diverging fortunes

going into 2010”

Q1 2010“Financial

Repair, economical uncertainty”

Q2 2010“Confidence

grows”

Q3 2010“Higher confidence,

good results”

Q4 2010“Planning for

Growth”

Q1 2011“Call for caution” Q2 2011

“At a turning point”

Q3 2011“Results under

pressure”

Q4 2011“Outlook 2012:

a very difficult year”

Q1 2012“Anxiety has eased,

but plenty ofrisks remain”

Q4 2012“Outlook 2013:

how CFOs are preparing for 2014”

Q1 2013“Concerns Dominate”

Q2 2013“Call for Action”

Q3 2012“The New Normal

is here to stay“

Q2 2012“Corporates

are defensive“

Q3 2013“A new mood”

Q4 2013“Growth ambitions”

Q1 2014“More appetite

for risk”

Q2 2014“Concern over

government policies clouds current optimism”

Optimism



Mor

e O

ptim

istic

Less

Opt

imis

tic

Q2 2009 “Preparing for a slow recovery”

Q1 2009“First signs of optimism in

uncertain times”

Q3 2009 “Financial

conservatism is back”

Q4 2009“Diverging fortunes

going into 2010”

Q1 2010“Financial

Repair, economical uncertainty”

Q2 2010“Confidence

grows”

Q3 2010“Higher confidence,

good results”

Q4 2010“Planning for

Growth”

Q1 2011“Call for caution” Q2 2011

“At a turning point”

Q3 2011“Results under

pressure”

Q4 2011“Outlook 2012:

a very difficult year”

Q1 2012“Anxiety has eased,

but plenty ofrisks remain”

Q4 2012“Outlook 2013:

how CFOs are preparing for 2014”

Q1 2013“Concerns Dominate”

Q2 2013“Call for Action”

Q3 2012“The New Normal

is here to stay“

Q2 2012“Corporates

are defensive“

Q3 2013“A new mood”

Q4 2013“Growth ambitions”

Q1 2014“More appetite

for risk”

Q2 2014“Concern over

government policies clouds current optimism”

Optimism


8

It is tough running a business in Belgium. Taking into account the financial and economic situation in recent years, the outlook for the coming 12 months is overall positive. The mood amongst CFOs remains optimistic. It is encouraging that the proportion of CFOs who are today less optimistic about the financial prospects of their organisations than they were three months ago, has once again decreased. For the first time in several years, one third of CFOs report that their organisations are outperforming the budget. Risk appetite is at the highest level since the launch of the survey in 2009. On the other hand, many organisations remain first and foremost focused on defensive strategies rather than on expansion. CFOs are above all concerned about policy risk and the long-term success of businesses in Belgium. Policy makers are not providing the answers CFOs are looking for.

Business conditions improvingNotwithstandingunexcitingoverallgrowthexpectationsinBelgiumandintheEurozone,CFOsareinanoptimisticmoodforthefourthquarterinarow.

Thegeneralleveloffinancialandeconomicuncertaintyhasfurtherdecreased,andfollowingthestrongruninfinancialmarketslastyear,equitiesandgovernmentbondsareconsideredadequatelypriced.Interestratesareexpectedtoremainlowforsometime,andthefeelingisthatcentralbankerswillprovidemorestimulustotheeconomytogetthingsmovingifrequired.

IllustrativeforthegraduallyimprovingclimateisthatthepercentageofCFOsthatturnedmorepessimisticabouttheprospectsoftheirownorganisationhasfallenfrom50%atthebeginningof2013toonly10%today,thelowestreadinginyears.

Good financial performanceGraduallyimprovingbusinessconditionshavetranslatedintogoodbusinessresults:attheendofthesecondquarter70%ofsurveyrespondentsreportfinancialperformanceisinlinewiththebudget,upfromaround50%lastyearandonly40%in2012.ThepercentageofCFOsreportingthatsecondquarterresultswilloutperformthebudgetshasgoneupfrom20%in2012andin2013to40%today.

Moregoodnewsonthetopline,whichisexpectedtogrowfor70%ofrespondents.ConsideringthemodestgrowthexpectationsfortheBelgianeconomy

asawhole–typicallybetween1and1.5%-growthprojectionsofsurveyrespondentsfortheirowncompaniesevenseembullish:56%expecttoplinetogrowmorethan2%.32%evenpredicttheirrevenuestogoupbymorethan5%. Desire to growRiskappetitehadseenamarkedincreasefromthebeginningoftheyear,andhassteppedupagainthisquartertothehighlevelswewitnessedin2010.Balancesheetsseemhealthyandfundingisoverallattractiveandavailable.Growthexpectationsinoverseasandemergingmarketsand,toamuchlesserextent,intheEurozoneorBelgiumarethemostimportantdriversforinvestment.

Costcontrol,debtreductionandbuildingupcashhelpedgetbusinessthroughtherecession.CFOsareplacingemphasisonexpansionarystrategiessuchasincreasingcapitalexpenditureandexpandingbyacquisition.Yetweseethatforabouthalfoforganisations,defensivestrategieswithfocusonefficiencyandcostreductionremainthemostimportantpriority–moreimportantthangrowthandexpansion.

SafeguardingthecompetitivepositionoftheirbusinessesremainstheCFOstopconcernintheshortrun,butalsointhelongrun.TheUkrainiancrisisistosomeextentaconcernforCFOs.Abouthalfofrespondentsexpectthat(additional)EUsanctionsagainstRussiawillhaveanegativeimpactontheirbusinesses,althoughtheimpactislikelytobelimited.

Short term prospects improving, but concerns about the future success of business in Belgium


Worrying long-term perspectiveSincethebeginningof2012,wehavereportedhowCFOsevaluatetheappropriatenessofBelgianfinancialandeconomicpolicy-makingforthelong-termsuccessoftheirbusinesses.Sincethen,thereporthasshownreasonsforconcern.Lookingintothedetailsofthevariouspolicyareas,BelgianCFOsaremostnegativeabout–andthisisnotnew-taxationandlabourmarketpolicies.Butalsopolicyareasrelatedtourbanplanning,energy,infrastructure,publicexpenditureandgenerallevelsofregulationforbusinessesareconsideredinappropriateforthelong-termsuccessandviabilityofbusinessesinBelgium.Onlyonepolicyareaisevaluatedpositively:themonetarypolicy,includinginterestratesandinflationwhichfallundertheEuropeanauthorityoftheEuropeanCentralBank(ECB).

Challenges for policy makersWithJuneelectionsjustbehindus,30%ofCFOsareoptimisticthattheresultsofthevotewillhaveapositiveeffectonthelong-termsuccessofbusinesses,whereas15%arepessimistic.CFOsareclearaboutwhatshouldbepolicymakers’keyfinancialandeconomicpriority:reducingthelabourcostbyloweringemployercontributions.Otherpriorities–butsignificantlyloweronthelist–arethereformoftheautomaticwageindexationsystemandlabourmarketflexibility.

CFOshopenewFederalandRegionalgovernmentswillbeformedsoon.AlthoughhalfofCFOsreportalonggovernmentformationprocessmighthaveanegativeimpactonconsumerdemandanddelaycapital

spending,hiringorforeigninvestments,theotherhalfreporttheirbusinesseswilllikelynotbeimpacted.

CFOsmightevenpreferalong(er)governmentformationprocess,aslongasthisintheendresultsinfinancialandeconomicpolicyprioritiesthatwillcontributetothelong-termviabilityoftheirbusinesses.

Itisuptothepolicymakerstotakeupthechallenge.TheresultsoftheDeloitteCFOsurveysuggestbusinessesarewillingandreadytoinvest,providedthelong-termperspectiveisclear.Tothisend,politicalstabilityandregulatorypredictabilityarekey.

ThierryVanSchoubroeck, JoëlBrehmenPartner,CFOServices FinanceLead,Partner

10

Positive highlightsOptimistic mood lasts

InthecourseofthelastfourquartersNetOptimism,oneofthekeyindicatorsofthesurvey,hasstabilisedandremainspositive.Sincethethirdquarteroflastyear,CFOsareoveralloptimisticaboutthefinancialprospectsoftheircompany.

Theoptimisticmoodcoincideswithagradualreductionofthegeneralleveloffinancialandeconomicuncertainty.Inthesecondquarter,theindicatorfurtherdecreasedfortheseventhquarterinarowsince2012.12%ofCFOsnowratethegenerallevelofexternalfinancialandeconomicuncertaintyhigh/veryhigh.

Mor

e op

timis

ticLe

ss o

ptim

istic

Net % of CFOs who are more/less optimistic about financial prospects for their company

-100%-90%-80%-70%-60%-50%-40%-30%-20%-10%

0%10%20%30%40%50%60%

-18%

0%

22%17%

25%

44%40%

53%

26%

8%

-34%

-75%

-42%

-27%

-11%

-29%

-15%

34%30%

39%35%

12%

'14 Q1

'14 Q2

'13 Q4

'13 Q3

'13Q2

'13Q1

'12 Q4

'12 Q3

'12 Q2

'12Q1

'11 Q4

'11 Q3

'11 Q2

'11 Q1

'10 Q4

'10 Q3

'10 Q2

'10 Q1

'09 Q4

'09 Q3

'09 Q2

'09 Q1

% of CFOs rating the general level of external financial and economic uncertainty high/very high

0%

10%

20%

30%

40%

50%

60%

2014 Q2

2014 Q1

2013 Q4

2013 Q3

2013 Q2

2013 Q1

2012 Q4

2012 Q3

2012 Q2

2012 Q1

2011 Q4

2011 Q3

2011 Q2

21%

47%

51%

42%

53%

41%37%

33%

27%

26%

17%16%

12%


AlthoughNetOptimismhasremainedrelativelyconstantinthelastyear(andhashencenotincreased),weobservethatthepercentageofCFOswhoarelessoptimisticabouttheprospectsoftheircompanycomparedtothreemonthsagostillcontinuesitsgradualdecline.

Followingtheimportantrallyinfinancialmarketsinthelastyear,andthefurtherstabilisationofthesovereigndebtcrisis,equityandgovernmentbondvaluationsareconsiderednormal.

55%

48%

30%

48%

38%

18% 18%

13%10%

% of CFOs who are less optimistic about the financial prospects for their company

0%

10%

20%

30%

40%

50%

60%

2013Q4

2014Q1

2014Q2

2013Q3

2012Q2

2013Q1

2013Q2

2012Q3

2012Q4

Net % of CFOs who think that the following assets are overvalued/undervalued

-80%

-60%

-40%

-20%

0%

20%

40%

Equity Governments bonds

‘13Q4

‘14Q1

‘14Q2

‘13Q3

‘10Q3

‘10Q4

‘11Q2

‘11Q1

‘11Q3

‘11Q4

‘12Q1

‘12Q3

‘13Q1

‘13Q2

‘12Q2

‘12Q4

‘10Q2

‘10Q1

‘9Q1

‘9Q2

‘9Q3

‘9Q4

Ove

rval

ued

Und

erva

lued

12

Performancetobudgetmarkedanimportantimprovementinthefirstquarteroftheyear.Attheendofthesecondquarter,70%oforganisationsreporttheirfinancialperformanceisinlinewith,orbetter,thanbudgeted.Sinceafewquarters,thepercentageofcompaniesthatareoutperformingtheirbudgetshasbeenincreasing,reaching40%today.

Actual performance & expectations on the rise

Comparison of the surveyed organizations' actuals performance versus budget over time

Worse than expected As expected Better than expected

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

‘13Q4

‘14Q1

‘14Q2

‘13Q3

‘10Q3

‘10Q4

‘11Q2

‘11Q3

‘11Q4

‘12Q1

‘12Q2

‘13Q1

‘13Q2

‘12Q3

‘12Q4

18%

41%

41%

‘10Q2

20%

38%

42%

12%

35%

53%

29%

37%

34%

50%

23%

27%

49%

22%

29%

37%

39%

24%

57%

23%

20%

45%

30%

25%

43%

22%

35%

57%

8%

35%

47%

35%

18%

54%

52%

32%

24%32%

28%

40%

32%

42%

27%22%

15%

CFOs' expectations on the evolution of the following metrics in the next twelve months

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

71% 12% 17%

69% 10% 21%

62% 22% 16%

59%

37%

29%

29%

29%

26%

23%

17%

22%

33%

29%

53%

46%

41%

42%

58%

19%

30%

42%

19%

25%

33%

35%

25%

Increase Same level Decrease

Revenues

Profit before taxes

Operating cash flow

Operating margins

Operating costs

Headcount

Levels of cash and cash equivalentson balance sheet

Capital expenditure

Financing costs

Discretionary spending, for instance on travel,training and marketing

Inventory levels

ThevastmajorityofCFOsexpecttogrowtheirtopline,marginsandprofitsthisyear.Withover40%oforganisationsplanningtoreduceheadcount,averageproductivityshouldgoup.


TakingintoaccountthemoderategrowthexpectationsfortheEurozoneandBelgium,manyCFOsseembullishwithregardstothegrowthexpectationsfortheirbusinesses:80%expecttobeatgeneraleconomicgrowth,withonethirdlookingat+5%growth.

0% 20% 40% 60% 80% 100%

Operating margins

Revenues

CFO’s expectations on key metrics for their companies in the next 12 months

19%

32% 24% 15% 12% 7% 7%

16% 24% 22% 12%

3%

3%

3%

Increase with more than 5%

Increase between 2% and 5%

Increase between 0% and 2%

Same level

Decrease between 0% and 2%

Decrease between 2% and 5%

Decrease with more than 5%

14

Riskappetitecontinuesitssharpincreasesincethebeginningoftheyearwith42%oftherespondingCFOssayingthatnowisagoodtimetotakegreaterriskontotheirbalancesheet.Withthis,wearebackatthelevelswewitnessedattheendof2010–justbeforetheEurocrisisescalated.

Appetite for risk grows

% of CFOs who think now is a good time to be taking greater risk onto their balance sheet

5%

17%17%

21% 23%

28%

31% 35%

41%

35%

30%

21%

22%21%

35%

42%

24%

14%

19%

19%

8%

13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

'14 Q2

'14 Q1

'13 Q4

'13 Q3

'13 Q2

'13 Q1

'12 Q4

'12 Q3

'12 Q2

'12 Q1

'11 Q4

'11 Q3

'11 Q2

'11 Q1

'10 Q4

'10 Q3

'10 Q2

'10 Q1

'09 Q4

'09 Q3

'09 Q2

'09 Q1

Net % of CFOs who think Belgian corporate balance sheets are overleveraged/underleveraged

34%

16%13%

4%

9%

2%

-11%-13%

-11% -10%

-10%

-3%

-9%

0%

-7%

0%

-4%

0%

-22%

-15%

-17%

-9%

-30%

-20%

-10%

0%

10%

20%

30%

40%

'14 Q2

'14 Q1

'13 Q4

'13 Q3

'13 Q2

'13 Q1

'12 Q4

'12 Q3

'12 Q2

'12 Q1

'11 Q4

'11 Q3

'11 Q2

'11 Q1

'10 Q4

'10 Q3

'10 Q2

'10 Q1

'09 Q4

'09 Q3

'09 Q2

'09 Q1

Ove

rleve

rage

dU

nder

leve

rage

d

Belgiancorporatebalancesheetsseemhealthyandallowforopportunityforleverage.


Funding is attractive

Allsourcesoffundingarereportedtobeattractive.Whereasbankborrowingandcorporatedebtgrewinattractivenesssincelastquarterandcontinuetofollowanupslopingtrend,theattractivenessofequitydecreasedinthepasttwoquarters.

Onaverage,bankcreditischeapandavailable,althoughonequarterofCFOsstillcomplainaboutunavailabilityofbankcredit.Surveyresultsalsoindicatethatlargerorganisationshaveeasieraccesstobankcreditthansmallerones.

Net % of CFOs reporting the following sources of funding as attractive/unattractive

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

'14 Q2

'14 Q1

'13 Q4

'13 Q3

'13 Q2

'13 Q1

'12 Q4

'12 Q3

'12 Q2

'12 Q1

'11 Q4

'11 Q3

'11 Q2

'11 Q1

'10 Q4

'10 Q3

'10 Q2

'10 Q1

'09 Q4

'09 Q3

'09 Q2

'09 Q1

Att

ract

ive

Una

ttra

ctiv

e

Bank borrowings EquityCorporate debt

Net % of CFOs reporting credit is costly and net % reporting credit is available

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

'14 Q2

'14 Q1'

'13 Q4

'13 Q3

'13 Q2

'13 Q1

'12 Q4

'12 Q3

'12 Q2

'12 Q1

'11 Q4

'11 Q3

'11 Q2

'11 Q1

'10 Q4

'10 Q3

'10 Q2

'10 Q1

'09 Q4

'09 Q3

'09 Q2

'09 Q1

Cre

dit

is c

ostly

Cre

dit

is c

heap

Cre

dit

is a

vaila

ble

Cre

dit

is u

nava

ilabl

e

Cost of credit Availability of credit

16

Overall,mostBelgianCFOsexpectthatpriceandlendingtermswillnotchangesignificantlyoverthenext6months.

CFOs' expectations about evolutions of price terms and lending terms in the next 6 months

25%27%

48%

Higher price terms and/ or harder lending terms

No change

Lower price terms and/ or easier lending terms


AlthoughthecrisisintheUkraineisnottopoftheCFOsprioritylist,itmighthaveanimpactonthebusinessenvironmentinBelgium.IncaseadditionalsanctionswillbeimposedonRussia,approximatelyhalfofthesurveyedCFOsexpectsomenegativeimpactontheirbusiness.

Withtheeconomicrecoveryprettymuchontrack,CFOsaremostofallconcernedabouttheircompetitivepositioninthemarket.Asinpreviousquarters,CFOsalsoremainconcernedabouttheimpactoffinancialandeconomicpolicymakingandregulatorychanges.

Current Focus Areas

CFOs' perception on the greatest concern for their business in the next 12 months

Competitive position in the market

Economic recovery/outlook

Impact of Belgian financial & economic policy making

Changes in regulation

Slow-down in China

Increasing sovereign risk

Access to capital

Commodity prices

Interest rates

Situation in Russia & Ukraine

Shortage of (skilled) labour

32%

27%

12%

7%

7%

3% 3%

3%3% 3%

0%

Impact of additional sanctions against Russia in the context of the Ukrainian crisis on CFO's company/business

0%

2%

52%37%

10%

Very positive

Positive

Neither positive nor negative

Negative

Very negative

18

Business strategies likely to be a priority for the CFO's businesses over the next 12 months (2014 Q2)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Strong priority Somewhat of a priority Not a priority

Increasing productivity/efficiency

Expanding organically

Reducing costs

Increasing cashflow

Introducing new products/services or expanding into new markets

Reducing leverage

Increasing focus on sustainability programmes

Expanding by acquisition

Increasing capital expenditure

Disposing of assets

Raising dividends or share buy backs

69%

53% 32% 15%

7%41%53%

51% 44% 5%

19%44%37%

20% 41% 39%

31%51%

25% 56%

19%

19%

12% 31% 58%

60%34%5%

3% 12% 84%

29%

2%

3%

13%

0%

10%

-2%

5%

2%

1%

-1%

Change in strong priority from 2013 to 2014

Increasing productivity/efficiency

Expanding organically

Reducing costs

Increasing cashflow

Introducing new product/service or expanding into new markets

Reducing leverage

Expanding by acquisition

Increasing capital expenditure

Disposing of assets

Raising dividens or share buy backs

-6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14%

decreased as priority increased as priority

-5%

Notwithstandingtheimprovedbusinessclimateandtoplinegrowthambitionsofmostcompanies,safeguardingthecompetitivepositionthroughcostreductionandefficiencyimprovementstillrankstopofthestrategicprioritylist.

Today’sstrategicprioritiesarenotverydifferentfromthosereportedoneyearago.Organicexpansionhasgainedsomeground,reflectingtoplinegrowthambitions.


FormostCFOs,defensivestrategiesremainmoreimportantthanexpansionarystrategiesinspiteofgrowingoptimismandriskappetite.

CFO priorities: defensive vs. expansionary strategies

Arithmetic average of the % of CFOs who rated expansionary and defensive strategies as a strong priority for their businesses in the next 12 months. Expansionary strategies are introducing new products/services or expanding into new markets, expanding by acquisition and increasing capital expenditure. Defensive strategies are increasing productivity/efficiency, reducing costs, reducing leverage, disposing of assets and increasing cash flow.

Expansionary strategies Defensive strategies

20%

30%

40%

50%

2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2

Stimulating/Inhibiting factors to investment plans (current impact)

0% 10% 20% 30% 40% 50% 60%

10%

10%

8%

37%

32%

44%

59%

Actual or expected growth in Belgium

Actual or expected growth in the euro area

Cost and availability of external finance

Actual or expected growth in US,Japan, Asia-Pacific

Availability of internal finance

Actual or expected growth inemerging markets

Secular or long-term growth for your products or services

Secularorlong-termgrowthforproductsandservicestogetherwithgrowthinUS,Japan,AsiaPacificandtheemergingmarketsarethemostimportantdriversforinvestment.TheprospectsforBelgiumandtheeuroareaarelessexciting.

20

Inparticularorganisationswhoderiveatleast70%oftheirrevenuefromabroad,expectgrowthinUS,Japan,Asia-Pacificandtheemergingmarketstohaveapositiveimpactontheirinvestment.Theyarealsomorepositiveabouttheimpactoftheavailabilityofinternalfinanceandlong-termgrowthfortheirproductsandservices.

Stimulating/Inhibiting factors to investment plans (current impact) - Local vs. international companies

0% 10% 20% 30% 40% 50% 60% 70% 80%

Actual or expected growth in Belgium

Actual or expected growth in the euro area

Cost and availability of external finance

Actual or expected growth in US, Japan, Asia-Pacific

Availability of internal finance

Actual or expected growth in emerging markets

Secular or long-term growth for your products or services

13%

17%

4%

11%

17%

6%

54%

11%

42%

22%

61%

18%

65%

44%

Organisations deriving 70-100% of revenue from outside Belgium

Organisations deriving 0-30% of revenue from outside Belgium


Attention points

ThismeansCFOsaresignificantlylessoptimisticthanTheNationalBankofBelgium.IntheirJuneforecast,theNBBanticipatesgrowthof1.5%forBelgiumin2014.

AlthoughCFOsarepositiveaboutboththetopandbottomlineprospectsfortheirownorganisations,theyarelessoptimisticaboutBelgianeconomicgrowthprospectsforthisyear.90%expectthatgrowthwillnotexceed1%.

CFOs' expectations for the Belgian economic growth in 2014

Greater than 1%

0,6% to 1%

0,2% to 0,5%

-0,1% to 0,1%

-0,5% to -0,2%

-1% to -0,6%

Less than -1%

10%

32%

45%

13%

0%

Real GDP evolution: Belgium vs. the Eurozone

-2,0%

-1,5%

-1,0%

-0,5%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

Belgium Eurozone

2010 2011 2012 2014*2013

* Source of data: Economic Indicators for Belgium N° 2014-24, National Bank of Belgium2014 data are forecasts, the Belgian forecast is based on NBB estimates from June 2014, Eurozone forecast on OECD data from May 2014

22

CFOshavegenerallybeendissatisfiedwithBelgianprioritiesforfinancialandeconomicpolicy-making.Thisremainsthecasetoday.However,itissomewhatencouragingthatthepositivetrendofdecreasingdissatisfactionseeninthepastyearcontinues.

-33%

-25%

-29%

-20%

-52%

-44%

-27%-34%

-46%

-63%

2012 Q1

2012 Q2

2012 Q3

2012 Q4

2013 Q1

2013Q2

2013 Q3

2014 Q1

2014 Q2

2013 Q4

Perception of a net % of CFOs of the way in which the Belgian government is setting the right priorities for financial and economic policy making

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

appr

opria

teun

appr

opria

te

-63%

-45%

-43%

-26%

-23%

-22%

-16%

-9%

-14%

14%

53%

Net % of CFOs evaluating appropriateness of the current policy settings in the following areas for the long-term success of business in Belgium

Taxation policy

General levels of regulation affecting business

Labour market

Public expenditure

Energy policy

Urban & town planning

Infrastructure

Financial regulation

Immigration policy

Education & training

Monetary policy, including interest rates, inflation and the

availability of credit (Eurozone policy)

-80% -70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%

Inappropriate Appropriate

CFOsaretodaypositiveaboutthemonetarypolicyoftheEuropeanCentralBank.Itisworryingthat–withtheexceptionofeducation-noneofthepolicyareasundertheresponsibilityoftheBelgian/regionalauthoritiesthatwesurveyedareperceivedasappropriateforthelong-termsuccessofbusinessesinBelgium.


Shortlyafterthelatestregionalandfederalelections,mostCFOsdonotexpectthenewlycreatedpoliticalsituationwillresultinamarkedchangeinthebusinessenvironmentinBelgium.However,withanetbalanceof+15andwiththegovernmentformationprocessstillongoing,theaverageCFOissomewhatpositiveaboutthepotentialforimprovement.

Ifthegovernmentformationprocesswouldbeverylong,aswasthecaseafterthe2010elections,impactwillbelimitedtohalfofthesurveyedorganisations.Ontheotherhand,forthathalfcontinuedpoliticalinstabilitywillresultinreducedconsumerdemand,lowerordelayedcapitalspending,andreducedforeigninvestment.

Extent to which outcome of current elections will have a positive impact on businesses in Belgium, also in the long-term

Very positive

Positive

Neither positive nor negative

Negative

Very negative

29%

53%

14%

2% 2%

Expected impact of a long federal government formation process of CFOs' companies

Planned investments delayed

Drop in consumer demand

Loss of investments from foreign investors

Cutback on hiring new employees

Reduction in capital spending

Reduction in spending on e.g. R&D,

marketing and other discretionary spending

No impact

25%

10%

5%

2%0%

49%

9%

24

Aboveall,CFOsdemandpolicymakerstogiveprioritytolabourcostreductionbyloweringemployercontributions.AsCFOsareoverallconcernedabouttheircompetitivepositioninthemarketandfocusedoncostreduction,thisdirectmeasurecouldprovidetheoxygenthatmanyorganisationsneed.

Measures that would have the most positive impact on CFOs' business

Decrease labour cost by lowering employer contributions

Decrease labor cost by changing automatic wage indexation

Increase labour market flexibility

Deregulation/stable regulation

Mobilise savings for long term financing of businesses

Lower energy costs

Increase amount of tax free personal allowance50%

17%

10%

9%

9%

5%

0%


Atotalof60CFOs,activeinavarietyofindustriescompletedour2014secondquartersurvey.27%oftheparticipatingcompanieshaveaturnoverofover€1billion,46%ofbetween€100millionand€1billionand27%oflessthan€100million.

31%oftheparticipatingcompaniesderiveupto30%oftheirrevenuesfromoutsideBelgium,29%between31%and69%and41%derivemorethan69%oftheirrevenuesfromoutsideBelgium.

Profile Q2 survey participants

Industry sector

Manufacturing

Banking/finance/insurance

Construction/mining

Retail/wholesale

Services/consulting

Transport

Healthcare/pharmaceuticals

Communication/media

Energy/utilities

Real estate

Technology

Leisure/entertainment

28%

14%

12%9%

7%

7%

5%

5%

5%3%

3% 2%

Revenues derived from outside Belgium

0% - 30%

31% - 69%

70% - 100%30%

29%

41%

Turnover

> € 1 bn

€ 100-€ 999 mn

< € 100 mn

27%

46%

27%

26

The Deloitte Belgian CFO Survey is produced by Thierry Van Schoubroeck, Partner, and Romana Jelinkova, Senior Consultant.

A note on methodologyNotallsurveyquestionsarereportedineachquarterlysurvey.Inresponsetothecurrentfinancialeconomicsituation,surveyquestionswillbeselected.Incaseyouparticipatedinthesurveyandwouldliketoreceiveinformationaboutnon-reportedquestions,donothesitatetocontactus.

SomeofthechartsintheDeloitteCFOsurveyshowtheresultintheformofanet%balance.Thisisthepercentageofrespondentsreporting,forinstance,thatbankcreditisattractiveminusthepercentagesayingbankcreditisunattractive.Thisisastandardwayofpresentingsurveydata.

The2014secondquartersurveytookplacebetween2Juneand19June,2014.Atotalof60CFOscompletedoursurvey.TheparticipatingCFOsareactiveinvarietyofindustries.27%oftheparticipatingcompanieshaveaturnoverofover€1billion,46%ofbetween€100millionand€1billion,and27%oflessthan€100million.

WewouldliketothankallparticipatingCFOsfortheireffortsincompletingoursurvey.Wehopethereportmakesaninterestingread,clearlyhighlightingthechallengesfacingCFOs,andprovidinganimportantbenchmarktounderstandhowyourorganisationratesamongpeers.

Delivering the voice of the CFO community

DeloittereferstooneormoreofDeloitteToucheTohmatsuLimited,aUKprivatecompanylimitedbyguarantee,anditsnetworkofmemberfirms,eachofwhichisalegallyseparateandindependententity.Pleaseseewww.deloitte.com/aboutdetaileddescriptionofthelegalstructureofDeloitteToucheTohmatsuLimitedanditsmemberfirms.

Deloitteprovidesaudit,tax,consulting,andfinancialadvisoryservicestopublicandprivateclientsspanningmultipleindustries.Withagloballyconnectednetworkofmemberfirmsinmorethan150countries,Deloittebringsworld-classcapabilitiesandhigh-qualityservicetoclients,deliveringtheinsightstheyneedtoaddresstheirmostcomplexbusinesschallenges.Deloitte'smorethan195,000professionalsarecommittedtobecomingthestandardofexcellence.

©July2014,DeloitteConsultingDesignedandproducedbytheCreativeStudioatDeloitte,Belgium.

Joël Brehmen FinanceLead,[email protected]+3228002232

ContactThierry Van SchoubroeckPartner,[email protected]+3227495604

deloitte belgian cfo survey concern over government ... · q2 2010 “conﬁdence grows” q3 2010...

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