Frankfurt/Main – Germany’s Chief Financial Officers (CFOs) are significantly more cautious about business prospects than they were just six months ago. On the other hand, the majority consider themselves well equipped to cope with tougher times. They are also confident with regard to increasing regulation in the financial sector. Those are some of the findings from the third CFO panel surveyed by the editorial board of FINANCE magazine – for the first time in conjunction with CMS Hasche Sigle.
More than 100 CFOs of German companies provided their assessment of the market anonymously. Finance chiefs are clearly ready to take unconventional measures in response to the market situation. 6% of those surveyed are considering applying for a banking licence or a licence as a financial or payment service provider. Currently, more than half of all DAX30 companies have a licence from the German Federal Financial Supervisory Authority (BaFin) to offer certain financial services, notes Dr Marc Riede, Banking partner at CMS Hasche Sigle. "This is a trend that could also become more common outside the DAX30."
Respondents are split on the matter of regulation. Almost 60% of survey participants have a neutral view on current trends, around one third find them detrimental, while some 10% rate them as beneficial.
The relative willingness to consider less usual foreign currencies for financing purposes, such as the renminbi or yen, shows that German CFOs are also looking to diversify their sources of finance. "In addition to diversification, this enables companies to avoid potential currency risk in the Eurozone or to take advantage of interest rate differences," says Marc Riede. Significantly, 9% of respondents are thinking about using this type of finance within the next six months, with most focusing on the renminbi, followed by the yen. One participant even has his sights on the Norwegian krone.
The responses from survey participants also indicate that CFOs are now trimming back their expectations in relation to business prospects. In the previous survey some six months ago, panellists still seemed to be defying the turbulence caused by the euro crisis. In contrast, about one third are now saying that the business outlook for the coming half year is set to deteriorate. The new subdued mood is very apparent when investment is mentioned. On average, CFOs are now only budgeting for a 2% rise in investment. Back in April, CFOs had been expecting a rise of 9%. Expectations for sales (up 5%, after 6% in the spring) and earnings (a rise of 4%, following 7.3% in spring) also fell substantially in autumn 2012.
In contrast, companies seem to be making good progress in terms of their financial planning, with expectations in relation to cash flow and net liquidity improving. Expectations for the latter increased from + 2.4% in the spring to + 8%, while cash flow expectations rose from + 5.8% in the spring to + 7% at present. "Overall, these opposing trends can be seen as a consequence of reduced investment and thus as a reflection of more pessimistic expectations with regard to business performance and financing options," comments Riede.
When it comes to the subject of acquisitions, CFOs are not conspicuously optimistic. An increasing number are nonetheless at least considering the idea of possibly picking up a bargain. Only around 60% of respondents categorically exclude an acquisition in the near future; six months ago, the figure was almost 70%. Finance bosses have enough cash on hand for cut-price acquisitions that offer opportunities for consolidation. "Companies are largely relying on their own resources rather than on banks for acquisition projects," says CMS partner Dr Christian von Lenthe.