U.S. chief financial officers (CFOs) of middle-market companies are becoming more positive on the state of the industries in which they operate, as well as on the outlook for growth, according to the latest GE Capital survey of middle-market CFOs. In fact, this level of optimism has increased substantially since GE first conducted the survey in January 2010.
The survey of 530 CFOs took place in the first quarter of 2011. Respondents worked for companies with revenues of $50 million to $1 billion, operating in seven industry segments (listed below).
Revenues: 72% of CFOs across all industries expect revenues will increase in 2011 compared to 2010. This is up from 64% of CFOs who expected increased year-over-year revenues when asked in January 2010. The survey also found:
Profit margins: 82% of CFOs expect profit margins to increase or stay the same in 2011, down slightly from 86% in January 2010.
Raw Materials: 75% of CFOs saw rising raw materials costs as a significant potential concern in the next 12 months by 75% of CFOs, compared to 60% in the January 2010 survey.
Hiring: 80% of CFOs expect to hire more employees in the next 12 months. Of those planning to hire, they expect to increase their workforce by 6%, with 80% of those positions expected to be permanent. 65% of CFOs have already begun hiring in 2011.
Cost structure: 56% of CFOs expect to grow their cost structures in 2011 – about the same as in January 2010.
Mergers and Acquisitions: 53% of CFOs expect more M&A activity in their industries.
Credit ratings: GE reported an 8-point increase in CFOs who expect to see their credit ratings increase in 2011.
Capital expenditures: 36% of CFOs expect to increase their capital expenditures in 2011, up from 28% in January 2010.
Financing/credit: Capital expenditures top the list of expected financing needs in the next 12 months. Credit availability declined the most in a list of potential concerns over the next 12 months to 39%, down from 51% a year ago.
Product Pricing: 59% of CFOs expect to raise prices on their company’s products or services in 2011.
"It’s clear that top line growth for middle-market companies is improving. CFOs are more optimistic than they were a year ago, which is evident in their plans to invest in their people and infrastructure,” said Dan Henson, president and CEO of GE Capital, Americas. "This is consistent with the uptick in demand we’re seeing across our lending and equipment leasing businesses. Our first quarter financing volume was up 83% versus the same period a year ago, reflecting much improved activity levels.”
About the Survey
CFO respondents worked for companies in seven major industry segments:
• metals, mining and metals fabrication
• food, beverage and agriculture
• general manufacturing
• technology and business services
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