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CFO optimism drops in Q4 2012

CFO optimism drops in Q4 2012

CFO optimism drops in Q4 2012

Pictured: Shane Mohan

Optimism amongst finance leaders in Ireland stood at a net 17pc in the fourth quarter of 2012, down from 31pc in the previous quarter, according to the latest Deloitte CFO survey.

Deloitte said the findings appear to tie in closely with Ireland’s prospects of securing a deal on the legacy bank debt.

While just 10pc of respondents said they believe the Irish economy had returned to growth by the end of 2012, a net 27pc believe that their company had returned to growth in Q4 2012. However, a net 24pc said their turnover will increase in the next six months compared to a net 38pc of respondents in Q3 2012.

A net 37pc of respondents said they expect increased profitability within the next six months, broadly in line with Q3 2012. Eight out of 10 CFOs believe the EU presidency will boost their business in the first half of 2013.

“All business leaders require certainty, however it is clear from this quarter’s findings that this remains as elusive as ever,” said Deloitte partner Shane Mohan. “There appears to be a direct correlation between CFO confidence and Ireland’s efforts to secure a deal with the EU to lighten the legacy bank debt burden.  A deal on the bank debt may be the green light that many Irish businesses are waiting for before enough confidence is restored for companies to begin investing again. With current noises about a debt deal more hopeful in recent days, it will be interesting to see if CFO optimism rises again in the first quarter of 2013.”  

The survey finds that Ireland continues to rank poorly in comparison with its European counterparts in terms of cost and availability of credit. In terms of cost, Ireland ranks bottom of the six countries surveyed. Availability of credit is perceived as most difficult in the Netherlands with a net 37pc of respondents finding credit hard to get. However, Ireland ranks just above this at net 23pc.

“It’s encouraging that confidence in the domestic capital markets is on the rise,” said Mohan. “However this quarter’s report does highlight the trend that CFOs are decreasingly depending on credit as their primary source of funding – 48pc of respondents expect the total debt on their company’s balance sheet to decrease over the next three years. Lending institutions are no longer seen as a certain source of funds. This is resulting in increased internal sources of funding and a reduction in balance sheet gearing.”

This quarter’s survey also shows that nine out of 10 CFOs do not believe that Budget 2013 went far enough in terms of job creation initiatives. Similarly, 83pc of respondents believe that the Budget did not go far enough in delivering real reform of the public finances. However, the increase of the cash receipts basis threshold for VAT was deemed positive – 75pc believe that this will improve cashflow within their companies. Overall, the majority of CFOs (66pc) had a neutral reaction to the coalition’s second budget.