Thursday, 8 January 2009

More in-house financing next year, say CFOs at manufacturers

This is interesting data - KT

Recession? What recession?

Half of the CFOs at manufacturing companies recently surveyed said they expect their company’s revenues to go up in 2009, while nearly four in ten said they were predicting increased earnings.

Remarkably, over half of the finance chiefs said that the current state of the economy will have no impact on their growth plans. In fact, nearly seven in ten CFOs said they expect to boost the price of their products in 2009. That’s a fair jump from the 56% predicting price hikes last year.

The survey, conducted by Granite Research Consulting for Bank of America Business Capital, elicited responses from some 600 finance chiefs at mid-size and large manufacturers.

“Overall, these results reflect the severity of the current economic downturn and the uncertainty about how long it will take to work our way out of it,” said Mickey Levy, chief economist for Bank of America. “But, CFOs are taking necessary steps such as trimming inventories and operating costs in order to remain competitive, as they try to weather the storm.”

Indeed, only about a fifth of CFOs indicated that their capital expenditures for next year will be higher. Last year, about a third expected an increase in capex.

Meanwhile, 40% of finance chiefs expect to spend less or refrain from making capital expenditures altogether in 2009.

Nevertheless, about 80% of the CFOs surveyed said their company’s borrowing needs will either increase or stay about the same in 2009. While half of the finance chiefs indicated that credit availability has remained steady over the past twelve months, about a third said their lender has restricted credit availability. Last year, only 10% said they were expecting a shrinking of available credit.

And while nearly 60% of the respondents are considering financings next year, over half plan to use internal means to raise the cash. The most likely type of capital-raisings? Cash flow financing, asset-based financing, and leasing.

Given that response, it’s not overly surprising that CFOs said cash management (63%) and letters of credit (59%) remain the most commonly purchased services from banks.

John Goff, Financial Week, 11 December 2008.

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