cfo innovation business outlook survey q1 2013

7/29/2019 CFO Innovation Business Outlook Survey Q1 2013

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BUSINESSOUTLOOKSURVEY FIRST QUARTER 2013


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CFO INNOVATION ASIA BUSINESS OUTLOOK SURVEY FIRST QUARTER 2013 QUESTEX ASIA LTD

Key Takeaways

Economic outlook: Heightened optimism in 2013

Equally positive at the company level

Sales and prots: Greater expectations

Holding steady on capex

Fewer hiring but higher pay

More comortable with risk

Intensiying worries about regulations

Talent as perennial concern

Back to marketing

About this report

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CONTENT

2013 Questex Asia Ltd. All rights reserved. All

inormation in this report is veried to the best o the

publishers ability. However Questex Asia Ltd does not

accept responsibility or any loss arising rom reliance on it.

Neither this publication nor any part o it may bereproduced, stored in a retrieval system, or transmitted

in any orm or by any means electronic, mechanical,

photocopying, recording, or otherwise, without the prior

permission o Questex Asia Ltd.


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KEY TAKEAWAYS

There is a sharp increase in optimismin CFO sentiment on the growthprospects o the economy where theyare based. Hal o the nance executivespolled (50%) now say they are moreoptimistic or very optimistic, comparedwith just 30% who said the same in theprevious quarter. This level o optimismis the highest since the rst quarter 2011survey.

By economy, respondents based in India(59%) and Malaysia (55%) are the mostoptimistic, ollowed by Hong Kong (47%)and China (38%).

Singapore is host to the least optimisticCFOs, only 26% o whom say they are moreoptimistic today. Four out o ten (44%) areactually less optimistic or not optimisticat all about the growth prospects o theSingapore economy.

Confdence in company perormancehas likewise strengthened. More thanve out o ten respondents (54%) areoptimistic about the growth prospects otheir rm, up rom 39% in the previoussurvey. Nearly six out o ten (58%) expecthigher sales (previous quarter: 54%) while53% orecast bigger prots (previousquarter: 48%).

CFO Innovation Asia surveyed 169 CFOs, nance directors,

controllers and other senior executives across Asia rom 29

December 2012 to 7 January 2013. The key ndings include

the ollowing:

CFOs remain sanguine about somecompany-level risks. Only 27% o theexecutives surveyed now expect receivablesat risk to increase, the same level as in thetwo previous surveys, down rom 31% inthe second quarter o 2012. The proportiono those orecasting a longer Days SalesOutstanding period has also allensharply, to just 19% rom 29% and 26%,respectively, in the previous two surveys.

While companies remain cautious oncapital spending, they appear to bemore willing to invest more in salesand marketing and R&D. Only 35% orespondents say their rm will increasecapital expenditures, roughly the sameproportion as in the previous two surveys.But 36% will spend more on marketing andadvertising (29% and 30%, respectively, inthe previous two surveys). And 22% willincrease R&D investment (previous survey:17%).

The proportion o companies that willintensiy M&A activity stands at 21%, downrom 27% in the ourth quarter o last year.

Consumer demand remains on top othe list o external concerns. It is rated asa top-three concern by 47% o respondents(previous survey: 51%). Worries aboutgovernment regulations have increasedsharply it is cited by 42% o respondentsas a top-three external issue, rom only31% in the previous quarter.

Key Takeaways l Economic outlook: Heightened optimism in 2013 l Equally positive at the company level

Sales and prots: Greater expectations l Holding steady on capex l Fewer hiring but higher pay l More comortable with risk

Intensiying worries about regulations l Talent as perennial concern l Back to marketing l About this report


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Currency risk (29% vs. 26% previously)and oreign competition (27% vs. 23%)round out the list o key external concerns.Worries over an infux o oreign rivalshave been rising since the beginning o2012, when 19% o respondents cited thisexternal issue as a top-three concern.

As noted in previous reports, this maybe an indication o actual or expectedreocusing o US and European MNCs,

and Asian regional businesses, on sellingto Asian consumers and businesses asdomestic consumption becomes a keydriver o growth across the region andthe economic environment in the US andEurope remains volatile.

As in previous surveys, attractingand retaining qualifed employeescontinues to be the top internalconcern. Indeed, the proportion orespondents that cite talent managementas a top-three internal concern has risensharply to 60% rom 49% in the previousquarter. Cost-cutting is a ar second at38% (previous survey: 41%), ollowedby working capital management at 30%(previous survey: 29%).

Interestingly, supply chain risk is climbingthe list o internal concerns 21% cite thisas a top-three concern, up rom just 13%in the previous quarter.

For the frst time, renewing ocus onsales and marketing has overtakenexpanding to new markets as thetop strategic ocus. In previous surveys,expansion (66% in the previous survey)was the top-three strategic priority orcompanies in the next 12 months. In thissurvey, sales, marketing and distributionis cited by the highest number orespondents as a top-three strategic ocus(54%), ollowed by reducing overhead

costs (52%) and expansion to newconsumer segments and/or geographicalmarkets (50%).

It may be that companies are eeling theneed to nurture and strengthen the marketshare they already have in consumersegments and geographical markets, inaddition to continuing expansion intonew areas. I so, this is a wise move sincethere is little point in expanding into reshmarkets and then neglecting to deepenpenetration and growth.





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Base: 160 respondents (4Q 2009); 205 (1Q 2010); 215 (2Q 2010); 165 (3Q 2010); 147 (4Q 2010);144 (1Q 2011); 119 (2Q 2011); 165 (3Q 2011); 215 (4Q 2011); 192 (1Q 2012); 286 (2Q 2012);

250 (3Q 2012); 162 (4Q 2012); 169 (1Q 2013). Totals may not add up to 100% due to rounding

Economic outlook:Heightened optimism in 2013

How optimistic are you about the prospects o

the economy where you are based?

Optimism about the growth prospectso the economy where the respondent isbased has spiked sharply, with 50% oAsias CFOs now saying they are moreoptimistic or very optimistic, comparedwith 30% who said the same in theprevious quarter. The proportion o thosewho are less optimistic or not optimistic atall has correspondingly allen, to just 24%,rom 43% in the previous survey.

At hal o respondents, the level o optimismis the highest since the rst quarter o 2011,when 54% o respondents said they weremore optimistic or very optimistic about thegrowth prospects or their economy.

4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13

9%

11%

9%

32%

19%17%

29%

32%

51% 53%

32%

44% 43%

24%

65%

61%

67%

43% 47%

54%

45%

27%

20% 20%

35%

20%

30%

50%

26% 27%24%

26%

33%

29% 27%

41%

29% 27%

34% 36%

27%26%

No change





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Base: 99 respondents

Optimism by country

Finance executives based in India arethe most positive about that countryseconomic prospects, with 59% optimistic,ollowed by Malaysia (55%), Hong Kong(47%) and China (38%).

CFOs in Singapore are the least optimistic,with only 26% orecasting economicgrowth in that economy. Highly exposedto the global economy, Singapores GDPis orecast to have grown by just 1.5%to 2.5% in 2012, whereas China, HongKong, India and Malaysia are expected tohave turned in a considerably more robusteconomic perormance.

No change

38%

47%

59%

55%

26%

31%

37%

18%

45%

29%

31%

16%

23%

0%

44%

China

Hong Kong

India

Malaysia

Singapore





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Base: 124 respondents (4Q 2009); 202 (1Q 2010); 214 (2Q 2010); 163 (3Q 2010); 143 (4Q 2010);

143 (1Q 2011); 116 (2Q 2011); 164 (3Q 2011); 214 (4Q 2011); 188 (1Q 2012); 286 (2Q 2012;

249 (3Q 2012); 161 (4Q 2012); 167 (1Q 2013). Totals may not add up to 100% due to rounding

Equally positiveat the company level

How optimistic are you about the growth prospects

o your own company?

The executives surveyed are equallyoptimistic about the growth prospects ortheir own company. More than ve out oten (54%) express optimism, up rom 39%in the previous survey.

The level o pessimism has correspondinglyallen, with only 19% saying they are lessoptimistic down rom 32% in the lastsurvey.

4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13

14%11%

12%

22%

17%

8%

20%

26%

37%

30%

27%

31%

32%

19%

53%

67%

58%

49% 50%

57%

51%

35%

33%

36%

47%

31%

39%

54%

33%

27%

30% 29%34%

36%29%

40%

30%

34%

26%

39%

29%

27%

No change





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Base: 157 respondents. Totals may not add up to 100% due to rounding

Sales and prots:Greater expectations

What changes does your company anticipate

in the next 12 months?

Consistent with the greater optimism onthe companys growth prospects, 58%o the executives surveyed expect salesto rise in the next 12 months (previoussurvey: 54%), while 53% orecast largerprots (previous quarter: 48%).

There is a similar spike in expectationswith regards to new orders or thebusiness (57% say they will be getting

more o them, up rom 42% in the previousquarter), possibly refecting improvementin the exports environment in China andelsewhere in Asia and more buoyantdomestic consumption.

The proportion o those who believe theircompany will enjoy pricing power goingorward has increased as well, to 36% rom32% in the previous survey.

Increase No change Decrease

58%

15%

27%

Sales/turnover

53%

25%22%

Earnings

57%

15%

27%

New orders forthe business

36%

13%

50%

Prices of yourgoods/services





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Holding steady on capexWhat changes does your company anticipate


Caution in capex and other spendinghas been evident in the three previoussurveys and this continues to be the casein this current research. The proportion orespondents who say their company willincrease capital expenditures remains at35%.

A majority (51%) had planned to increasecapex in the third quarter o 2011. In thiscurrent survey, 25% will actually cut backon capital spending (previous survey:28%).

The business category that will seehigher spending is sales, marketing anddistribution. Thirty-six percent o theexecutives surveyed will spend more onmarketing and advertising, compared with29% and 30%, respectively, in the previoustwo surveys. In addition, 22% will increaseR&D investment (previous survey: 17%).

The proportion o companies that willintensiy M&A activity stands at 21%, downrom 27% in the ourth quarter o last year.


35%

25%

39%

Capital spending

36%

17%

47%

22%18%

59%

R&D spending

21%

12%

67%





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Base: 138 respondents.

Sotware spending in 2013

Asked what enterprise sotware solutionstheir company will invest in this year,the respondents most oten mentionedenterprise resource planning (36%),customer relationship management (35%)and business intelligence (34%).

Cloud computing (26%) and sotware asa service (22%) also garner signicantmentions, along with HR and nancialmanagement solutions.

36%

35%

34%

29%

28%

26%

22%

21%

20%

13%





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Fewer hiring but higher payWhat changes does your company anticipate


Its still status quo on personnel matters.The majority o respondents (52%) expectemployeee numbers to remain unchanged,compared with 42% who said the samein the previous survey. Only 32% ocompanies will be hiring (previous quarter:34%).

The majority o companies will increase

wages and salaries (54%), though theproportion o those doing so is now lowercompared to the same time last year (69%).Bonuses will remain unchanged (51%) oreven decreased (24%).

Forty eight percent expect productivity(output per hour worked) to increase(previous survey: 52%), with 43% predictingno deterioration.


54%

6%

40%

Wages and Salaries

48%

9%

43%

32%

16%

52%

Number ofemployees

25% 24%

51%

Bonuses





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More comortable with riskWhat changes does your company anticipate


Only 27% o respondents are seeingincreased volumes o receivables at riskin their company (previous survey: 28%),much lower than the 43% at this time lastyear. The proportion o those orecastinga longer Days Sales Outstanding periodremains low at 19% (compared with 29%and 30%, respectively, in the previous twosurveys).

Consistently since this survey was startedin September 2009, respondents indicatethat their company will not decrease cash

on the balance sheet. The proportion oenterprises that will bring down cash levelshas never gone beyond 23% until theourth-quarter 2011 survey, when 29% saidtheir company would decrease cash levelsin the next 12 months.

This trend may be reversing. Only 22%o respondents now say their companywill decrease cash on the balance sheet,compared with 30% at this time last year.Forty six percent o respondents say theircompany will continue accumulating cash(previous survey: 36%).


46%

22%

32%

Cash on the

balance sheet

27%

13%

60%

Receivables

at Risk

19% 18%

63%

Days SalesOutstanding (DSO)

18%21%

61%

Inventory levels





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Base: 145 respondents.

Intensiying worries about regulationsWhat are the most serious external issues that ace your company?

Respondents were asked to identiy and rank the top threeexternal issues their company aces, with Rank 1 denotingthe most serious concern. Consumer demand is ranked No.1 worry by 32% o respondents. In all, 47% rank consumerdemand as a top-three concern (previous survey: 51%).

Worries about government regulations have increased sharply.It is ranked No. 1 concern by 18% o respondents, versus 11%in the previous survey. Regulations is cited as a top-threeexternal issue by 42% o the executives surveyed, rom only

31% in the previous quarter.

This may be a refection o policy actions such as the newlevy on property transactions in Hong Kong and Singaporeor certain corporate buyers, expectations o new rulesand regulations in China, Japan and Korea as new political

leaderships take power and local policy responses to globalbanking, anti-money laundering, anti-corruption, climate-change, corporate governance and accounting initiatives.

Currency risk (29% vs. 26% previously) and oreigncompetition (27% vs. 23%) round out the list o key externalconcerns. Worries over an infux o oreign rivals have beenrising since the beginning o 2012, when 19% o respondentscited this external issue as a top-three concern.

As noted in previous reports, this may be an indication oactual or expected reocusing o US and European MNCs, andAsian regional businesses, on selling to Asian consumers andbusinesses as domestic consumption becomes a key driver ogrowth across the region and the economic environment inthe US and Europe remains volatile.

Rank 1 Rank 2 Rank 3

Consumer demand

Currency risk

Counter-party default and other credit risk

Cost of fuel

Interest rates

Tax policies

Credit markets

Trade agreements

Trade policies

32%

18%

9%

7%

5%

1%

4%

5%

4%

3%

0%

3%

1%

3%

1%

1%

1%

0%

2%

7%

15%

11%

13%

7%

5%

5%

5%

4%

7%

5%

1%

3%

1%

2%

3%

3%

2%

1%

7%

9%

9%

7%

9%

10%

7%

6%

7%

6%

6%

4%

3%

3%

3%

1%

0%

1%

1%





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Talent as perennial concernWhat are the most serious internal issues that ace your company?

Respondents were also asked to identiyand rank the top three internal issues theircompany aces. Attracting and retainingqualied employees is ranked yet again asthe No. 1 internal challenge by the mostnumber o respondents (30% versus 25%in the previous survey). The proportion orespondents that cite talent managementas a top-three internal concern has risensharply to 60% rom 49% in the previousquarter.

Cost-cutting is a ar second as a top-threeconcern at 38% (previous survey: 41%),ollowed by working capital managementat 30% (previous survey: 29%).

Interestingly, supply chain risk is climbingup the list o internal concerns 21% citethis as a top-three concern, up rom just13% in the previous quarter.


Working capital management

Supply chain risk

Ability to forecast results

Internal control and risk management

Business intelligence

Managing IT systems

Payment defaults

Inventory management

Balance sheet weakness

Scenario planning and analysis

Cost of health care/pension plans

Data security

Counter-party risk

19%

0% 20% 40% 60%

12%

8%

12%

8%

3%

5%

5%

6%

3%

3%

2%

3%

4%

1%

2%

1%

2%

30%

13%

9%

6%

8%

8%

4%

3%

1%

2%

3%

4%

3%

2%

1%

1%

1%

1%

10%

12%

12%

8%

6%

8%

6%

7%

6%

6%

2%

3%

2%

2%

3%

4%

3%

2%





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Back to marketingWhat is your companys strategic ocus in the next 12 months?

For the rst time since this survey wasstarted in September 2009, renewingocus on sales and marketing hasovertaken expanding to new markets asa top-three strategic ocus.

In previous surveys, expansion (66% inthe previous survey) was the top-threestrategic priority or companies in thenext 12 months. In this survey, sales,marketing and distribution is cited bythe highest number o respondents as atop-three strategic ocus (54%), ollowedby reducing overhead costs (52%) andexpansion to new consumer segmentsand/or geographical markets (50%).

It may be that companies are eeling theneed to nurture and strengthen the marketshare they already have in consumersegments and geographical markets, inaddition to continuing expansion into newareas. I so, this is a wise move since there islittle point in expanding into resh marketsand then neglecting to deepen penetrationand growth.


Reduce overhead costs

Expand to new consumer segmentsand/or geographical markets

Reduce direct costs

Renew focus on R&D

0% 20% 40% 60%

20%

10%

32%

9%

14%

3%

7%

16%

23%

12%

20%

11%

5%

6%

17%

19%

6%

21%

12%

11%

4%





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About this ReportFieldwork or this online survey was conducted rom 20 December 2012 to 7 January 2013.Cesar Bacani, CFO Innovations Editor-in-Chie, devised the questionnaire, analysed theresults, and wrote the report. Dick Wong, Questex Asia Art Director, designed the report.

A total o 169 respondents rom Singapore, India, Hong Kong, China, Malaysia and otherjurisdictions in Asia participated in this survey. They are CFOs, nance directors, controllersand other senior executives who work in a range o companies in terms o turnover, em-ployee numbers and industry.

Respondents are personally based in the ollowing markets . . .

25%

8%

1%

1%

2%

3%

4%

5%

8%

10%

14%

16%

Singapore

India

Hong Kong

China

Malaysia

Indonesia

Philippines

Thailand

Australia

Japan

Taiwan

Other

Total may not add up to 100% due to rounding





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. . . work in companies with these employee numbers . . .

. . . hold positions with the ollowing titles . . .

39%

7%

1%

3%

4%

7%

9%

14%

15%

CFO/Finance Director

CEO, Chairman, President,Managing Partner or Owner

Financial Controller

Financial Controller

Finance Manager

Vice President Finance

Treasurer

Other



17%

15%

13%

25%

13%

16%

Fewer than 50

51 to 200

201 to 500

501 to 2,000

2,001 to 5,000

More than 5,000





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. . . have the ollowing in annual global turnover . . .

. . . and engaged in the ollowing industries:



8%

19%

10%

14%

12%

8%

9%

5%

7%

8%

Less than US$1 million

US$1 million to US$5 million

More than US$5 million to US$10 million






US$501 million to US$1 billion

Over US$1 billion

15%

4%

4%

4%

4%

7%

7%

9%

10%

10%

11%Manufacturing

Chemicals

Fast-moving consumer goods

7%

3%

3%

3%Energy/oil/gas

Healthcare

Other





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cfo innovation business outlook survey q1 2013

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