Sixty-five percent of CFOs are more optimistic about the financial prospects for their companies in 2014 and 72 percent reported they are planning capital expenditures in computer hardware and software, indicating a strong and sustained commitment to technology investments, according to Prime Advantage, a buying consortium for midsized manufacturers.
The data was drawn from Prime Advantage’s sixth annual Group CFO Survey, which revealed that member CFOs remain optimistic about financial prospects and are focused on growth, as indicated by increased hiring, capital, and research and development investments.
Cutting operational costs and developing new products and services, the top priorities cited in both the 2012 and 2013 CFO surveys, retained their positions for 2014. The other top priorities included seeking new markets for products and services, cited by 62 percent of respondents, and developing new products and services in response to changing consumption patterns, cited by 54 percent of respondents.
Chief among these anticipated market challenges are worries about the effectiveness of the U.S. government (83 percent), health care costs (81 percent), and the U.S. budget deficit (70 percent). Last year, CFOs also picked health care costs and the U.S. budget deficit as their top concerns. Concerns about Europe, oil prices, and the U.S. housing market, which were prominent in 2012, have subsided.
While health care remains an obstacle, 94 percent of responding CFOs said they were ready to comply with the Affordable Care Act (ACA), and 75 percent said the ACA has forced them to change their health plan designs for 2014.
Sixty-five percent said they have open positions, but are having difficulty filling them due to a lack of qualified labor, and 62 percent forecast moderate growth for their key customers in the next 12 months.
Other top concerns centered on the effectiveness of the U.S. government, effectively managing competitive price pressures, and maintaining margins.
Optimism about the U.S. economy remains, but it is a bit more tepid. Forty-six percent of CFOs feel more optimistic about the U.S. economy, and 41 percent feel the same as in 2013. Fourteen percent feel less optimistic about the U.S. economy this year. Nearly all CFOs (97 percent) believe U.S. manufacturing will expand or stay the same (43 percent) in 2014. These numbers are very close to last year’s CFO survey, when 56 percent predicted expansion for the U.S. economy and 96 percent said the economy would either stay the same or expand.
The level of optimism that CFOs have about their own companies continues to climb, as well. Eighty-nine percent of respondents rated their optimism about financial prospects for their own companies as moderate to high, up from 72 percent in 2013, and a 27 percentage point increase from projections in 2012.
Growing Companies and Customers
CFOs believe the business outlook for their customers is robust. All respondents expect to see growth from key customers this year. In addition, 54 percent report a higher new order pipeline this year than at this time last year. Just 3 percent see a decrease in their order pipelines this year, as compared to last year.
Plus, 62 percent of the CFOs with Prime Advantage member companies are predicting moderate growth from their key customers over the next 12-36 months.
Member companies are again planning to increase the number of domestic employees in the year ahead, as indicated by 65 percent of respondents (up from 55 percent in 2013). Three in four companies are planning to increase wages and salaries this year. Steady corporate employment plans have also appeared in other recent industry surveys, such as Bank of America/Merrill Lynch’s 2014 CFO Outlook and Duke/CFO Business Outlook survey.
Yet, companies are still struggling with finding skilled labor, as 65 percent of CFOs report having open positions that are difficult to fill because of a lack of available skilled workers. The top three areas for planned capital expenditures are manufacturing equipment (86 percent), computer hardware (72 percent), and computer software (61 percent).
“The manufacturing sector has continued to show healthy growth over the past few years, and we are so pleased that the midsized industrial manufacturing market contributes to this trend. To see continued growth in revenue, capital expenditures, and hiring expectations, following another strong year in 2013, is a testament to the strength of the manufacturing sector and its importance to the overall U.S. economy,” said Louise O’Sullivan, founder, president, and CEO of Prime Advantage.
The Prime Advantage Group CFO Survey was conducted in February and March 2014 using an online survey platform. Prime Advantage surveyed a cross section of finance executives from its member companies consisting of industrial manufacturing firms representing more than 25 different industries with annual revenues ranging between $10 million and $4 billion, of which the majority ranges between $20 million and $500 million. Prime Advantage surveyed 497 financial executives that are employed by member companies to get the results for this survey study.
Information provided courtesy of Prime Advantage, a buying consortium for manufacturers with more than 750 members. To request a copy of the annual CFO report, visit www.primeadvantage.com/surveys.
Publication date: 4/14/2014