May 2010- GE Capital, Americas, Norwalk, Conn., recently surveyed the CFOs of 539 midmarket companies in seven distinct industries across the United States: food, beverage and agribusiness; general manufacturing; healthcare; metals, mining and metals fabrication; retail; technology and business services; and transportation. The CFOs were chosen from an independent Dun & Bradstreet list of middle-market companies and were asked about their current views and outlook on the U.S. economy, commercial credit and lending conditions, sales, capital expenditures, M&A activities, business energy costs and other operational issues.
More than half of surveyed CFOs predict that the U.S. economy would expand within the next six months, although only about 40 percent anticipate growth within their respective industries, and 50 percent expect their industries to remain flat during that time period.
However, according to the results, the majority of metals, mining and metals fabrication CFOs see upcoming growth over the next six months, with 54 percent (the highest percentage of any of the surveyed industries). Six percent expect the industry to contract, and 40 percent expect the industry to stay the same. Along those same lines, metals, mining and metals fabrication CFOs rate the current state of the industry as a 5.06 on a scale of one to 10, with one being the weakest and 10 being the strongest.
Moderate growth ahead
Fifty-two percent of the surveyed metals, mining and metals fabrication companies forecast a moderate growth phase over the next one to three years, which was second only to the technology sector in the results. Forty-four percent expect cyclical or limited growth, while only 2 percent expect to downsize or reorganize.
And the industry ranked third from the top in terms of revenue expectations in 2010, with 68 percent of CFOs expecting to see revenue growth. Continuing on the finance front, the 26 percent of metals, mining and metals fabrication CFOs who believe capital expenditures will increase in 2010 see an increase of 45 percent over the next 12 months. A majority of CFOs (58 percent) expect capital expenditures to remain about the same in 2010.
Sixty percent of CFOs thought their financing needs would remain the same in 2010, which was in line with other industries surveyed. Fifty-eight percent of respondents foresee their cost of capital remaining the same, while 42 percent of respondents were considering additional financing for capital expenditures, 36 percent for working capital, 22 percent for organic growth and 27 percent for acquisitions.
Opportunities in a down market
A majority of CFOs said the downturn provided opportunity to gain share, while 25 percent said it restricted opportunity and 23 percent said their company's position in the market was negatively impacted.
For a majority of metals, mining and metals fabrication survey respondents, credit availability has remained the same. However, energy costs were a big concern with 70 percent of respondents saying that these costs would have a moderate impact on their company's performance. Respondents also expect M&A to continue, citing opportunities to increase efficiencies through industry consolidation and relatively low purchase prices as two of the major driving factors. MM