Challenges multiply: maintaining balance in a changing world - Central Europe CFO Survey - Deloitte
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Challenges multiply: maintaining balance in a changing world Central Europe CFO Survey 2020
Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020 This survey was completed in Q4 2019, since when the disruption caused by the Covid-19 outbreak has caused significant changes and heightened uncertainty. Nonetheless, we believe that understanding the trends over a longer period (this is the 11th edition) can be of interest to businesses, regulators and policy-makers. Thinking forward to the next survey later in 2020, we will be able to analyse what has changed. 2
Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Contents
Introduction 5
Methodology 6
I. The CFO Confidence Index 8
II. Economic outlook 11
III. Business environment outlook 23
IV. Company growth outlook 39
V. Diversity and inclusion 51
VI. Climate change 61
Local perspectives 69
Contacts 82
3
Brochure / report title goes here |
Section title goes here
4Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Introduction
This survey was completed in Q4 2019, since We agree. The impact is likely to include
when the disruption caused by the Covid-19 disruptions and delays in many traditional
outbreak has caused significant changes and value chains, causing supply shortages,
heightened uncertainty. Nonetheless, we short-term decline of productivity, reduced
believe that understanding the trends over investment and decreased household
a longer period (this is the 11th edition) can demand. While fiscal and monetary policy
be of interest to businesses, regulators and measure will seek to alleviate the impact
policy-makers. Thinking forward to the next on the demand side of the economy, it is
survey later in 2020, we will be able to analyse impossible in the short term at least to
what has changed. escape the impact of supply-side shock.
The main message of the latest survey is that All that said, we do believe that the survey’s
confidence about the economic outlook and findings, and the trends affecting key
the wider business environment has now indicators that they represent, remain
been falling for two years among Central worthy of analysis and comment. They
Europe’s leading finance professionals. reflect the underlying sentiment and beliefs Gavin Flook
However, more than 80% still expected their of our region’s financial leaders before we CFO Programme Leader
company revenues to grow or stay the same entered this unprecedented period in our Deloitte Central Europe
over the next year and close to three- economic history, and will give a valid point of
quarters (74%) are either more optimistic comparison as we move out of it once more.
about their companies’ financial prospects or Turning to the report’s content, the CFO Despite these views, around 90% of CFOs
hold the same views as they did six months Confidence Index (see Chapter 1), which expect the levels of M&A in their countries
ago. measures expectations around factors either to rise (43%) or stay the same (46%) as
such as unemployment, GDP and inflation, last year. This suggests a widely held belief
These are some of the headline findings of has fallen for the second successive year. that companies will have funds available
this, the 11th Deloitte Central Europe CFO However, most CFOs remain confident that to invest in growth, potentially reflecting
survey report, which again indicates how their own strategies will deliver the progress the more positive views in Chapter 4 on
CFOs across our region tend to be more they are looking for. the company growth outlook.
confident about the future performance
of their own businesses than that of When it comes to the economic outlook This year, we also included two special
the regional economy as a whole. (Chapter 2), this is the first year since 2016 questions in the CFO survey, on climate
in which survey respondents do not expect change and diversity & inclusion (D&I). We
It is only right to point out here that GDP to be higher than in the previous find the findings quite striking. Despite
the survey was carried out between year. Similarly, this is the first time in some the very high profile gained by the issues
September and December of 2019. This, of years that the proportion expecting involved in both areas over recent years,
course, was before anyone had ever heard unemployment to rise (36%) exceeds clear gaps were apparent. These included
of Covid-19 or had the faintest suspicion of the proportion that expects it to fall (24%). the significant proportion of companies with
the pandemic that was to come and disrupt no emissions targets in place and those with
the performance and prospects of CE In Chapter 3, on the business environment, no plans to include D&I issues among their
companies and economies as a whole. we can see how the proportion of CFOs who strategic priorities over the next three years.
believe the level of financial and economic You can read the detail on these findings
Its effects will continue to be felt long after uncertainty is high has grown steadily, from in Chapter 5 and 6.
the pandemic itself is over. As Angel Gurria, 31% in 2018 to 35% in 2019 and now 40%
Secretary-General of the Organisation for in 2020. Respondents also report how they As ever, I would particularly like to thank all
Economic Co-operation and Development expect to see the costs of doing business the 558 CFOs from 12 countries who took
(OECD), has said, “We must act now to avoid rise during 2020, including in areas such the time to answer our questions. Once
a protracted recession. Only a sizeable, as workforce, production/delivery and again, I am delighted to bring you the Deloitte
credible, internationally coordinated effort transportation. As a result, close to three- Central Europe CFO report, and hope you
can buffer the economic shock and develop quarters (74%) of CFOs do not see 2020 as find the insight it gives you into the collective
a path towards recovery.” a good time for companies to take on more mindset of finance leaders across our region
risk. both interesting and useful.
5Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Methodology The findings discussed
in this report represent
the opinions of
About the data
558 CFOs
The findings presented and discussed in this The Deloitte Central Europe CFO Confidence based in
report represent the opinions of 558 CFOs Index consists of three sub-indices that
based in 12 Central European countries: reflect CFOs’ optimism (or lack of it) about 12 Central European countries:
Bulgaria, Croatia, the Czech Republic, three key issues:
Bulgaria (BG), Croatia (HR),
Hungary, Latvia, Lithuania, Poland, Romania,
Serbia, Slovakia, Slovenia and Ukraine.
• Economic processes (the Economy the Czech Republic (CZ),
Confidence Index): this is based on
questions about economic growth,
Hungary (HU), Latvia (LV),
The survey was conducted between
unemployment and the Consumer Price Lithuania (LT), Poland (PL),
September and December 2019.
Index (CPI). Romania (RO), Serbia (RS),
When ‘Eurozone’ is used in the charts • The business environment (the Business Slovakia (SK), Slovenia (SI),
and infographics in this report, this refers Environment Confidence Index): this
and Ukraine (UA).
to those Central European countries is based on questions concerning
in the survey that have adopted the Euro uncertainty, risk, operational expenses,
as their currency. ‘Non-Eurozone’ refers to the attractiveness of different sources
the other countries covered by the survey. of funding and opinions about
When we use ‘EU’, this refers to those the M&A market.
Central European countries in the survey
• Prospects for the development of
that are full members of the European
the CFOs’ companies (the Company
Union.
Perspective Index): this is based on
questions concerning the company's
Please note that due to the limited number
future, its financial position (revenue,
of answers from CFOs in Lithuania and
debt-servicing capabilities, capital
in the Public Sector, data concerning those
expenditure and margins), its predicted
two elements in this report need to be
level of gearing and employee numbers.
interpreted cautiously.
The sub-indices are a net balance of average
Some of the charts in the report show
positive and negative answers derived
results as an index value (net balance). This
from selected questions. The main index
is calculated by subtracting the percentage
is a mean of the sub-indices and assumes
of respondents giving a negative response
values between - 100 and 100: - 100 means
from the percentage giving a positive
that a given CFO provided only pessimistic
response. We deem responses that
answers, while 100 means only optimistic
are neither positive nor negative to be
answers were given.
neutral. Due to rounding, responses to
the questions covered in this report may not
aggregate to 100.
6Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
BG Bulgaria LV Latvia RS Serbia
HR Croatia LT Lithuania SK Slovakia
CZ Czech Republic PL Poland SI Slovenia
HU Hungary RO Romania UA Ukraine
LV
LT
PL
UA
CZ
SK
HU
RO
SI
HR RS
BG
7Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
I. The CFO Confidence Index
The CFO Confidence Index has fallen costs will increase as well, while two- Environment Confidence index, already
significantly for the second year in a row. thirds believe the costs of real estate and negative in both 2018 and 2019, remained
As recently as 2018 it stood at 23%, before business-related services are also set to rise. at almost the same level as last year: -28%
falling by 7 percentage points (pp) to 16% in 2019 and -27% in 2020. This again is
in 2019. This time it fell again – by 7pp to 9%. For the second successive year, the sharpest mostly due to an increase in the predicted
fall of all was in the optimism of participating costs of running a business.
In short, CFOs have become considerably CFOs about the economic outlook for
less optimistic about the future over the last the year ahead. This time it declined The Company Perspective Confidence
two years. by 15pp, from 50% to 35%. Even lower Index continues to indicate a fall in positive
expectations of a fall in unemployment than expectations, which fell by 6pp from 24%
This year’s outcome continues to be those recorded in 2019 provide the biggest to 18%. Even though 60% of CFOs believe
driven by negative expectations about driver of this decline. However, despite their own company revenues will increase
the business environment. In particular, the steep falls in optimism about the next in the next 12 months, 25% feel less
CFOs anticipate an increase in the costs of 12 months, this measure was still the most optimistic about their future revenues than
running a business. More than 90% expect in our survey, standing considerably ahead they did six months ago.
workforce costs to increase, while 80% think of 2017’s 11%.
the overall costs of production and delivery
will also be higher than last year. Almost There is also a lot of pessimism regarding
the same proportion thinks transportation the business outlook. The Business
CFO Confidence Index by sub-indices
2020 2019
Economy Confidence Economy Confidence
35% 50%
Index Index
Business Environment Business Environment
-27% -28%
Confidence Index Confidence Index
Company Perspective Company Perspective
Confidence Index 18% Confidence Index 24%
CFO Confidence CFO Confidence
9% 16%
Index Index
2018 2017
Economy Confidence Economy Confidence
60% 11%
Index Index
Business Environment Business Environment
-22% -2%
Confidence Index Confidence Index
Company Perspective Company Perspective
32% 29%
Confidence Index Confidence Index
CFO Confidence CFO Confidence
23% 13%
Index Index
scale (-100; +100)
where -100 means all answers are negative and +100 all answers are positive
8Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
9Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020 It is only right to point out here that the survey was carried out between September and December of 2019. This, of course, was before anyone had ever heard of Covid-19 or had the faintest suspicion of the pandemic that was to come and disrupt the performance and prospects of CE companies and economies as a whole. We do believe that the survey’s findings, and the trends affecting key indicators that they represent, remain worthy of analysis and comment. They reflect the underlying sentiment and beliefs of our region’s financial leaders before we entered this unprecedented period in our economic history, and will give a valid point of comparison as we move out of it once more. 10
Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
II. Economic Outlook
GDP growth is expected to average 2% in 2020, 0.3% less than in 2019.
This change is not large, but you have to look back to 2016 to find the last
year when CFOs did not expect an increase over the previous year.
In addition, the numbers predicting a fall in unemployment are getting
smaller: just 24% of CFOs predict a reduction in 2020, compared to
38% in 2019 and 47% in 2018. A higher share of respondents expects
unemployment to rise: 36% in 2020, compared to 21% in 2019.
CFOs’ estimates for future CPI levels remain almost exactly the same as
last year, up by just 1pp to 83%.
11Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Economic outlook
1
Respondents expect average GDP growth
of 2% in 2020, 0.3% less than in 2019.
2
A significant majority of CFOs (83%) expect
the Consumer Price Index (CPI) to rise in 2020,
1pp more than in 2019.
3
The largest share of CFOs (40%) expect no change
in unemployment levels during 2020. However,
the share of those expecting an increase grew to 36%
in 2020, up from 13% in 2018 and 21% in 2019.
12Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Slightly slower GDP growth
The average expected GDP growth for 2020 48% in 2019. to exceed 2.6%, and Ukraine, where 58%
is 2%, compared to 2.3% in 2019. expect the same growth rate.
The CFOs who are least optimistic about
There has been a 10pp fall in the proportion GDP growth are from Lithuania, the Czech The most polarised opinions are those
of CFOs expecting GDP to reach more than Republic and Slovakia. In those countries, held by CFOs in Bulgaria. Here, 35% expect
2.5%. In 2020, 30% expect GDP to exceed the share of CFOs expecting GDP growth of GDP to grow by at least 2.6%, another 35%
2.5%, down from 40% in 2019. no more than 1.5% stands at 60%, 51% and predict growth of between 1.6% and 2.5%,
53% respectively. and 29% do not expect growth to exceed
In a very significant decline, just 10% of 1.5%.
CFOs in Eurozone countries expect GDP The most optimistic are CFOs from
to increase by more than 2.5%, down from Hungary, where 70% expect GDP growth
What is your expectation for the country economic GDP growth for the year 2020?
4% 4% 1% 6% 3% 6%
8% 8% 8% 10%
11% 9% 14% 12% 8% 12%
20%
13% 23%
26% 35%
40%
32% 46%
30% 38%
43% 31% 40%
44% 48%
42%
54% 33%
41% 58%
35%
33%
20%
35%
25% 24%
35%
36% 31%
40% 18%
25% 40%
33% 33%
24% 23% 25%
28% 16% 16%
19% 40% 10%
13% 24% 12%
14%
19% 4%
13% 13% 13% 12% 16% 15% 12% 13% 13% 15%
8% 11% 11%
5% 8% 8%
2017 2018 2019 2020 EU 2020 Eurozone Bulgaria Croatia Czech Hungary Latvia Lithuania Poland Romania Serbia Slovakia Slovenia Ukraine
2020 Republic
58%
33%
20% 16% 23%
12% 13%
5%
-6% -11%
-16%
-31% -26% -27%
-35%
-45% -45%
-60%
Very low (≤0.5%) Low (0.6% - 1.5%) Medium (1.6% - 2.5%) High (2.6% - 3.5%) Very high (≥3.5%) Net balance
13Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
CFOs from the Business & Professional
Services, Manufacturing and Life Sciences
sectors are particularly pessimistic about
GDP growth in 2020. Almost half of our
respondents in these sectors do not
expect growth to exceed 1.5%
CFOs from the Energy, Utilities, Mining
sector are the most optimistic, with 50%
predicting that GDP will grow by at least
2.6% in 2020.
What is your expectation for the country economic GDP growth for the year 2020?
2% 6% 3% 6% 4%
7% 8%
13%
21% 19% 22%
30% 20%
27%
13%
33%
33%
43%
31% 32%
27%
44%
41% 32%
39%
30%
33%
23%
33%
33% 34%
24%
18% 22% 24%
20% 13%
3%
26%
12% 13% 13% 13% 13% 11% 13%
9% 9%
Business & Construction Consumer Business Energy, Utilities, Financial Services Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Services Mining Telecommunication
33%
17%
9%
2%
-11% -7% -6%
-20% -26%
-28%
Very low (≤0.5%) Low (0.6% - 1.5%) Medium (1.6% - 2.5%) High (2.6% - 3.5%) Very high (≥3.5%) Net balance
14Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
The countries that overestimated GDP
growth in 2019 were the Czech Republic,
Latvia, Romania, Slovakia and Slovenia,
with Slovakian CFOs (74%) overestimating
the most.
The countries where CFOs most
underestimated GDP growth are Lithuania
(100%), Ukraine (98%), Bulgaria (97%) and
Hungary (90%).
Predictions of GDP growth in 2019 (1) vs real GDP growth in 2019 (1)(2)
Accuracy of GDP estimations for 2019
Country Underestimated Accurately estimated Overestimated
Bulgaria 97% 3% 0%
Croatia 76% 24% 0%
Czech Republic 19% 56% 24%
Hungary 90% 10% 0%
Latvia 40% 41% 20%
Lithuania 100% 0% 0%
Poland 86% 14% 0%
Romania 49% 39% 12%
Serbia 84% 16% 0%
Slovakia 19% 7% 74%
Slovenia 24% 31% 46%
Ukraine 98% 2% 0%
(1) Data for countries that participated in the previous edition of the survey
(2) Data for real GDP obtained from https://tradingeconomics.com/country-list/gdp-annual-growth-rate?continent=europe (accessed January 2020)
15Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Increasing expectations
of unemployment
We have seen an increase in the proportion Like last year, the Czech Republic is again
of CFOs expecting unemployment figures
to rise, and 36% now expect an increase the country where CFOs’ expectations
in 2020. Predictions of ‘no change’ have
remained stable since 2017, and 40% of a fall in unemployment are the lowest
of respondents went for this option
in 2020. Predictions in this area by CFOs (2%). This is probably due to an already
in Eurozone countries differ somewhat
those in other countries, with 51% of low level of Czech unemployment
Eurozone respondents predicting no
change in unemployment and 28% in recent years – at 2.9% in December
expecting a rise.
2019.
Over the next 12 months how do you expect levels of unemployment to change?
13% 11% 10%
18% 15%
21% 23%
28% 28%
36% 33%
38% 38% 40% 41%
28% 48%
60% 27%
40% 63%
38%
56%
41%
14% 35%
51% 62% 40%
40%
41% 38%
41%
61% 58% 48%
47% 49%
45%
38% 35% 40% 38%
33%
24% 27%
21% 21% 19% 21%
15%
2% 5%
2017 2018 2019 2020 EU Eurozone Bulgaria Croatia Czech Hungary Latvia Lithuania Poland Romania Serbia Slovakia Slovenia Ukraine
Republic
50%
34% 40% 42%
27%
18% 23%
11% 10%
-7% -8% -7%
-12% -17% -22% -20%
-43%
-61%
Decrease No change Increase Net balance
16Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Actual unemployment rate by the end of 20193
Like last year, the Czech Republic is again
the country where CFOs’ expectations
Unemployment rate
of a fall in unemployment are the lowest
(2%). This is probably due to an already EU 2020 6.3%
low level of Czech unemployment in recent
Euro-zone 2020 7.5%
years – at 2.9% in December 2019, this is
the lowest level of all the countries that had Bulgaria 5.8%
respondents in this year’s survey.
Croatia 7.9%
CFOs in Croatia and in Serbia are the most Czech Republic 2.9%
optimistic, with 61% and 58% respectively
Hungary 3.5%
expecting unemployment to fall. Similarly,
this might be due to the already high level Latvia 6.0%
of unemployment in Serbia, which stood
Lithuania 8.7%
at 9.5% in September 2019 and at 7.9%
in Croatia in December 2019. Poland 5.1%
Romania 4.0%
With almost 60% predicting a fall
in unemployment, CFOs from the Public Serbia 9.5%
Sector are the most optimistic in this
Slovakia 4.9%
area. CFOs from Business & Professional
Services are the most pessimistic, with Slovenia 7.4%
more than half expecting a rise in 2020. Ukraine 7.3%
While a majority (60%) of those from
the Life Sciences Sector predict no change, 3. Data for actual unemployment obtained from https://tradingeconomics.com/country-list/unemployment-
almost 30% expect unemployment to rise. rate?continent=europe (accessed January 2020)
Over the next 12 months how do you expect levels of unemployment to change?
23% 23%
27% 30%
33% 34%
41% 39% 40%
54%
11%
42%
50% 35%
30%
60% 45%
41% 40%
36% 56%
35% 35%
30%
27%
18% 20% 21%
10% 13%
Business & Construction Consumer Business Energy, Utilities, Financial Services Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Services Mining Telecommunication
22%
13%
3% 6%
-9% -13% -14%
-23% -20%
-44%
Decrease No change Increase Net balance
17Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Increases expected in CPI
inflation during 2020
As in last year’s survey, the majority of
CFOs expect growth in Consumer Price
Index (CPI) inflation (83% in 2020 and
82% in 2019). At 1.8%, their estimate for
the Eurozone inflation rate is also one of
the highest. No respondents from Hungary,
Latvia, Lithuania, Slovakia or Slovenia
expect the CPI to fall in 2020.
Over the next 12 months how do you expect CPI (Consumer Price Index) levels to change?
58%
73% 75%
82% 82% 81% 80% 79% 80% 83% 83%
85% 83% 85% 85% 87%
96% 93%
38%
22% 5%
22% 15% 6%
10% 13% 13% 12% 16% 21% 20%
18% 18%
5% 13% 13%
9%
6% 4% 5% 4% 3% 3% 3% 5% 4% 2% 4%
2017 2018 2019 2020 EU Eurozone Bulgaria Croatia Czech Hungary Latvia Lithuania Poland Romania Serbia Slovakia Slovenia Ukraine
Republic
-54%
-67% -72% -75% -70%
-81% -78% -79% -81% -82% -78% -79% -80% -76% -83%
-96% -91% -87%
Decrease No change Increase Net balance
18Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Almost every CFO (95%) from the Business expect the highest inflation rate in their
& Professional Services sector expects own countries and the lowest when it
the CPI inflation rate to increase. CFOs comes to the Eurozone.
from the Energy, Utilities, Mining industry
are the most optimistic when it comes to
predicting a fall in CPI inflation. That’s not
to say the majority are positive: only 10%
anticipate a fall, and 83% still expect a rise
in CPI inflation. CFOs from this sector also
Over the next 12 months how do you expect CPI (Consumer Price Index) levels to change?
71%
83% 83% 83% 80%
84% 87% 89% 89%
95%
21%
7% 15%
14% 7% 13%
16% 9%
3% 10% 8% 11%
7% 4% 5%
3% 3% 2%
Business & Construction Consumer Business Energy, Utilities, Financial Services Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Services Mining Telecommunication
-63%
-80% -73% -80% -80% -75%
-92% -84% -89% -87%
Decrease No change Increase Net balance
What do you think will be the inflation rate (for the Consumer Price Index) in both your country and the Euro-area over the next 12 months?
4.1
3.3 3.5 3.5
3.3
2.9 3.1 2.9
2.7
1.8 1.8 1.8
1.6 1.4 1.6 1.5 1.5 1.5 1.6
1.4
Business & Construction & Real Consumer Business Energy, Utilities, Financial Services Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Services Estate Mining Telecommunication
Your country Eurozone
19Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
CFOs from countries whose official
As in last year’s survey, the majority of CFOs expect
currency is the Euro (Latvia, Lithuania, growth in Consumer Price Index (CPI) inflation (83%
Slovakia and Slovenia) all predict that
the inflation rate in their countries will be
in 2020 and 82% in 2019).
higher than in the Eurozone as a whole. All
surveyed CFOs expect the CPI inflation rate
in the Eurozone to rise, with predictions
ranging from 1.3% by CFOs in Slovenia to
2.1% by those in Ukraine.
When predicting inflation levels for their
own countries, those from Ukraine predict
higher rates than CFOs from any other
country. That said, the 8.2% they predict for
2020 is still lower than the nearly 11% they
predicted last year for 2019.
What do you think will be the inflation rate (for the Consumer Price Index) in both your country and the Euro-area over the next 12 months?
8.2
3.8
3.5 3.3
3.2
2.8 2.8
2.4 2.4 2.5
2.2 2.0 2.2 2.1
1.6 1.8 1.8 1.7 1.6 1.8 1.7
1.6 1.5 1.4 1.5 1.4 1.6 1.4 1.5 1.3
2020 EU Eurozone Bulgaria Croatia Czech Hungary Latvia Lithuania Poland Romania Serbia Slovakia Slovenia Ukraine
Republic
Your country Eurozone
20Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
21Brochure / report title goes here |
Section title goes here
Business outlook
Workforce costs are again expected to rise,
with 91% of CFOs predicting an increase.
73% believe this is not a good time 51% of CFOs point to increasing
for companies to take on more risk. costs as a significant threat
to their business.
22Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
III. Business
environment outlook
There are no significant shifts since last year in the perceived levels of
uncertainty facing respondents’ businesses. That said, there is a clear
tendency towards more pessimistic expectations. This is especially true
when we compare the results from 2020 with those from 2018.
As in 2019, the majority of CFOs do not think the year ahead will be a good
time for companies to take on more risk.
Since 2017, CFOs taking part in the survey have expected costs to
increase. As in the preceding years, in 2020 the overwhelming majority
of respondents (91%) predict a rise in workforce costs. CFOs still perceive
increasing costs as the most significant threat to business over the next
year. Another of the CFOs’ greatest concerns is a shortage of qualified
workers during the next 12 months.
23Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Pessimism around uncertainty
grows again
The survey recorded no significant shifts The net balance index – the difference likely to face their businesses in 2020,
since last year in the perceived levels of between the shares of respondents with 55% of surveyed respondents
uncertainty facing respondents’ businesses. expecting low and high levels of uncertainty in both countries predicting a high level of
That said, there is a clear tendency towards – fell from -19% in 2018 to -24% in 2019, uncertainty. While no CFOs from Romania
more pessimistic expectations. This is reaching -32% in 2020. This negative expect a low level of uncertainty, this is
especially true when we compare the results tendency is also visible for the EU (-21% slightly less pessimistic than in 2019 when
from 2020 with those from 2018 (when in 2019 and -30% in 2020) and the Eurozone 66% of Romanian respondents predicted
exactly the same 12 countries participated (-24% in 2019 and -30% in 2020). a high level of uncertainty. CFOs from
in the CE CFO survey). The share of Lithuania are the most positive, with
respondents who believe there is a high Except for those from Ukraine (38%), just 20% expecting a high level and 60%
level of uncertainty has increased by 9 Romania (45%) and Slovakia (48%), most anticipating a normal level of uncertainty.
percentage points (pp), from 31% in 2018, CFOs see the uncertainty level as normal. Other countries with a relatively low
to 35% in 2019 and to 40% in 2020. Their expectations for future levels of net balance of responses are Bulgaria,
The share of those anticipating a low level of external financial uncertainty differ from Hungary and the Czech Republic. Despite
uncertainty fell by 3pp, from 11% in 2019 to country to country. There is a negative net this, Hungary recorded the biggest rise
8% in 2020. balance in all countries except for Lithuania in the proportion of CFOs anticipating high
(0%). CFOs from Romania and Ukraine are uncertainty, from just 5% in 2019 to 27%
the most pessimistic about the uncertainty in 2020.
How would you rate the overall level of external financial and economic uncertainty facing your business?
20%
27% 27%
31% 31% 31% 33%
35% 38% 37% 36%
43% 40% 42% 42% 43%
55% 55%
60%
54% 58%
57% 57%
54% 64%
53% 54% 56% 59% 48% 67%
48% 51%
58%
38%
45%
19% 20%
12% 15%
9% 12% 11% 10%
8% 8% 7% 6% 5% 7% 8%
2017 2018 2019 2020 EU Eurozone Bulgaria Croatia Czech Hungary Latvia Lithuania Poland Romania Serbia Slovakia Slovenia Ukraine
Republic
0%
-19% -8% -12%
-34% -24% -32% -30% -30% -19%
-25% -31% -35% -33% -33%
-42%
-55% -48%
Low level of uncertainty Normal level of uncertainty High level of uncertainty Net balance
24Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
CFOs’ views on the likely levels of external
financial uncertainty in 2020 differ from
industry to industry. Only those from
the Public Sector gave us a neutral net
balance of answers (with 22% expecting
a high level of uncertainty and exactly
the same share predicting a low level). All
other sectors show a negative net balance,
with Energy, Utilities, Mining recording
the most pessimistic opinions of all (-53%).
Those from the Life Sciences industry
appear to be more optimistic than their
counterparts in other industries, with 27%
expecting uncertainty levels to be high and
60% predicting normal levels.
How would you rate the overall level of external financial and economic uncertainty facing your business?
22%
27%
36% 35% 35% 34%
38%
48% 46%
53%
56%
60%
46% 52%
56% 58% 59%
41%
50%
47%
22%
15% 13% 13%
11%
8% 6% 4% 6%
Business & Construction & Real Consumer Business Energy, Utilities, Financial Services Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Services Estate Mining Telecommunication
0%
-13%
-23% -22%
-29% -29% -28%
-36% -42%
-53%
Low level of uncertainty Normal level of uncertainty High level of uncertainty Net balance
25Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Cost expectations continue
to rise
Since 2017, CFOs taking part in the survey (80%) and transportation costs (77%). Clear
have expected costs to increase. majorities expect VAT (82%) and corporate
As in the preceding years, in 2020 tax (76%) to remain stable. Cost categories
the overwhelming majority of respondents that depend on manpower are those
(91%) predict a rise in workforce costs. believed to be at the greatest risk of cost
Most respondents also predict an increase increases in the year ahead.
in overall production and delivery costs
In your view how are costs for companies in your country likely to change over the next 12 months?
14%
19%
42% 40%
44%
64% 64%
77%
80%
91%
82%
76%
46% 53%
49%
31% 32%
21%
17%
6% 12%
5% 4% 7% 7% 5% 4%
3% 3% 3%
Cost of workforce Transportation costs Overall production/ Real estate costs Cost of business- Cost of debt Cost of equity Provision for bad Corporate tax VAT
delivery costs related services debts
-14% -10%
-29% -32% -36%
-59% -60%
-74% -77%
-89%
Decrease No change Increase Net balance
26Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Regardless of industry, CFOs expect As in 2019, VAT and corporate tax are seen
increases across most cost categories as the most stable cost categories, with
in 2018 (meaning a negative net balance). most respondents expecting no change.
More Consumer Business CFOs than
those from other industries expect overall
production and transportation costs to
increase (except for the Public Sector).
More CFOs from Business & Professional
Services than other industries anticipate
increases in the costs of equity and
debt. Two industries – Life Sciences and
the Public Sector – stand out in anticipating
especially high workforce costs.
In your view how are costs for companies in your country likely to change over the next 12 months?
Business & Energy,
Construction & Consumer Financial Life Public Technology, Media,
Professional Utilities, Manufacturing
Real Estate Business Services Sciences Sector Telecommunication
Services Mining
No change 87% 91% 67% 77% 85% 93% 83% 89% 85%
VAT
Net Balance -8% -5% -21% -17% -10% -7% -5% -11% -11%
No change 72% 82% 74% 80% 79% 60% 71% 78% 83%
Corporate tax
Net Balance -18% -9% -17% -20% -21% -27% -12% 0% -17%
No change 36% 55% 56% 60% 44% 67% 47% 44% 50%
Provision for bad
debts
Net Balance -33% -36% -26% -27% -15% -33% -45% -33% -39%
No change 36% 50% 53% 53% 54% 40% 53% 56% 56%
Cost of equity
Net Balance -54% -45% -26% -40% -29% -33% -38% 0% -22%
No change 36% 41% 36% 50% 48% 53% 50% 22% 50%
Cost of debt
Net Balance -49% -45% -30% -30% -10% -20% -33% 33% -24%
No change 33% 27% 21% 33% 40% 33% 36% 22% 37%
Cost of business-
related services
Net Balance -62% -59% -67% -47% -52% -67% -53% -78% -63%
No change 26% 23% 27% 47% 40% 33% 33% 44% 30%
Real estate costs
Net Balance -64% -73% -67% -47% -44% -67% -54% -33% -59%
No change 10% 27% 12% 20% 27% 27% 18% 0% 15%
Overall
production
Net Balance -74% -73% -88% -67% -56% -73% -74% -100% -81%
No change 18% 20% 11% 23% 42% 13% 22% 0% 22%
Transportation
costs
Net Balance -67% -80% -89% -70% -42% -87% -69% -100% -74%
No change 10% 14% 8% 0% 13% 0% 6% 0% 6%
Cost of
workforce
Net Balance -74% -77% -89% -87% -79% -100% -90% -100% -91%
27Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Assessing the risk landscape
CFOs still perceive increasing costs as Between 24% and 29% of respondents The biggest decreases relate to interest
the most significant threat to business chose four other factors – market pressure rate risk, the increasing costs of running
over the next year, despite a 6pp decrease to reduce pricing, reduced demand (both a business and a shortage of qualified
to 51% since 2019. Another of the CFOs’ domestic and foreign) and legal instability. workers (all three standing at -6pp).
greatest concerns is a shortage of qualified The least risk-laden issues according to our
workers during the next 12 months, again respondents are interest rate risk, cyber
showing a 6pp fall to 49% since 2019. risk and disruptive technologies. The factor
that has risen most since last year is
reduced foreign demand (up by 9pp, from
17% in 2019 to 26% in 2020).
Which of the following factors are likely to pose a significant risk to your business over the next 12 months?[multiple aswers]
Increase in costs of running a business (price increase of 51%
-6%
materials, workforce, services) 57%
49%
Shortage of qualified workforce -6%
55%
29%
Market pressure for price decrease of offered goods/services -2%
31%
27%
Reduction in demand (domestic) 6%
21%
26%
Reduction in demand (foreign) 9%
17%
24%
Unstable economic and tax law 7%
17%
15%
Increasing regulations 2%
13%
13%
Growing competition 1%
12%
12%
Exchange rate risk -1%
13%
10%
Geopolitical risks -1%
11%
10%
Insolvency and payment bottlenecks in the economy 1%
9%
6%
Shortage of capital 0%
6%
3%
Interest rate risk -6%
9%
3%
Cyber Risk 0%
3%
3%
Disruptive technologies 1%
2%
2%
Other 0%
2%
2020 2019 Change
28Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
A cross-industry comparison shows CFOs from the Construction (59%), 30% of respondents in both groups say
similarities between how CFOs perceive Manufacturing (53%), Technology, Media, this is their main concern. Falling foreign
the main challenges they will face over Telecommunications (52%) and Consumer demand is a major concern for CFOs
the year to come: concerns about qualified Business (52%) industries all select in the Manufacturing sector (58%), while
workers and overall costs come first, the same issue as their biggest concern: those from the Consumer Business (42%)
followed by reduced demand and market the increasing costs of running a business and Construction (34%) sectors see
pressure for them to cut the price of (driven by the growing prices of materials, decreasing domestic demand as a serious
goods and services. CFOs from the Public workforce and services). threat.
Sector (78%), Business & Professional
Services (67%) and Technology, Media, Unstable economic and tax law is high on
Telecommunications (63%) are those who the agenda of CFOs from the Business
most often identify a shortage of qualified & Professional Services and the Energy,
workers as a significant threat to business. Utilities, Mining sectors – more than
Which of the following factors are likely to pose a significant risk to your business over the next twelve months?
Business & Professional
Energy, Utilities, Mining Manufacturing
Services
37%
67% Shortage of qualified workforce 58%
Shortage of qualified workforce Reduction in demand (foreign)
33%
49% Increase in costs of running a business 53%
Increase in costs of running a business (increasing price of materials, workforce, Increase in costs of running a business
(increasing price of materials, workforce, services) (increasing price of materials, workforce,
services) 33% services)
Downward market pressure on price
31% 40%
of goods or services
Unstable economic and tax law Shortage of qualified workforce
33%
Unstable economic and tax law
Construction &
Financial Services Public Sector
Real Estate
44% 78%
59% Increase in costs of running a business Shortage of qualified workforce
Shortage of qualified workforce (increasing price of materials, workforce, 44%
services) Increasing regulations
59% 38%
Increase in costs of running a business Shortage of qualified workforce 33%
(increasing price of materials, workforce, Increase in costs of running a business
38%
services) (increasing price of materials, workforce,
Downward market pressure on price
of goods or services services)
34%
38% 33%
Reduction in demand (domestic)
Increasing regulations Exchange rate risk
Technology, Media,
Consumer Business Life Sciences
Telecommunications
52% 53% 63%
Increase in costs of running a business Downward market pressure on price Shortage of qualified workforce
(increasing price of materials, workforce, of goods or services 52%
services)
40% Increase in costs of running a business
Shortage of qualified workforce (price increase of materials, workforce,
50%
33% services)
Shortage of qualified workforce
Increase in costs of running a business 24%
42% (price increase of materials, workforce, Downward market pressure on price
Reduction in demand (domestic) services) of goods or services
29Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Is this the time for taking
greater risk?
As in 2019, the majority of CFOs do not Hungary is one country that stands out
think the year ahead will be a good time when comparing CFOs’ willingness to take
for companies to take on more risk; this on more in 2019 with their views in 2020.
was the view of 74% of respondents (up In 2019, 50% of Hungarian CFOs were
by just 1pp from last year). CFOs from willing to take on more risk; in 2020, this
the Eurozone and EU countries are equally had fallen to just one in four respondents.
risk-averse.
In contrast, the countries with the biggest
Lithuania, Latvia and Ukraine are countries increase in CFOs who think the conditions
where the largest percentage of surveyed are right for riskier decisions are Croatia
CFOs believes that conditions will be (+10pp) and Latvia (+8pp). Similarly to
favourable for taking riskier financial last year, the most risk-averse country is
decisions in 2020. CFOs in Romania, Romania, where only 10% of respondents
Slovakia and Slovenia are the most risk- are ready to take on greater risk.
averse.
Is this a good time to be taking greater risk onto your company’s balance sheets?
10% 13%
15%
26% 24% 25% 27% 25%
27% 31% 28% 31%
31% 35%
36% 38% 40% 40%
90% 87%
85%
74% 76% 75% 73% 75%
73% 69% 72% 69%
69% 65%
65% 62% 60% 60%
2017 2018 2019 2020 EU Eurozone Bulgaria Croatia Czech Hungary Latvia Lithuania Poland Romania Serbia Slovakia Slovenia Ukraine
Republic
-30% -23% -20% -20%
-29%
-38% -46% -39% -43% -46% -38%
-48% -51% -49% -51%
-79% -70% -73%
No Yes Net balance
30Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
With the exception of the Public Sector,
there is a consensus across all industries
that conditions in 2020 will not be
favourable for taking more risk in financial
decisions. The proportions holding this
opinion range from 63% in Financial
Services to 82% in Manufacturing.
After the Public Sector, the most positive
respondents were those from Financial
Services (with 38% seeing this as a good
time to take on more risk) and Business
and Professional Services (33%).
Is this a good time to be taking greater risk onto your company’s balance sheets?
20% 18%
25% 23% 24% 25%
29%
33%
38%
67%
80% 82%
75% 77% 76% 75%
71%
67%
63%
33%
Business & Construction & Real Consumer Business Energy, Utilities, Financial Services Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Services Estate Mining Telecommunication
33%
-25%
-33%
-50% -42% -52% -50%
-53% -60% -64%
No Yes Net balance
31Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
How best to finance
the business?
CFOs see internal financing and bank
borrowing as the most attractive sources of
funding for their companies. These options
were selected respectively by 50% and 49%
of respondents. Corporate debt and equity
are seen as moderately attractive – less
than 30% of CFOs call them ‘attractive’,
while half of respondents see them as
neither attractive nor unattractive.
How do you currently rate the following sources of funding for your company?
2020 2019 Change
Bank borrowing 16% 34% 49% 33% 50% -1%
Internal financing 14% 37% 50% 36% 52% -2%
Corporate debt 25% 49% 26% 1% 27% -1%
Equity 21% 52% 27% 6% 29% -2%
Unattractive Neither attractive nor unattractive Attractive Net balance
32Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
CFOs in Bulgaria, Croatia, the Czech
Republic, Slovakia and Slovenia rate bank
borrowing as much more attractive than
internal financing. This is especially the case
in Croatia, where 61% are in favour of bank
borrowing and 44% of internal financing,
and the Czech Republic (55% pro bank
borrowing and 33% pro internal financing).
Corporate debt is the most attractive
source of funding for Czech and Hungarian
companies.
The share of respondents selecting different funding sources as attractive
Bank borrowing Corporate debt Equity Internal financing
Bulgaria 49% 30% 16% 46%
Croatia 61% 25% 11% 44%
Czech Republic 55% 43% 26% 33%
Hungary 54% 35% 58% 58%
Latvia 31% 18% 49% 46%
Lithuania 20% 0% 20% 40%
Poland 59% 11% 14% 60%
Romania 35% 28% 37% 51%
Serbia 42% 19% 27% 58%
Slovakia 53% 30% 25% 45%
Slovenia 67% 27% 27% 60%
Ukraine 48% 15% 28% 68%
33Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Bank borrowing is the most attractive Construction CFOs instead rate financing
source of funding for CFOs from through corporate debt financing as
the Construction (with a net balance of the most attractive option, with a net
59%) and Consumer Business (net balance balance of 25%. This route appeals least
of 48%) industries. It is least attractive to CFOs from Business & Professional
to those from the Technology, Media, Services, with a net balance of -41%.
Telecommunication (15%) and Financial
Services (17%) industries. Equity appeals most to respondents from
Financial Services (with a net balance of
CFOs in most industries see internal 27%) and least to those from Business
financing as an attractive source of capital. & Professional Services (-13%) and
Consumer Business CFOs award it a net Manufacturing (-12%).
balance of 52%. It is least attractive to
Construction-company CFOs, with a more
modest net balance of 20%.
How do you currently rate the following sources of funding for your company?
Business & Energy,
Consumer Financial Life Public Technology, Media,
Professional Construction Utilities, Manufacturing
Business Services Sciences Sector Telecommunication
Services Mining
Net balance 26% 59% 48% 23% 17% 40% 32% 44% 15%
Bank
borrowing Neither attractive
18% 23% 39% 23% 46% 33% 37% 11% 37%
nor unattractive
Net balance 31% 20% 52% 47% 27% 33% 37% 33% 44%
Internal
financing Neither attractive
28% 43% 30% 33% 35% 27% 38% 44% 41%
nor unattractive
Net balance -41% 25% 5% -17% 13% 0% -2% 22% -11%
Corporate
debt Neither attractive
28% 48% 59% 37% 50% 60% 50% 33% 56%
nor unattractive
Net balance -13% 23% 15% 3% 27% 0% -12% 11% 6%
Equity
Neither attractive
36% 59% 55% 63% 52% 47% 50% 67% 50%
nor unattractive
34Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Attitudes to M&A
The great majority of CFOs, regardless of The net balance (difference between those
country, think the level of M&A transactions who expect M&A levels to increase and
in 2020 will be similar to or slightly lower those who think it will decrease) is lowest
than that of 2019. The most optimistic CFOs in Latvia (15%), the Czech Republic (24%),
are from Serbia, where 62% of respondents Poland (25%) and Slovakia (also 25%).
expect M&A transaction levels to increase,
and Lithuania, where 60% do so.
The highest net balances were recorded
in Lithuania (60%), Serbia (58%) and
Ukraine (48%), all countries where CFOs are
clearly optimistic and expect no significant
decreases in M&A levels.
Over the next 12 months how do you expect M&A levels to change in your country?
31%
37% 40% 36% 35%
43% 43% 41% 43% 42%
44%
51% 48% 53%
60% 62% 55%
59%
54%
48% 44% 55% 20%
48% 53%
48% 46% 46%
50% 50% 44%
43% 38%
37% 40% 35%
27%
14% 16% 15%
9% 11% 12% 11% 11% 8% 10%
4% 6% 6% 8% 4% 8%
2017 2018 2019 2020 EU Eurozone Bulgaria Croatia Czech Hungary Latvia Lithuania Poland Romania Serbia Slovakia Slovenia Ukraine
Republic
55% 60% 58%
45% 48%
33% 39% 35% 40%
32% 29% 32% 25% 25% 27%
23% 24%
15%
Decrease No change Increase Net balance
35Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
CFOs from the Life Science sector and
the Energy, Utilities, Mining and Financial
Services industries hold the most
optimistic opinions about the likely
levels of M&A transactions in 2020, with
more than 50% expecting an increase.
The most negative views were expressed
by respondents from the Construction
sector, where 20% anticipate falls. Half or
more of CFOs from the Public Sector (56%),
Technology, Media, Telecommunications
(54%) and Manufacturing (50%) anticipate
no changes in M&A levels.
Over the next 12 months how do you expect M&A levels to change in your country?
33%
38% 41% 41%
47% 44% 44%
52%
57% 60%
54% 39%
41% 50%
51%
47%
42% 33% 56% 27%
20%
13% 15% 12% 13%
10% 9%
6% 6%
Technology, Media, Consumer Business Financial Services Energy, Utilities, Business & Manufacturing Construction & Real Public Sector Life Sciences Other
Telecommunication Mining Professional Services Estate
46% 47% 44% 47%
41%
28% 32%
20% 26% 20%
Decrease No change Increase Net balance
36Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
37Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Company growth outlook
Most CFOs expect the number
of employees in their companies
to remain unchanged (39%)
or to increase (36%) during 2020.
Expansion through acquisition is set
to be a priority for businesses in 2020,
with 37% of CFOs putting it at
While 60% of CFOs believe that
the top of the agenda.
revenues in 2020 will be higher
than last year, this is a 6pp
decrease since last year.
38Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
IV. Company
growth outlook
When we compare CFOs’ sentiments about their companies’ financial
prospects with their attitudes from six months ago, it is clear that CFOs are
more pessimistic than they were in the 2019 survey. That said, more CFOs
are still optimistic (34%) than pessimistic (25%).
The proportion of CFOs anticipating revenues to increase in 2020 (60%)
was lower than in 2019. There is also a downwards trend in most of
the industries we surveyed. While most CFOs expect operating margins to
increase (34%) or stay the same (40%), optimistic expectations have been
on a downward trajectory over the last two years. The percentage of CFOs
expecting their companies to increase their capital spending in 2020 is
little changed since last year.
CFOs’ views on their companies’ ability to service debt over the next three
years remain largely unchanged, with almost 90% expecting it either to
increase or remain the same.
39Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Slide in financial optimism
continues
When we compare CFOs’ sentiments trend in optimism that’s been underway in 2020 just 33%.
about their companies’ financial prospects since 2017. This tendency is even more There are considerable differences
with their attitudes from six months ago, evident when we look at EU countries between countries. While 54% of CFOs
it is clear that CFOs are more pessimistic and the Eurozone. In 2018, 46% of in Bulgaria and 48% in Ukraine expect
than they were in the 2019 survey. That CFOs in the Eurozone told us they were things to get better for their companies,
said, more CFOs are still optimistic optimistic. In 2019, this slid to 38%, and only 7% of CFOs in Slovenia agree with
(34%) than pessimistic (25%). The net down to just 28% in 2020. There is a similar them (net balance -47%).
balance of answers fell by 9pp, from pattern among the EU countries: in 2018
18% to 9%, continuing the downwards – 43% were optimistic; in 2019, 35% and
Compared with six months ago, how do you feel about the financial prospects for your company?
7%
28% 26% 25%
30%
34% 33% 36% 35% 35%
39% 38% 40%
43% 40%
49% 40% 48%
54%
38% 43%
42% 41% 35%
40% 38%
37%
39% 41%
50% 28%
40%
35% 36%
30% 60%
53%
35% 33%
29% 29% 31%
25% 22% 27% 25%
16% 21% 21%
16% 16% 14% 12%
2017 2018 2019 2020 EU Eurozone Bulgaria Croatia Czech Hungary Latvia Lithuania Poland Romania Serbia Slovakia Slovenia Ukraine
Republic
38% 40%
33%
27% 28%
22% 18% 23%
18%
9% 11% 8%
1% 4%
-1%
-9% -8%
-47%
Less optimistic Broadly unchanged More optimistic Net balance
40Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
CFOs from the Public Sector have
the most positive expectations for their
financial prospects, with 56% feeling
more optimistic than six months before.
The most negative expectations are among
CFOs from Manufacturing companies
(39%). CFOs from the Life Sciences sector
recorded the biggest fall in optimism
(down from a net balance of 30% in 2019
to 0% in 2020). It is worth noting that
in 2019 the Life Sciences sector also
recorded the biggest rise in optimism (up
from a net balance of -7% in 2018 to 30%
in 2019). Apart from those in the Energy,
Utilities, Mining and Financial Services and
the Public sectors, CFOs’ expectations for
their financial prospects in 2020 were less
optimistic than in 2019.
Compared with six months ago, how do you feel about the financial prospects for your company?
20%
24%
35% 37% 34%
41% 39% 40%
42%
56%
36%
60%
31% 34% 45%
46% 43%
39% 43%
33%
39%
28% 27%
18% 19% 20% 20% 21%
17%
11%
Business & Construction & Real Consumer Business Energy, Utilities, Financial Services Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Services Estate Mining Telecommunication
44%
24% 23%
17% 17% 14%
13% 11%
0%
-15%
Less optimistic Broadly unchanged More optimistic Net balance
41Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
More CFOs are expecting
revenues to fall
The proportion of CFOs anticipating CFOs from the Consumer Business and
revenues to increase in 2020 (60%) Technology, Media, Telecommunication
was 6pp lower than in 2019. There is sectors are the most optimistic, with 76%
also a downwards trend in most of and 74% respectively expecting their
the industries we surveyed, with Life revenues to increase.
Sciences experiencing the biggest fall in net
balance (from 70% in 2019 to 27% in 2020).
In your view, how are revenues for your company likely to change over the next 12 months?
46%
54% 57% 56% 53% 56%
60% 63%
71% 66% 66%
73% 76% 74%
23%
21% 20%
19% 22%
21% 25%
17%
20% 21%
16%
17%
15% 31% 20%
26% 25% 27%
20% 20% 22%
18%
14% 14% 14%
10% 9% 6%
2017 2018 2019 2020 Business & Construction & Consumer Energy, Utilities, Financial Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Real Estate Business Mining Services Telecommunication
Services
63% 67% 69%
57% 52% 52%
40% 39% 43%
28% 31% 27% 33%
15%
Decrease No change Increase Net balance
42Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Mixed view about operating
margins
While most CFOs expect operating margins only two industries – the Public Sector
to increase (34%) or stay the same (40%), (-11%) and Manufacturing (-9%) – show
optimistic expectations have been on a negative net balance. Net balances range
a downward trajectory over the last two between the Public Sector’s -11% up to 31%
years (from 42% in 2018 to 38% in 2019 in Technology, Media, Telecommunication.
and 34% in 2020). CFOs from different The biggest falls in net balance over the last
industries have mixed views about how year (apart from in the Public Sector) were
their operating margins will change in 2020. experienced by the Construction (-27pp)
However, optimistic attitudes are more and Life Sciences (-25pp) industries.
common than pessimistic views, and
In your view, how are operating margins for your company likely to change over the next 12 months?
26% 26% 22%
30% 27%
34% 36%
38% 42% 38% 40% 38%
44% 44%
40% 44%
49% 43% 47%
40% 33%
37% 38% 33% 39%
36%
36%
43%
34% 33%
26% 27% 27% 29% 27%
25% 23% 24% 26% 25%
20%
13%
2017 2018 2019 2020 Business & Construction & Consumer Energy, Utilities, Financial Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Real Estate Business Mining Services Telecommunication
Services
31%
24%
19%
13% 13% 13% 11%
8% 8%
0% 2% 0%
-9% -11%
Decrease No change Increase Net balance
43Challenges multiply: maintaining balance in a changing world | Central Europe CFO Survey 2020
Little change in CAPEX outlook
The percentage of CFOs expecting their CAPEX to increase) and the Public
companies to increase their capital Sector (where 56% expect a rise) hold
spending in 2020 is little changed since the most optimistic attitudes. Those from
last year (39% in 2020 and 40% in 2019). the Manufacturing industry are the most
It is almost the same as the proportion negative, with 40% expecting a fall in their
of respondents who expect no change companies’ CAPEX during the next year.
in CAPEX (40%). The share of negative Consumer Business CFOs delivered
views, meanwhile, grew from 16% in 2019 the biggest increase in net balance (+27pp),
to 21% in 2020. CFOs from the Consumer while the biggest fall was among those
Business industry (with 55% expecting from Manufacturing (-41pp).
In your view, how are capital expenditures (CAPEX) for your company likely to change over the next 12 months?
31%
38% 39% 35%
40% 39% 40% 39%
49% 44% 47% 47%
55% 56%
28%
40% 41% 39% 47%
44% 33% 33%
43% 50% 52%
39%
36%
44%
40%
21% 21% 23% 20% 20%
16% 18%
13% 13% 10%
9% 9%
2017 2018 2019 2020 Business & Construction & Consumer Energy, Utilities, Financial Life Sciences Manufacturing Public Sector Technology, Media, Other
Professional Real Estate Business Mining Services Telecommunication
Services
56%
45%
36% 32%
24% 27% 29% 27% 30%
18% 18% 16% 17%
-9%
Decrease No change Increase Net balance
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