Asia Pacific CFOs Optimistic on 2013 Earnings Potential

The majority of Asia Pacific-based chief financial officers expect growth in revenues and profits at their corporations in 2013, according to a survey conducted by Bank of America Merrill Lynch (BofA Merrill).

The bank’s ‘2013 CFO Outlook Asia report’, which surveyed 600 CFOs and senior finance executives in the region, found that 71% are forecasting year-on-year revenue growth in 2013, while 62% anticipate that their 2013 net profits will exceed that of 2012.

Among other key findings of the BofA Merrill survey:

• Southeast Asia presents significant earnings opportunities: 81% and 72% of CFOs forecast growth in revenues and profits, respectively, in Southeast Asia in 2013 compared with 2012.
• Credit access remains strong and affordable: CFOs in the region intend to maintain or increase borrowing (73%), and financing will be used for capital expenditure (23%) and to raise working capital (17%). Credit availability remained robust in the last year according to respondents (90%), and 47% expect the cost of capital to remain consistent this year.
• CFOs favour organic growth over mergers and acquisitions (M&A). Sixty-three per cent of CFOs aren’t planning to participate in any M&A activity in 2013, and half of those who intend to will do so to achieve growth targets and will mostly look at opportunities in their home markets or in developing Southeast Asia.
• The CFO skill set continues to evolve: Corporate strategic planning is an important (61%) or growing (29%) part of the job of CFOs in Asia Pacific. Eighty-four per cent of respondents believe it is getting tougher to recruit treasury staff with the appropriate skills in the region.

CFOs polled intend to increasingly focus on improving operational efficiencies at their corporations and commit resources to enhancing working capital management to drive profits. On the flipside, respondents identified higher commodity prices as the greatest risk to earnings in 2013.

“Despite economic uncertainty and global market headwinds, there remains a sense of unbridled optimism towards business prospects in Asia Pacific, according to the region’s leading CFOs,” said Steven Victorin, head of Asia Pacific corporate banking and global corporate banking subsidiaries at BofA Merrill. “This year’s report again sheds relevant light on the perceptions and strategies of the evolving CFO function across the region. The results clearly reinforce this view.”

The interviews were conducted with financial executives in Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand. Over 50% of respondents came from corporations with annual revenues of US$500m or above, representing a broad range of multinational, regional and local companies.   

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