Chief financial officers at many of Canada’s largest companies are forecasting higher profits in 2014, but they remain glum about hiring and investing, according to a survey by Deloitte.
Canadian CFOs are predicting no new hiring and a slim 2.2-per-cent increase in capital expenditures.
The findings come from a survey conducted of roughly 100 executives working for Canadian, U.S. and Mexican companies with average annual revenues of more than $5-billion. The survey was conducted in November.
Canadians CFOs are consistently less upbeat than their American and Mexican counterparts on profits, hiring and investing. The average expectation for sales increases in Canada, at 4.2 per cent, is slightly above the average in the survey.
“Too many Canadian companies have been under-investing in productivity-enhancing measures, and the latest CFO survey suggests the problem is going to continue for the foreseeable future,” said Deloitte partner Eddie Leschiutta.
Bill Cunningham, who leads Deloitte’s CFO program in Canada, suggested that lower expectations in Canada are partly because companies here were hit less hard in the recession than many U.S. companies and so they are starting from a higher base.
Canadian CFOs are somewhat less optimistic than they were earlier in 2013. But Mr. Cunningham said optimism “remains strong.”
Net optimism – the percentage-point gap between positive and negative responses – is plus-25 in Canada, compared with plus-36 in the United States.
Across North America, optimism is higher than it was in the third quarter. But the survey found a growing “defensive” posture at many companies. Fifty-four per cent of respondents expressed optimism about their companies’ prospects, up from 42 per in the third quarter.
“It is good that conditions are improving, but real recovery relies on a level of expansion that has seemed ‘right-around-the-corner’ for a few years now,” the report pointed out.
“This quarter’s findings suggest CFOs are still not planning for substantial growth, and a growing number are becoming more defensive. … The tide appears to be shifting.”
CFOs still favour pursuing opportunity over limiting risk, but an increasing proportion of companies are now focused on “contracting and rationalizing,” including cutting costs.
The top economic concern of CFOs is the potential fallout from the unwinding of years of massive bond purchases by the U.S. Federal Reserve.
Eighty-one per cent of CFOs identified North America as the main engine of economic growth this year, well ahead of China and Europe.