CFOs bullish on economy

CFOs bullish on economy

Almost half of transportation CFOs predicted an increase in their company’s profit margins

GE Capital’s fifth bi-annual “U.S. Mid-Market CFO Survey” indicates financial executives across a wide range of industries are becoming more positive on where the U.S. economy stands—as well as more upbeat on the state of their own industries.

The survey polled some 500 chief financial officers of mid-market companies in seven distinct industries across the U.S., including transportation. The CFOs selected for the survey were drawn from middle-market companies with revenue ranging from $50 million to $1 billion, except for those in the trucking industry, where the revenue range was from $15 million to $1 billion.

Dan Clark, president & general manager of GE Capital, Transportation Finance, said the CFOs were asked about their current views on the U.S. and global economies, commercial credit and lending conditions, business and energy costs and other operational issues.

The survey’s authors stated that overall the “most significant insights” (as compared to 2011 3Q results) garnered this time around include:

  • CFOs are more positive on U.S. economy and business performance.
  • 67% expect higher revenues in 2012, up 5 points from the previous survey
  • 74% planning to hire, up 6 points from the previous survey
  • 81% see stable or improving profits, up 8 points from the previous survey
  • Their views on the global economy have deteriorated

What’s more, GE Capital stressed, CFO sentiment on the current health of the U.S. economy grew stronger after a “significant dip” during the third quarter of 2011 and those surveyed “expressed more positive sentiment” since last year’s third quarter about the current health of their own industries.

Several key survey findings point to what’s currently uppermost on the minds of top transportation financial executives:

  • Profitability – 47% of transportation CFOs predicted an increase in their company’s profit margins (the most optimistic among their peers across all industries)
  • Growth expectations — Transportation CFOs (along with those in the metals & mining and retail sectors) reported the highest rate of moderate business-specific growth expectations (54%)—indicating they expect to operate in that phase for the next 12 months.
  • Business opportunities – In 2012, the greatest business opportunities cited are acquiring new customers and increasing average revenue per loaded mile (59% each). Increasing tonnage volume from existing customers was cited by 57%.
  • Concerns – From a list of 12 factors, 67% said they’re most concerned about the impact fuel-price volatility will have on their business, followed by 59% who were most concerned about the impact of safety/truck accidents.
  • Hiring – 80% expect to hire in the next 12 months and anticipate increasing their workforce by 9% on average.
  • Cost structure — Transportation CFOs are the most bullish on this topic; 61% expect to increase their cost structure. However, that marks a 10-point decrease from the third quarter 2011 survey.
  • Financing — When asked about additional financing needs over the next 12 months, transportation CFOs led all industries considering financing for equipment—69%—the number- one category for financing cited.

“ When you go through the survey results you find 90% of the trucking CFOs expect the industry will continue to grow [this year],” GE Capital’s Clark told Fleet Owner. “However, even as their revenues go up and tonnage stays solid, we won’t see them adding trucks—so they will be looking at profits as they continue to come out of the downturn.”

Clark pointed out that usually in such a recovery scenario fleets do add equipment but he said “fleets are more cautious this time about adding capacity and considering it only in the context of its pure impact on the business.”

On the other hand, fleets are back to hiring sales personnel. “Per the survey,” Clark said, “71% expect revenues to go up and that’s because they have added to their sales force as well as cut empty miles and become more effective at getting rate increases.”

As to why 69% of transportation CFOs are now considering financing equipment, Clark said “they are starting to think about or even know they are at the point of having to attain new equipment to replace older units. They may be able to run what they have a little longer, but eventually will cross the line to where they cannot afford not to start replacing them.”

Along with fuel-price volatility and finding drivers, Clark noted that a big concern expressed by fleets —and one that did not surprise him—was over-regulation of trucking. “They are already dealing with hours-of-service reform plus other safety measures and now wonder what else may be coming and how they will manage it,” Clark remarked.

In a separate announcement, the GE Capital Fleet Services business unit announced this week the launch of its IntelliGauge, a mobile fuel and CO2 calculator application. The company said the app allows users to compare components of their current vehicles against future vehicles when making vehicle-purchase and other management decisions.

IntelliGauge is free to use and is optimized for use on iPads, smartphones and desktop computers. It is available at www.geintelligauge.com.

According to GE Capital, by using IntelliGauge, decision makers can “quickly and intuitively” calculate annual fuel savings, CO2 emissions and fuel efficiency to assist in budget planning, vehicle selection and other decisions that take these factors into account.

The application asks users to provide information regarding the makeup of their vehicles including annual mileage estimates. It allows users to edit fuel prices to attain a customized report that can be saved, shared or compared against other scenarios.

“Fuel price volatility continues to have a big impact on the decisions companies make, including vehicle replacement strategies,” said Brad Hoffelt, senior vice president & general manager—products and services for GE Capital Fleet Services. “We’re focused on identifying ways to couple technology solutions with our deep domain expertise to help our customers preserve capital and optimize fleet efficiency.”

 The app includes links to a number of other GE Capital Fleet Services mobile and educational resources, including GE’s ecomagination site, an alternative fuel locator application, a U.S. fuel price map, and information regarding GE’s WattStation  electric-vehicle charging technology.

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