Growth expectations improving

The Deloitte/SEB CFO Survey

Spring 2014 results

Contents
Introduction Lower unemployment as growth exceeds trend in 2014 Hot topic Impact of emerging market concerns Business conditions and outlook Prospects and concerns 3 4-5 6 7 8

Financing 9 Strategic opportunities An international outlook Easing uncertainty improves optimism 10 11

Contacts 12

Welcome to the latest edition of the Deloitte/SEB CFO Survey!

We are excited to present the spring 2014 results of the Deloitte/SEB CFO Survey and hope you find our accompanying analysis both stimulating and valuable. Please send us all feedback together with any suggestions for improvement to help us ensure the Deloitte/SEB CFO Survey remains an essential resource for your daily work.

Tom Pernodd Johan Lindgren Partner Credit Strategist Financial Advisory, Deloitte Credit Strategy, Trading Strategy, SEB tpernodd@deloitte.se johan.y.lindgren@seb.se

Lower unemployment as growth exceeds trend in 2014

70 65 60

Swedish GDP accelerated in the final quarter last year confirming the upturn signalled 55 by forward looking indicators. The Deloitte/SEB indicator increased to 56.2 in February 50 2014, its highest level since May 2011. However, despite improvements in the domestic 45 economy, for example in terms of employment and consumer confidence, export perfor40 mance remains sluggish. SEB forecasts GDP growth of 2.7 per cent in 2014 and 3.2 per 0 1 3 8 2 9 2 4 7 8 9 3 0 1 7 -1 -1 -1 -0 -1 -0 -1 -1 -0 -0 -0 -1 -1 -1 -0 g g p p p p b b b b b b b b ug cent Fe Fe Fe in A2015. Fe Se Se Fe Se Fe Se Fe Au Fe Au
Swedish CFO Index
65

60

55

50

45

40

35
b Fe 7 -0 g Au 7 -0 b Fe 8 -0 p Se 8 -0 b Fe 9 -0 p Se 9 -0 b Fe 0 -1 g Au 0 -1 b Fe 1 -1 g Au 1 -1 b Fe 2 -1 p Se 2 -1 b Fe 3 -1 p Se 3 -1 14 bFe

The Swedish CFO index for February 2014 is 56.2, which reflects positive expectations. The index is based on four components; business climate, financial position, willingness to lend and counterparty default risk. The four component indices increased in February 2014 to 50.8, 58.5, 66.7 and 48.9, respectively.

Mixed signals from manufacturing

Despite rising sentiment indicators since the first half of 2013, industrial production and merchandise exports have remained weak. This may be due to the unusual combination of a strong krona and poor global demand, making it difficult for manufacturers to keep pace with international expansion. However, surveys from the NIER and Statistics Sweden show that manufacturing capacity utilisation has increased. Also, the Deloitte/SEB indicator has continued to trend higher. Further, manufacturers plan relatively expansionary capital spending this year. We believe special circumstances explain why official export and production figures for the second half of 2013 exaggerate the underlying weakness, a view supported by the slight improvement in exports reported at the beginning of this year. SEB expects total exports to increase by 3.5 per cent in 2014 and 6 per cent in 2015. With demand picking up, capital spending is very likely to begin rising again, an assessment corroborated by the latest Statistics Sweden survey. There are also many indications that the upturn in residential construction will continue this year. Residential investments are expected to increase by around 20 per cent both in 2014

and 2015, contributing approximately half a percentage point annually to total GDP growth. At the same time, it is difficult to see how a substantial rise in new construction of owner-occupied housing can be consistent with the Riksbanks aim to prevent increases in household debt. Overall the Deloitte/SEB CFO survey comes to the same conclusion; business conditions are regarded as either average or favourable; more companies plan to raise investments (three times more intend to increase than decrease spending); and almost 50 per cent of firms expect to boost capacity utilisation.

Financial position improves

The survey continues to show that companies regard their financial positions and banks willingness to lend as positive. As before, the two sub-indices have the highest readings of the indexs four components. In particular, the Financial Conditions Index increased to 58.5 in February from 56.4 last September, while the Lending Willingness Index rose to 66.7 from 63.1. Some 90 per cent of companies see lending attitudes as either favourable or very favourable which, together with improvements in cash flow, supports higher investments. At the same time however, firms also say they prefer to use surplus cash to pay down debt or invest strategically overseas.

Financial position
70 65 60 55 50 45 40

inflation is that a stronger global economy will result in higher prices for energy and other commodities. With wages and salaries likely to increase at rates well below the historical average for the next couple of years, and with trends clearly exerting downward pressure on many commodities a key factor for CPI, downside inflation risks dominate both in 2014 and 2015. Business conditions
70 65 60 55 50 45 40 35 30
b Fe
70 65 60 55 50 45 40 35 30 7 0 1 8 9 2 3 7 8 9 0 1 2 4 3 -0 3 -1 -1 -0 4 -0 -1 -1 -0 2 -0 -0 -1 -1 -1 -1 -1 3 2 g g p p p b b b b b -1 Sep -1 Feb -1 Febp -1 Aug -1 Feb Se Fe Fe Au Fe Fe Au Se Fe Se p b b Fe Se Fe Se

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Consumption drives growth

There are relatively clear signals that consumption is set to accelerate. Consumer confidence has trended 60 upward since mid-2013 and is now above its historical average, despite a setback at the beginning of this year. 55 An increasingly strong labour market, together with 50 rapidly rising wealth and incomes, suggests that the upturn will continue this year. Retail sales of cyclically 45 sensitive durable goods, in particular, are now growing 40 faster than at any time since 2011. Tax cuts equivalent to nearly 1 per cent of income and rising real wages 35 1 7 8 2 0 1 9 7 8 are large increases in10income. SEB 09 -1 -0 -0 -1 -1 -0 -0 1 relatively 0 producing 2 -0 13 ep 3 -1 4 ug 2 1 g b b -1 Feb 1 -1 eb -1 Sep p -1 Feb -1 Aug g -1 Feb Fe Au Fe g p F b b S b- A b Fe Fe Au Se Fe Se Au forecasts that consumption will rise Feby 3 per cent both in 2014 and 2015, while the current historically very high household savings ratio will decrease slightly. The risk of weaker consumption growth remains linked to a fall in house prices. Although the downturn in prices in Norway has increased uncertainty, SEB expects Swedish house prices to increase by around five per cent this year before stabilising in 2015.
65

7 -0

g Au

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b Fe

8 -0

p Se

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b Fe

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p Se

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b Fe

0 -1

g Au

0 -1

b Fe

1 -1

g Au

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b Fe

Inflation target regains lost ground

p Se

p Se

9 -0

b Fe

0 -1

Stronger economic growth and falling unemployment 2 3 3 14 -1 -1 -1 p b bFe Fe Se Decembers suggest that key interest rate cut was the last in this cycle, although we still see a 35 per cent probability of a further reduction. We assume that continued low inflation and poor resource utilisation will delay key rate hikes until spring 2015 and that the Riksbank will hike twice, bringing the repo rate up to 1.25 per cent at the end of 2015. The minutes of the central banks last monetary policy meeting (December 2013) indicate a paradigm shift, with long-term low inflation becoming the centre of attention at the expense of financial stability. We expect low inflation to remain in focus. This implies that the central bank will continue to signal a downside risk to its repo rate forecast during most of this year. It is also likely that one or more board members will argue in favour of more interest rate cuts and eventually dissent from a decision to leave the key rate unchanged.

Unemployment declines
Job creation has continued to exceed expectations, though sharply rising labour supply has helped prevented falls in unemployment. Labour supply is being driven both by strong population growth and rising labour force participation. However, there are many signs that unemployment will begin to fall early this year, due to a combination of stronger job growth and slower expansion in the labour force. According to the NIERs Business Tendency Survey, hiring plans have become increasingly bullish over the past 5-6 months. Due to rapid population growth, labour supply looks set to continue rising rapidly. SEB expects unemployment to fall to 7.6 per cent at the end of 2014 and to 6.8 per cent at the end of 2015. Risks of increased wage pressure over the next couple of years are small. Significantly, even the lowest unemployment rate in the past 20 years (around 5.7 per cent) had no significant effect on inflation.

Krona continues to appreciate

The krona has strengthened by around 3 per cent in trade-weighted terms since the Riksbank cut its key rate on December 17. With the EUR/SEK exchange rate appreciating rapidly from 9.10 to 8.80, there is a risk that Swedish inflation will prove lower than estimated in coming months, provoking expectations of further rate cuts and causing foreign investors to sell SEK. However, as SEBs main scenario is that CPIF will bottom out and the Riksbank will leave its key rate unchanged, it expects the krona to benefit from relatively strong economic conditions. In addition, increasing expectations about new ECB measures will exert general downward pressure on the euro against most other currencies. The krona should benefit from rising global growth. We therefore reiterate our forecast EUR/SEK rate of 8.50 at the end of 2014, and raise our estimate slightly to 8.40 at the end of next year. We project a USD/SEK rate of 6.64 at the end of this year and 6.72 at the end of 2015.

Inflation well below target

Price pressures have remained very low, with CPIF inflation (CPI excluding interest rates) below 1 per cent and CPI close to zero. Further, the combination of historically small collective pay agreements for the next 2-3 years and weak international price pressure indicates continued low inflation in 2014-2015. While decreasing downward pressure from previous krona appreciation and slightly higher pay rises suggest inflation will increase slightly during the second half of 2014, SEB expects CPIF to remain well below the Riksbanks target throughout our forecast period. It also forecasts that CPI inflation will rise above 2 per cent during 2015, as expected Riksbank key interest rate hikes inflate mortgage interest costs. The main risk of higher

during the coming 12 months?

30% 20%

eased cantly

Hot topic Impact of emerging market concerns

10% 0% Lesser investments Unchanged Increased investments

Chart 14
How will your company change its capacity utilization and production plans during the coming 12 months?

50% 40% While most CFOs fully share current market concerns over developments in emerging markets, they still plan to raise investments and expect capacity utilisation to improve over the 30% next six months. Although the increase will occur from an abnormally low level, it never20% theless indicates greater self-confidence and better prospects going forward. 10%

0%

ancial stments broad

Lower/decrease

Unchanged

Higher/increase

Do you think financial market concerns relating to emerging markets are:

Chart 13
50%

How will your companys investment plans with respect to plants and personnel change during the coming 12 months?
60% 50% 40% 30% 20%

Chart 15
Do you think financial market concerns relating to emerging markets are:

100%

40%

80%

30%

60%

How will your companys investment plans with respect to plants and personnel change during the coming 12 months?

20%

40%

10%

20%

10% 0% Fair Understated

0%

Increased significantly

Increased slightly

No change

0%

Decreased Decreased Overstated slightly significantly

Lesser investments

Unchanged

Increased investments

50%

40% 70% 30% 60% 20%50% 40% 10% 30% 0% 20% Increased significantly 10% 0% Pay down debt Strategic Dividend investments to abroad shareholders Increased slightly No change

A very high proportion of CFOs surveyed say they regard emerging market concerns as justified. For How will your companys some time, unease has resulted in low investments. investment plans with The current Russian-Ukrainian crisis, countries to respect to plants and personnel change which several Swedish companies are significantly during the coming 12 months? exposed, further illustrates the serious and less easily Sep 2012 foreseen risks involved. In view of current concerns How will your company Feb 2013 change its capacity over developments in emerging markets, we utilization asked and production Sep 2013 plansproduction during the coming 12 CFOs for their views on investments and months? capacity over the next 12 months.

Chart 13

Chart 14

Approximately 60 per cent of CFOs questioned replied that they expect no change in their companys 60% investment plans for plant and personnel over the next 50% 12 months, while around 30 per cent believe they will increase spending. This is interesting, given the large 50% 40% production deficit in recent years. More investments 30% in40% plant and personnel imply greater production and 20% higher output going forward, as well as a higher infla30% tion rate and increased interest rates. 10%
20% 0% 10% Lesser investments Unchanged Increased investments

Decreased slightly

Decreased significantly

0% Strategic Financial investments investments in Sweden in Sweden Financial investments abroad

Lower/decrease

Unchanged

Higher/increase

How will your company change its capacity utilisation and production plans during the coming 12 months? The CFOs surveyed answer this question consistently with their replies to the last. They emphasise that companies are preparing to raise output, not some How will your at company change its capacity indefinite point in the future but within the next 12 Do you think financial utilization and production market concerns relating plans during the coming 12 to months. This is clearly a positive development, sugemerging markets are: months? gesting increased momentum and a further improvement in market sentiment.

70% 60% 50% 70% 40% 60% 30% 50% 20% 40% 10% 30% 0% Pay down 20% debt 10% 0%
Foreign competition

Chart 14 Chart 15

50% 100% 40% 80% 30% 60% 20% 40% 10% 20% 0%

Strategic Dividend investments to abroad shareholders

Strategic Financial investments investments in Sweden in Sweden

Financial investments abroad

Lower/decrease 0% Overstated

Unchanged Fair

Higher/increase Understated

Increase
Access to capital Other

Be unchanged

Decline

of raw erial/ odities

Chart 15
Do you think financial market concerns relating to emerging markets are:

100%

80%

70% 60% 60% 50%

60% Sep 2012 40% Feb 2013

Business conditions and outlook

Overall, CFOs are increasingly positive towards current and prospective business conditions. Most companies are generally optimistic on the prospects for the rest of this year. Respondents regard their financial positions as favourable, while most expect to improve their operating cash flows.

80% 70%

(an increase of 10 percentage points compared to last September) regard business conditions during the 30% next six months as favourable. Probably, the increase 20% is attributable to a more positive attitude among those 10% who regarded them as only average last fall. This de0% velopment may correlate very closely with surprisingly Very Favourable Average Not so Very Average Not so Very positive Q4unfavourable GDP data reported in favourable February.unfavourable favourable favourable
50% 40%

What is your EUR/SEK budget rate for tions have continued to improve, according tothe CFOs Business conditions financial year 2014? 60% for your company in surveyed. Today, approximately 40 per cent of CFOs the next 6 months

Chart 5 Chart 1 Since our last update in September, business condi-

1. Business conditions for your company in the next 6 months are seen as:
9,40

Chart 5

9,40

80% 9,20 70% 9,00 60% 8,80 50% 8,60 40%

8,40 30% 8,20 20% 8,00 10%
l-1 0% Ju 2

What is your EUR/SEK budget rate for the financial year 2014?

EUR/SEK SEB forecast CFOs budget rate (median estimate)

Chart 9 Chart 5

9,20 9,00 8,80 8,60 8,40 8,20 8,00

How has the level of financial risk on your SEB forecast balance What is sheet your EUR/SEK CFOs budget rate changed over the budget rate for the estimate) (median last 12 months? financial year 2014?

EUR/SEK

50%

9,40

40% 9,20

30% 9,00

8,80 20% 8,60

10% 8,40

8,20

0%

12 tOc Very favourable

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2. The overall financial position of your company is seen as:

60% 50% 40% 30% 20% 10% 0%

Average

Chart 6 Chart 2

3. How do you expect operating cash flow in your company to change over the next 12 months?

Chart 10
Assume a current cash surplus position. How would you prefer to use the money in the next 6 months? How do you expect operating cash flow in your company to change over the next 12 months?

Chart 6

70%

How do you expect operating cash flow The overall financial in your company to position of your change over the company next 12 months?

50%

60% 40% 50%

30% 40% 20% 30% 10% 20%

How do you expect operating cash flow in your company to change over the next 12 months?

50%

Chart 6

60%

50%

40%

50% 40%

30% 40%

30%

20%

20%

30% 10%

20%0%

10%
10%
Increase by more thanVery 10% Increase by 0-10%

10% 0%

Very Not so favourable favourable

Favourable Very unfavourable

Average

Not so favourable

Very unfavourable

0%

favourable

0% Remain Remain Decline Increase Decline Increase No unchanged by 0-10% by more by more by 0-10% opinion unchanged than 10% from current from current than 10% Favourable Average Not so Very levels favourable unfavourable levels

Decline by 0-10%

Decline by more than 10%

No opinion

0%

The overall financial position of companies has improved, with just over 55 per cent (an increase of 10 percentage points since last September) of CFOs surveyed regarding their position as favourable. While a limited number of CFOs (amounting to only a few per cent) believe the financial position of their 60% Over the next 12 company has worsened, on average companies now months how do you expect levels of 50% The lending attitude see a brighter financial future than last September. corporate of financialacquisitions and divestments in the institutions toward 40% This view may reflect the general stabilisation of Sweden to change? your company European financial environment, as well as persistent30% ly low interest rates. CFOs surveyed have expressed 20% increasing concern over interest rates going forward. 10% Altogether, we conclude that companies are financially sound and the outlook increasingly positive. This is a 0% Average Not so Very Very Favourable Average Not so Very key finding of our survey. favourable unfavourable

Chart 7 Chart 3

Swedish CFOs retain positive cash flow expectations for the next 12 months, although they are not as wholly optimistic as they were in our survey last fall. Today, some 51 per cent of respondents expect cash flow to increase, signaling a still very positive outlook. However, following higher operating cash flows in 80% 80% Over the next 12hardly surprising companies recent quarters, it is months how do you 70% 70% 60% levels of forecast a expect more stable development going forward. corporate acquisitions 60% 60% A total of and 15 divestments per centinof CFOs believe operating cash 50% 50% 50% Sweden to change? flows will decline, which is surprisingly high given the 40% 40% current overall positive outlook.40%

Chart 11a
The number of employees working in Sweden for your company is, in the next 6 months
70% 60% 50% 40% 30%

Chart 7

Chart 7
Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to change?

80% 20% 70%

10% 60% 0% 50%

30% 30% 20% 20% 10%

30% 20% 10%

Increase significantly Increase somewhat No change

40% 30% 20%

10% 0% 0%

favourable

favourable

unfavourable

0% Decrease Increase Decrease Increase No somewhat significantly significantly somewhat opinion

Not so favourable Very unfavourable

No change

Decrease somewhat

Chart 11b
Decrease significantly No opinion

10% 0%
60% 50%

Feb 2013

Sep 2013

Feb 2014

Very favourable

Favourable

Average

The number of employees working abroad for your company is, in the next 6 months

40% 30%

30% 20%

20%

0%

Prospects and concerns

10% 0% Increase Be unchanged Decline

Chart 11b
The number of employees working abroad for your company is, in the next 6 months
60%

Chart 9

cast

dget rate estimate)

How has the level of financial risk on your balance sheet changed over the last 12 months?

As50% in our previous surveys, demand remains the greatest concern for Swedish CFOs. However, they are becoming more worried about the threat of rising interest rates followChart 13 40% ing the recent prolonged period during which they have How remained low. Respondents are 50% 60% will your 30% companys increasingly concerned about the cost and availability ofinvestment skilled labour, a 50% development plans with 40% respect to plants and 20% personnelCFOs change that usually signals improving market conditions. Positively, are more 40% confident of during the coming 12 30% months? 10% increased employment in Sweden and abroad. 30%
20%

Sep 201

Feb 201

Sep 201

4. What areIncrease the greatest concerns in 2014? Be unchanged for your company Decline As in previous surveys, demand is the greatest con0% for CFOs. However, we see increasing worries cern Increased Increased No Decreased Decreased significantlyrates, slightly change slightly significantly over interest suggesting that higher interest 100% rates are of real concern. Given the low interest rate
80%
10%

0%

20% 10%

Ju

l-

14

Chart 12
What are the greatest concerns for your company in 2013?

Chart 10
Assume a current cash surplus position. How would you prefer to use the money in the next 6 months?

70% 60% 50%

60%

environment over the past few years, CFOs may think 0%levels, although rates may slowly return to pre-crisis Lesser investments this view is inconsistent with near-term consensus central bank rate forecasts. It is certainly unlikely to occur this year. Swedish, German and US government yields are however projected to rise during 2014. Exchange rates are also a growing problem, as are increased labour costs. Other factors (probably com50% also of growing pany or sector specific problems) are concern.

Unchanged

Chart 14

40%
40% 30%

How will your company change its capacity utilization and production plans during the coming 12 months?

40%

30%

20%

20% 20%
10% 10% 0%

0% Pay down Dividend Strategic Financial Demand Strategic Interest rates Exchange rates Labour cost
debt investments to abroad shareholders

investments investments in Sweden in Sweden

Financial Skilled labour shortage investments abroad

Cost of raw material/ commodities

Foreign competition

Access to capital

0% Other

Lower/decrease

Unchanged

on

Chart 11a
80% 70% 60% 50% 40% 30% 20% 10% 0% Very favourable Favourable Average

5. The number of employees in your company in Sweden is, in the next 6 months, expected to:
70% 60% 50% 40% 30% 20% 10% 0%

6. What is your EUR/SEK budget rate for the financial year 2014? 100%

Chart 5

Chart 15

The number of employees working in Sweden for your company is, in the next 6 months

9,40

What is your EUR/SEK budget rate for the financial year 2014?

Do you think financial market concerns relating to emerging markets are:

80%

EUR/SEK
60%

9,20 9,00 8,80 8,60 8,40 8,20

SEB forecast CFOs budget rate (median estimate)

40%

20%

0%

Overstated

Fair

Not so favourable

Increase

Very unfavourable

Be unchanged

Decline

8,00

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Chart 11b
The number of employees working abroad for your company is, in the next 6 months
60% 50% 40% 30% 20%

The percentage of CFOs believing their workforce in Sweden will remain unchanged over the next six months has increased slightly to just over 60 per cent, 60% while the share of respondents that think they will fall has declined by approximately 10 percentage points. 50% Probably, the change reflects a larger proportion of 40% CFOs that expect the workforce to increase, view How do youa expect operating cash flow 30% endorsed by 20 per cent of respondents. Nearly 40 per in your company to change over the cent also stated they expected employment abroad to 20% next 12 months? increase.

Chart 6

10%

The median EUR/SEK budget rate is 8.7, representing the average (or median) of the SEB 2014 forecast. This is significant as CFOs polled in previous surveys have tended to overestimate the actual EUR/SEK Sep 2012 rate, and Feb 2013 the speed at which the krona has appreciated. This Sep 2013 in previprobably caused several companies to suffer ous periods. Now, CFOs have apparently prepared 50% their budgets based on the forecast, which implies that 40% they are seeking to minimise the possibility of incurring currency related losses.
30% 20%

0% Increase Be unchanged Decline

ancial ur

Chart 2 Financing
60% 50% 40% 30%

Chart 6
60% 50% 40%

The overall financial position of your company

How do you expect operating cash flow in your company to change over the next 12 months?

50%

40%

Chart 6
How do you expect operating cash flow in your company to change over the next 12 months?
50% 40%

30%

20%

20% 10% 0% Very favourable Favourable Average Not so favourable Very unfavourable

30% 30% 20% 10%

10%

20%
0% Increase by more than 10% Increase by 0-10% Remain unchanged from current levels Decline by 0-10% Decline by more than 10% No opinion

The attitude of financial institutions to lending has continued to improve since our sur0% Very Favourable Average Not so Very vey last September to stand at new record highs, strongly signaling increased confidence favourable favourable unfavourable and financial stability. Currently, such institutions appear more focused on growth, than on balancing restrictions and new regulations on lending.

10%

0%

3
60%

Chart 7
Over the next 12
80%

titude

ward

months how do you 7. your company is 70% seen as: 50% The lending attitude of financial institutions toward expect levels of

Chart 3

40% Also the perceived lending attitudeThe towards compalending attitude of financial nies surveyed has improved. Almost 90 per cent of 30% institutions toward your company instituCFOs regard the lending attitude of financial 20% tions toward their company as favourable or very 10% favourable, compared with around 75 per cent last September. Probably, this also reflects the fact that 0% Very Favourable Average Not so Very interest rates are lower now than in September. favourable favourable unfavourable

60% 50% 40% 30% 20% 10% 0% Very favourable

corporate acquisitions and divestments in Sweden to change?

60% 50% 40% 30% 20% 10% 0% Increase significantly Increase somewhat No change Decrease somewhat

Chart 7
Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to change?
80% 70% 60% 50% 40% 30%
Decrease significantly No opinion

20% 10% 0%

Favourable

Average

Not so favourable

Very unfavourable

8. The probability for counterparties default in the next 6 months is expected to:

4
100%

Chart 9
EUR/SEK SEB forecast
80%

9. How has the level of financial risk on your balance sheet changed over the last 12 months?

Chart 8
How do you currently rate valuation of Swedish companies?

Chart 13

y for next 6

CFOs budget rate (median estimate)

How has the level of financial risk on your balance sheet changed over the last 12 months?

50%

50%

Chart 4

40%

40%

Chart 8

60%

40%

The probability for counterparties default in the next 6 months

30% 100% 20% 80% 10% 60% 0% 40%

30%

20%

How will your companys investment plans with respect to plants and personnel change during the coming 12 months? How do you currently rate valuation of Swedish companies?

60% 50% 40%

50% 30%
20% 40% 10% 30%

20%

10%

0%

l Ju

-1

t Oc

-1

3 J

an

-1

Increase 14 rAp

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-1

Remain unchanged

Decline

Increased significantly

Increased slightly

No change

0% Decreased Very slightly overvalued

Decreased Somewhat significantly overvalued

0%
At fair value Somewhat undervalued Very undervalued No opinion

20%

In our last survey, there was little difference between present and historical values. Also currently, the perceived probability of counterparties defaulting in the next six months is thought slightly positive. Some 13 per cent of CFOs surveyed believeAssume default will become a current cash surplus less likely, with 87 per cent saying the risk will remain position. How you prefer to unchanged. We regard the overall would positive sentiment use the money in the next 6 months? shown by the survey as a sign of stability and recovery, with almost no outright concerns expressed regarding defaults by counterparties.

20%

Chart 10

Most CFOs believe financial risk on their balance sheets has continued to decrease over the last 12 0% Increase Remain unchanged Decline months. Respondents report an ongoing improvement in conditions affecting their exposure to financial risk. Overall, sentiment has become increasingly positive 70% since our fall survey. Most companies are seen as 60% financially stable, while market conditions have gener50% ally improved.
40% 30% 20%

10%

0%

Chart 14
How will your company change its capacity utilization and production plans during the coming 12 months?

50%

40%

30%

20%

10% 10% 0% Pay down debt Strategic Dividend investments to abroad shareholders Strategic Financial investments investments in Sweden in Sweden Financial investments abroad 0%

emain changed m current evels

Decline by 0-10%

Decline by more than 10%

No opinion

Feb 2013

Sep 2013

Chart 11a
The number of employees working in Sweden for your
70% 60%

Feb 2014

Chart 15
9 Do you think financial market concerns relating to emerging markets are:

100%

80%

60%

Strategic opportunities Chart 6 Chart 5

80% 70%

Chart 10
Assume a current cash surplus position. How would you prefer to use the money in the next 6 months?
70% 60% 50% 40%

9,40
60%

How do you expect operating cash flow in your company to change over the next 12 months?

50%

40%

Chart 9

9,40 9,20 50% 9,00

EUR/SEK
30%

What is your EUR/SEK budget rate for the year 2014? Howfinancial has the level of

EUR/SEK SEB forecast

30% 20% 10%

9,20

50%
20%

SEB forecast CFOs budget rate (median estimate)

9,00 40% 8,80 30% 8,60 20% 8,40 8,20 8,00

Ju l-1 2 Oc t12 Ja n -1 3 Ap r13 Ju l13 Oc t13
10% 0% Very favourable Favourable Average

financial risk on your balance sheet changed over the last 12 months?

CFOs budget rate (median estimate)

40% 8,80
8,60 30% 8,40

0% Pay down debt Strategic Dividend investments to abroad shareholders

10%

able

Responses received confirm expectations of increased M&A activity. We see a further 0% Increase Increase Remain Decline Decline No 8,00 recovery in suchunchanged transactions over next 1210% months, with several large deals occurring by more by 0-10% by 0-10% by more the opinion Not so Very 3 2 4 than 10% from current than 10% 12 13 13 13 14 14 -1 -1 l-1 llfavourable unfavourable rrttn n levels Ju Ju to make Ju Ja still Ja strategic Oc Oc Apprefer Ap at the start of this year. CFOs with current cash surpluses 0% Increased Increased No Decreased Decreased 4 14 14 -1 lsignificantly slightly change viewslightly significantly rn Chart 11a investments more positive of future Ju and to pay down debt, confirming a slightly Ja Ap 70% The number of prospects. employees working in
20% 8,20
50% the money in 10. Assuming a current cash surplus position, how would you prefer to use the next 6 months? 40%

Stra inves in Sw

Chart 7
60% 50% 40%

50%

Over the next 12 months how do you expect levels of corporate acquisitions and divestments in Sweden to change?

80%

40%
30%

30%

20%

20% 10%
0% Very favourable Favourable Average

able

10%

0% Increase by more than 10% Increase by 0-10% Remain unchanged from current levels

Changes since last September areAssume less dramatic than a current 70% How do you expect cash surplus those that have occurred since last spring. During the operating position. How cash flow 60% in you your company Q4 reporting season, companies were more interested would prefer to to change over use the money in the 50% in paying dividends to shareholders, as forecast next 12 months? in the next 6 months? 40% our last survey. Now, following the announcement 30% of generous 2013 dividends, firms have refocused 20% elsewhere, preferring instead to pay down debt, with 10% nearly 40 per cent of CFOs ranking it their top prior0% Significantly, some 35 per cent of CFOs would ity. Increase Increase No Decrease Decrease No significantly somewhat change abroad, somewhat with significantly opinion prefer to invest strategically 8 per cent Not so Very choosing overseas financial investments, an increase favourable unfavourable of 4 percentage points since the last survey.
Decline by more than 10% No opinion

Chart 10 Chart 6

Sweden for your company is, in the next 6 months

60%

70% 50% 60%

40% 50%

30% 20% 10% 0%

40% 30% 30%

20% 20% 10% 10%

Increase

Be unchanged

0% 0%

Chart 11b
Pay down Strategic Dividend Increase Increase number of Remain debt The investments to by more employees by abroad 0-10%working unchanged shareholders than 10% abroad for your from current levels

Decline by 0-10%

company is, in the next 6 months

Strategic Financial Decline Decline 60% investments investments by 0-10% by more in Sweden in Sweden than 10% 50%
40% 30%

Financial No investments opinion abroad

Chart 11a of 11. How do you currently rate valuation

Chart 8
60% 50%

Swedish companies?

80% 70%
40%

How do you currently rate valuation of Swedish companies?

50%

40%

30%

The number of employees working in Sweden for your company is, in the the next 12 next Over 6 months months how do you expect levels of corporate acquisitions and divestments in Sweden to change?

Chart 7

12. Over the next 12 months 20% how do you expect levels of corporate 10% acquisitions and divestments in Sweden to change? 60%
70%
0%

80% 50% 70% 40% 60% 30% 50%

Increase

Be unchanged

Chart 12
What are the greatest concerns for your company in 2013?
Increase Be unchanged

100%

60% 30% 50% 40% 30%

10%
10%

20% 40% 10% 30% 0% 20%

10%

20%

20%

80%

Decline
60%

20% 0% 10% 0%

0%

0% Not Very so overvalued favourable

Somewhat Very overvalued unfavourable At fair value Somewhat undervalued Very undervalued No opinion

Very favourable

Favourable

Average

Increase significantly

Increase somewhat

No change

Decrease somewhat 40%

Decrease significantly

No opinion

Increase significantly

Increase somewhat

No change

Decrease somewhat

100%

Interestingly, CFOs now regard Swedish compaDecrease No significantly opinion nies as slightly overvalued, an appreciable change The number of compared to the fall survey. The OMX Stockholm 30 employees working abroad for your Index surged to record highs at the beginning of this company is, in the year, both by index value and price to earnings ratio. next 6 months However, with low interest rates and abundant market capital, the stock market may develop more positively than fundamentals indicate. Dividends and yields remain at reasonable levels.

Chart 11b

Chart 8
How do you currently rate valuation of Swedish companies?

80%

50%
60%

M&A activity has continued to increase in recent quarters with further improvements 20% expected. 60% Respondents are even more optimistic concerning numbers of M&A transactions compared to the 50% 0% Demand Interest rates Exchange rates fall survey. Some 68 per cent of CFOs now forecast 40% increased activity. While M&A volumes remain well 30% below historical levels, based on current developments, more companies are actively screening the 20% market for potential acquisitions. We therefore still 50% 10% expect more transactions over the next 12 months, a view supported by respondents increasing interest in 0% 40% Increase Be unchanged Decline strategic investments and their positive view concerning the lending attitudes of financial institutions. 30%
100% 20%

Labour co

40%
40%

30%
20%

Chart 12
10
Increase Remain unchanged Decline

Feb 2013
10%

Sep 2013

Feb 2014

20%
0%

What are the greatest concerns for your company in 2013?

80%
0% Very overvalued Somewhat overvalued At fair value Somewhat undervalued Very undervalued No opinion

10%

An international outlook Easing uncertainty improves optimism

The most recent Deloitte CFO surveys in the UK/ Europe, North America, and Asia Pacific (conducted in Q4 2013) included the following findings: Nevertheless, some 55 per cent of CFOs expect the economy to be stronger in a year, while only 7 per cent think it will be worse (up from 2 per cent). Monetary policy concerns have escalated, with more CFOs expressing worries over the effects of "quantitative easing" and its eventual wind-down. Some 17 per cent of CFOs say their boards have faced pressure to return cash, while the same proportion of respondents state they are concerned by the actions of activist investors. Capital spending growth expectations fell sharply to just 4.9 per cent during the third quarter of last year, before recovering to 6.4 per cent in Q4 2013. Still, this is well below the survey average of 8.6 per cent (though manufacturing is relatively positive at 8.4 per cent).

Europe
Across much of Europe, positive sentiment concerning local economies and business prospects has become more certain this quarter, while uncertainty has eased considerably. Some 80 per cent of Swiss CFOs are optimistic about their country's economic outlook, the highest share since March 2011. An overwhelming 96 per cent of Irish CFOs believe their economy has either returned to growth already or will do so in 2014. Dutch CFOs are more optimistic about their prospects than they have been since Q4 2010. In the UK, a record 57 per cent of CFOs say this is a good time to take risk onto the balance sheet, with business optimism higher than at any time in the last three-and-a-half years. The largest UK companies regard financing conditions as benign, as shown by the low cost and high availability of credit. In addition, CFOs expect all forms of capital raising issues of bonds and equity, and bank borrowing to increase in 2014. In Belgium, credit availability continued to increase in Q4 2013, and is still thought cheap by the average CFO. UK CFOs also place greater emphasis on capital spending, with 88 per cent expecting M&A activity to increase over the next 12 months. The Corporate Expansion Index has reverted to levels last seen in early 2011, when the UK looked set for sustained recovery. Dutch CFOs are still positive towards the M&A market. Meanwhile, they regard the private equity market bullishly, posting their most optimistic score (86 per cent) since Q1 2011. Some 92 per cent of CFOs expect the corporate M&A market to improve over the next 12 months.

Asia/Pacific
CFOs in Asia Pacific are cautiously optimistic this quarter. Overall, 44 per cent of respondents in Southeast Asia say they were more optimistic in Q4 2013 than in the previous quarter. However, public companies are slightly more pessimistic, due to various macroeconomic factors including financial and economic uncertainty. Almost 60 per cent of Indian CFOs consider a slowdown in the domestic economy as an economic concern, followed by rupee depreciation and volatility. In Australia, CFOs regard issuing equity as far less attractive than the previous quarter. Meanwhile, 44 per cent of respondents see credit as either slightly or very cheap (compared to 42 per cent in Q3), while 78 per cent describe credit as moderately or easily available (up from 76 per cent in Q3). In Southeast Asia, CFOs are currently much more involved in risk management practices than 12 months ago. Due to changes in external and internal environments faced by companies, some 72 per cent of CFOs polled say they are more engaged in risk management than they were a year ago, while only 6 per cent claim to be less involved. The outlook for Australian M&A activity has improved significantly since respondents were last polled. At the end of last year, some 30 per cent of CFOs said their companies had more important matters to address than M&A activity.

North America
CFOs in North America were generally optimistic in 2013, with strong Q4 results bringing the year to a positive end. Some 54 per cent believe their companies prospects are improving (up from 42 per cent last quarter), while 21 per cent are more pessimistic, down from 24 per cent. While 82 per cent of CFOs expect increased sales, on average they expect a rise of only 4.1 per cent this year, the slowest rate since Q2 2010

11

Contacts
Deloitte
Tom Pernodd Partner, Deloitte Financial Advisory tpernodd@deloitte.se 075-246 30 60 Christina Bergman Partner, Deloitte Consulting chrbergman@deloitte.se 075-246 26 88 Peter Ekberg Partner, Deloitte Audit pekberg@deloitte.se 075-246 30 54 Lars Franck Partner, Deloitte Tax lfranck@deloitte.se 075-246 21 26

SEB
Johan Lindgren Credit Strategist Credit Strategy, Trading Strategy, SEB johan.y.lindgren@seb.se 08-506 231 64 Daniel Bergvall Economist Economic Research, SEB daniel.bergvall@seb.se 08-763 85 94

About the survey

The CFOs who responded represent a selection of the 200 largest companies in Sweden across industries. The survey was carried out as a web-based questionnaire in February 2014. Given the broad range of industries and organisations that responded, the trends observed and conclusions made are considered representative of the wider Swedish CFO community.

SEB is a leading Nordic financial services group. As a relationship bank, SEB in Sweden and the Baltic countries offers financial advice and a wide range of other financial services. In Denmark, Finland, Norway and Germany the bank's operations have a strong focus on corporate and investment banking based on a full-service offering to corporate and institutional clients. The international nature of SEB's business is reflected in its presence in some 20 countries worldwide. On December 31, 2013, the Group's total assets amounted to SEK 2,485 billion while its assets under management totalled SEK 1,475 billion. The Group has about 16,000 employees. Read more about SEB at www.sebgroup.com.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and highquality service to clients, delivering the insights they need to address their most complex business challenges. Deloittes more than 200,000 professionals are committed to becoming the standard of excellence. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the Deloitte Network) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. 2014 Deloitte AB