Seven out of ten manufacturing CFOs expect revenues to increase in the coming year -- and nearly half (45%) predict increased profit margins, according to a survey by Bank of America Business Capital.
Nearly one-third of the respondents (32%) plan to fuel their revenue growth through increased capital expenditures. Twenty-three percent expect to participate in a merger or acquisition in 2008, up slightly from 20% last year. Seventy-one percent of manufacturing companies selling to foreign markets expect their sales to increase in 2008 -- up from 64% last year.
"With healthy balance sheets, manufacturing CFOs are continuing to look for and find ways to grow their businesses, whether organically, through M&A or expanding internationally," said Bank of America Business Capital President Joyce White. "Strong U.S. exports are certainly contributing to an expectation among manufacturers that revenues and profits will continue to increase through 2008."
Despite relative optimism about their own company's fortunes, respondents are less sanguine about growth prospects for the U.S. economy. Only 44% believe the U.S. economy will grow next year, down from 55% in last year's survey -- and only 22% expect the U.S. economy to outperform the world economy, down from 39% in last year's survey.
When asked about their top financial concerns, 74% of CFOs cited cost of materials, supplies and equipment compared to 84% last year. This was followed by healthcare costs (71% vs. 82% last year) and energy cost (65% vs. 82% last year). Nearly two-thirds of manufacturing CFOs (64%) said that an interest rate increase in 2008 would negatively impact their company.
Other key findings:
-- The majority of manufacturing CFOs see the current state of the U.S.
economy in a positive light, giving it an average score of "64" on an
economic scale ranging from 0 (extremely weak) to 100 (extremely
strong). This is slightly lower than last year's score of "67."
-- CFOs also have a positive view of the world economy, giving it an
average score of "67."
-- Only 26% percent of CFOs forecast an increase in their cost of capital,
down from 46% last year and 59% the year before.
-- Thirty-five percent say credit availability from their current lender
has increased over the past 12 months.
-- Only 21% percent expect their borrowing needs to increase in 2008, down
from 25% last year, and the lowest percentage in the ten-year history
of the survey.
-- Cash Management (59%) and Letters of Credit (54%) topped the list of
most widely used products and services from lenders, followed by
Foreign Exchange (37%) and Retirement Plan Services (36%).
Labor Costs and Product Pricing
-- Fifty-five percent of CFOs predict their labor costs will increase,
down from 56% last year.
-- Fifty-six percent plan to increase their product pricing in 2008, down
from 60% last year.
-- Eight in ten CFOs report that rising energy costs will impact their
product pricing in 2008.
Mergers and Acquisitions
-- Twenty-nine percent believe there are more businesses available at
lower prices, up from 23% last year and 20% the year before.
-- Eighty-three percent conduct business internationally, down from 87%
-- Thirty-nine percent have international operations, down from 42% last
-- Among manufacturing companies with foreign operations, 53% report plans
to expand them in 2008.