-- Majority of CFOs Expect Further Rate Cuts in 2008 --
NEW YORK, Dec. 6 /CNW/ -- Seven out of ten manufacturing CFOs expect
their company's revenues to increase in the coming year - and nearly half
(45%) predict increased profit margins. That's according to an annual survey
of U.S. manufacturing company CFOs commissioned by Bank of America Business
Capital, one of the world's largest asset-based lenders.
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Conducted by Granite Research Consulting from August through early
October 2007, the Bank of America Business Capital 2008 CFO Outlook surveys
CFOs from 600 U.S. mid-size and large manufacturers with revenues ranging from
$25 million to $2 billion.
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.
Thirty percent of CFOs expect the U.S. manufacturing sector to expand in
2008, while 30% also expect it to contract. This is a slight improvement from
last year when 26% expected the sector to expand and 35% expected it to
"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
Overall Economic Prospects Less Favorable
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.
Of particular note, CFOs are not only concerned about the impact that the
deteriorating housing market (56%) and oil prices (54%) will have on the
economy in 2008. Approximately one-third of CFOs are also concerned about
rising interest rates, the trade deficit, the war in Iraq, inflation, the U.S.
budget deficit and terrorism - a considerable increase from last year's survey
in the percentage of CFOs citing each of these factors.
A bright spot is that 58% of CFOs surveyed believe the actions taken by
the Federal Reserve Board over the past year have helped the U.S. economy.
However, nearly the same percentage (59%) expects further rate cuts in 2008.
"Despite recent financial turmoil and a dismal housing market, monetary
policy is consistent with sustained growth in domestic demand," said Mickey
Levy, chief economist for Bank of America. "That being said, many
manufacturers have prudently adjusted their production processes and inventory
while building cash balances to withstand a possible slowdown in demand in
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.
Margin of error for the survey is +/- 4 percent. For complete results of
the survey, visit http://www.bankofamerica.com/businesscapital24
Bank of America Business Capital is one of the world's largest
asset-based lenders, with more than 20 offices serving the United States,
Canada and Europe. It provides companies with senior secured loans, cash
management, interest rate and foreign exchange risk management, and a broad
array of capital markets products. Capital markets and investment banking
services are provided by Banc of America Securities LLC, member
NYSE/NASD/SIPC, a subsidiary of Bank of America Corporation and an affiliate
of Bank of America Business Capital. Visit
http://www.bofa.com/businesscapitalnews for more information.
Bank of America is one of the world's largest financial institutions,
serving individual consumers, small and middle market businesses and large
corporations with a full range of banking, investing, asset management and
other financial and risk-management products and services. The company
provides unmatched convenience in the United States, serving more than 57
million consumer and small business relationships with more than 5,700 retail
banking offices, more than 17,000 ATMs and award-winning online banking with
more than 23 million active users. Bank of America is the No. 1 overall Small
Business Administration (SBA) lender in the United States and the No. 1 SBA
lender to minority-owned small businesses. The company serves clients in 175
countries and has relationships with 99 percent of the U.S. Fortune 500
companies and 80 percent of the Fortune Global 500. Bank of America
Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
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For further information: Andy Schwartz of Bank of America Business
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