Report: Confidence increasing among Swedish CFOs

Signs of increasing confidence in

the Swedish economy

The Deloitte/SEB CFO Survey
Spring 2013 results

Contents
Introduction Continued below-trend growth Hot topic - Outlook on the stock market and bond market Business conditions and outlook Prospects and concerns Financing Strategic opportunities An international outlook - Moving beyond the euro to focus on growth Contacts 3 4-5 6 7 8 9 10 11 12

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Welcome to the latest edition of the Deloitte/SEB CFO Survey!
We are excited to present the spring 2013 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 Partner Financial Advisory, Deloitte tpernodd@deloitte.se

Johan Lindgren Credit Strategist Credit Strategy, Trading Strategy, SEB johan.y.lindgren@seb.se

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Continued below-trend growth
Indexvärde
65 60 55 After a weak year-end 2012, with many indications of a relatively sharp drop in GDP during the fourth quarter compared to the preceding quarter, forward-looking indica50 tors have recovered. The Deloitte/SEB indicator improved to 49.5 in February 2013 45 compared to 48.3 in September 2012. We are sticking to our forecast that Sweden 40 can avoid a recession. GDP will grow by 1.2% this year and by 2.5% in 2014, largely 35 7 0 1 6 8 2 9 8 9 0 1 2 unchanged-07compared pto our previous gforecast. -1But-1because13of below-trend growth in -0 -1 -0 -0 -1 -0 -0 -0 -1 -1 g g p p p b b b b b b b Se Fe Au Fe Se Se Fe Se Fe Fe Au Fe Au Fe both 2012 and 2013, unemployment will rise during much of 2013 and remain high throughout our forecast period.

Swedish CFO Index
65

60

55

50

45

40

35
p Se 6 -0 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

The Swedish CFO index for February 2013 has a value of 49.5, which reflects slightly negative expectations. The index is based on four components; business climate, financial position, lending willingness and counterparty default risk. The four components index values for February 2013 are 44, 54, 55 and 45 respectively.

Exports climb from a low level
Late in 2012 there were many signs of deceleration in the export sector, and monthly data indicate a sizeable decline in exports and industrial output during the fourth quarter. Yet at the same time, more forward-looking sentiment indicators confirm that the recovery in the US and emerging economies is now spreading to Sweden and elsewhere in Europe. The levels of most indicators are still low, and in merchandise exports the recovery is occurring gradually. Overall, we believe exports will climb by 2.0% in 2013 and 4.3% in 2014. Gross fixed investments held up relatively well despite last year’s downturn. Statistics Sweden’s capital spending survey nevertheless shows that businesses have become more cautious. Weak demand and uncertain economic prospects are holding back capital spending, but given the low initial level there are signs that such spending will rebound fairly rapidly once economic growth takes off. Residential investments fell by an estimated 10-15% during 2012,
4

but a stabilisation in the number of housing starts indicates that the decline will gradually decelerate this year. Altogether, we predict that capital spending will increase by 1-2% this year and then accelerate to 4-5% during 2014.

Somewhat better financial position
Continued expansionary monetary policy with low interest rates for a foreseeable future and unconventional monetary policy has reduced uncertainty. Companies in our survey respond that the financial position has improved even though the macroeconomic environment is weak. In our survey, the overall index improved to 54.2, up from 51.9 in September 2012. The improvement might be at the back of companies having stronger balance sheets and that companies expect the operating cash flow to increase somewhat (45% of respondents in the Deloitte/SEB survey indicate an increase by 0-10% over the next year). Paying down debt is a high priority according to the survey if there is a current cash surplus position.

Financial position
70 68 66 64 62 60 58 56 54
p Se 8 -0 b Fe 9 -0 p Se 0 1 9 2 0 3 1 2 -1 -1 -0 52 -1 -1 -1 -1 -1 g g p b b b b Se Fe Fe Au Fe Au Fe 50 1 0 7 2 9 8 6 1 2 3 0 9 7 8 -1 -1 -0 -1 -0 -0 -0 -1 -1 -1 -1 -0 -0 -0 g g g p p p p b b b b b b b Au Fe Fe Au Fe Se Fe Se Fe Au Se Fe Fe Se

Finansiell ställning Financial position

throughout our forecast period. Consumer Price Index (CPI) inflation, which is being pulled down by declining home mortgage interest expenses, dropped below zero this winter. We predict that CPI inflation will fall to -0.5% in April and then gradually rebound as a consequence of base effects. Business conditions
70 65 60 55 70 68 66 64 62 60 58 56 40 35 30
p Se

Affärsklimat Business climate

Finansiell ställning Financial position

08

Worried households but rising consumption
Households are now more clearly aware that the labour market is weakening. Consumer confidence fell late last year to its lowest level since 2009. Yet consumption is continuing to rise, and the confidence indicator recovered a bit in January. We still believe that given strong real income increases and falling mortgage interest rates, Swedish households will not reduce their consumption. The risk of a 1 9 2 0 1 9 2 3 10 -1 -0 -1 -1 -1 -0 -1 -1 p b b b b significant declineg -in home Apriceseb has Salso eased, ug ep Au Fe Se Fe Fe F Fe although we still view a home price decline as the biggest domestic risk factor. Our assessment is that home prices will be unchanged or fall slightly during our forecast period.

50 45

54 52
6 -0 7 -0 7 -0 8 -0 8 -0 9 -0 9 -0 0 -1 0 -1 1 -1 1 -1 2 -1 2 -1 3 -1

50
p Se

b Fe

g Au

b Fe

p Se

b Fe

p Se

b Fe

g Au

b Fe

g Au

b Fe

p Se

b Fe

6 -0

b Fe

7 -0

g Au

-0

Riksbank will most likely cut repo rate to 0.75%
Forward-looking indicators have recovered, and international risk sentiment has improved. Yet we are sticking to our forecast that the Riksbank will lower its repo rate one more time to 0.75% in April. The forces driving this rate cut are rising unemployment, falling resource utilisation and inflation that is well below target. Continued expansion in household borrowing is an upside risk, but household income is now increasing as fast as lending. Continued highly expansionary monetary policies by the world’s major central banks imply that it will be some time before the Riksbank begins to hike its repo rate, although it will presumably be in the frontlines once the rate hiking cycle begins. We predict that the repo rate will remain at 0.75% until the end of our forecast period.

07

b Fe

8 -0

p Se

8 -0

Unemployment will rise
It is clear that unemployment has been in a rising trend for the past three or four months. So far, the upturn is driven by an expanding labour supply while employment is still increasing and has actually been somewhat stronger than expected. Short-term indicators weakened late in 2012, however, indicating that the number of jobs will level out. Unemployment will climb to nearly 8.5% in mid-2013 before stabilising in 2014. The survey points at a rather balanced situation with 51% of the respondents stating the number of employees to be ‘’unchanged’’. As in 2012, this year’s pay negotiations will take place during a period of relatively large concerns about the economic outlook. Industrial agreements expire late in March, which means that the negotiations will enter a decisive phase during the coming month. Initial pay demands by trade unions are at around 3%, which is lower than their demands in 2012. We have adjusted our wage and salary forecast downward. We now expect pay increases, including wage drift, to total less than 3%. Due to the uncertain economic situation, agreements are likely to run for only one year.

Gradually stronger krona
Although the krona has weakened against the euro from its peak in mid-2012, the EUR/SEK exchange rate is lower than it was at any time during 20062011. In addition, the upswing in the EUR/SEK rate in recent months is largely a result of the euro’s appreciation against all currencies. In trade-weighted TCW terms, the krona is still less than 1-2% away from its peak during 2012. The krona having broken its historical pattern of weakening during economic downturns is thus still intact. Recent developments indicate that the krona will revert to its historical pro-cyclical pattern and will appreciate as the economic outlook improves. We expect a cautious decline in the EUR/SEK exchange rate to 8.30 at the end of 2013 and onward to 8.10 at the end of 2014. In TCW terms, the krona will appreciate to 112.0 at the end of 2014, or 4% stronger than today. This is a larger appreciation than almost all respondents budget for 2013, 8.50 is the median in the Deloitte/SEBsurvey which might put pressure on export oriented companies with low hedging.

Low price pressure
Inflation pressure in Sweden has been surprisingly low, and CPIF inflation has continued to fluctuate around 1%. Because of the stronger krona and modest pay increases, this trend is likely to continue this year. Fading downward pressure from the exchange rate – and to some extent a gradually diminishing impact from restaurant prices after the value-added tax cut in January 2012 – point towards a somewhat higher inflation rate this and next year. Yet CPIF inflation is expected to be well below the Riksbank’s target

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Hot topic - Outlook on the stock market and bond market
CFOs are generally optimisticChart 13a outlook for the Swedish stock market, a fairly regarding the positive indicator from individualsyou expect the closest knowledge of individual company 60% How do with the OMXS30 to perform during also 50% prospects. Their positive assessment is the consistent with increased M&A activity in early next 12 months? 40% 2013 and CFO expectations for the next 12 months. Based on the results of our survey, 30% bond market activity should continue to increase with more companies indicating their 20% intention to use it for funding. This is clearly consistent with the increasing popularity of 10% corporate bonds with both companies and investors in recent years.
Increased significantly Increased slightly No change

50%

40%

30%

20%

10%

0%

How do you expect the OMXS30 to perform during the next 12 months?

Decreased slightly

Decreased significantly

0%

Chart 13a
70% 60% 50% 40% 30% 20% 10% 0% Pay down debt Strategic investments abroad Dividend to shareholders 30% 20% 10% 0% Financial Strategic Increase investments significantly investments abroad in Sweden

Does your company presently use the corporate bond market for funding and if not, within the next two years do you have plans to finance via corporate bonds?
50%

Increase significantly

Increase slightly

No change

Decrease slightly

Decrease significantly

How do you expect the OMXS30 to perform during the next 12 months?

60% 50% 40%

Chart 13b
Does you company presently use the corporate bond market for funding and if not, within the next two years do you have plans to finance via corporate

40%

30%

20%

10%

ased cantly

Financial Increase investments slightly in Sweden

0% No change Decrease slightly Decrease significantly

We are not using corporate bonds, but will start doing so.

We are not using corporate bonds, and will not start doing so.

We are using corporate bonds, and will continue doing so.

We are using corporate bonds, but will not continue doing so.

a
70% 60% 50% 40% 30% 20% 10% 0%

ancial tments weden

Almost 60% of CFOs surveyed believe the OMXS30 will increase by 5% over the next 12 months while a further 16% expect it to increase by 10% or more. Some 16% of CFOs forecast no change while 9% 50% believe it will fall significantly during the next year. These results indicate an increase either largely in line 40% Does you company presently use the corporate bond with or slightly below the market’s long-term historimarket for funding and if 30% cal average growth. Between September 1 last year and not, within the next two years do you have plans to mid-February, the OMXS30 rose almost 10%. It may finance via corporate 20% be reasonable to ask whether CFOs are biased, based 10% on the market’s strong performance in recent months and the large dividends proposed in Q4 reports, or 0% We are not using We believe We are using We are will Increase Be unchanged whether they in factare not using they and their peers using Decline corporate bonds, corporate bonds, corporate bonds, corporate bonds, but reasonably well start and will not going forward? and will continue but will not performwill start

Chart 13b

CFO replies indicate that 59% of companies surveyed are not using the corporate bond market to finance operations. Of these, some 11% expect to do so at some point. If all CFOs do as they have indicated, we will have a positive net effect of 9%-points over the next two years of companies that will fund themselves in the bond market. This is fully consistent with the increasing popularity of corporate bonds amongst both companies and investors over the past few years.

doing so.

doing so.

doing so.

continue doing so.

b
60% 50% 40% 30% 20% 10% 0% Increase Be unchanged Decline Feb 2012 Sep 2012 Feb 2013 Nov 2011 Feb 2012 Sep 2012

6
80%

Business conditions and outlook

Overall CFOs remain reasonably positive regarding business conditions and outlook. Companies are currently looking forward to 2013 with signs of increasing optimism, albeit from a low level. They also regard their financial positions as favourable, as confirmed by the dividends proposed in year-end reports.
1. Business conditions for your company in the next 6 months are seen as: Replying to our current February survey, some 73% What is your EUR/SEK of CFOs thought business conditions werefor the budget conditions Businessrate average or 50% financial year 2013? for conditions better. Still, Swedish macroeconomicyour company in were the next 6 months 40% weak towards the end of last year with a sharp de30% crease in Q4 2012 GDP likely. In our fall Deloitte/SEB CFO Survey, CFOs apparently expected sentiment 20% to deteriorate, but yet again, we see a slight improve10% ment. Consequently, we forecast a 2% increase in exports this year, but from a low level. Given the im0% Favourable Average Not so Very Not Very so Very favourable favourable unfavourable portance of foreign trade for Sweden, such a positive favourable unfavourable development may improve sentiment even further.
60%

Chart 5 Chart 1

Chart 5

9,40

9,40

n

60% 9,20
9,00 50% 8,80 40% 8,60 30% 8,40

What is your EUR/SEK budget rate for the financial year 2013?

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

How has the level of SEB financial risk on your forecast What is your EUR/SEK balance sheetfor theCFOs’ budget rate budget rate changed over the (median estimate) financial year 2013? last 12 months?

EUR/SEK

50% 9,40

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

20% 8,20 10% 8,00 0%ul J
11 t Oc Very favourable 1 -1 Ja n Ap Favourable 2 -1 1 r2

8,40 10% 8,20

ble

Average

8,00 2 3 1 13 12 12 1 13 -1 -1 -1 r- nt - l -1 ll - pr n ct Ju Ju A Oc Ju Ja O Ap Ja Average Not so Very favourable unfavourable
12

Ju

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2 -1

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1 t-

2 Ja n

-1

3 Ap

1 r-

3 Ju l

3 -1

0% 8,00

Ju

l-

11

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

50%

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? you expect How do
70% 60% 50%

Chart 6

40%

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

50%

50%
40%

40%
30%

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

50%

Chart 6

40%

30%

30%

operating cash flow in your company to change over the next 12 months?

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

30%

20%

20%

20%

20%

20% 0%

10%

10%

10%
10%
Increase by more Very than 10% favourable Increase by 0-10% Favourable Remain unchanged Average from current levels

P

10%
Average

ble

0%

0% Not Very so favourable favourable Very Favourable unfavourable

0%

Average

Not so favourable

Very unfavourable

0%

Decline Increase by 0-10% by more Not so 10% than favourable

Decline Increase by by 0-10% more Very than 10% unfavourable

Remain unchanged from current levels

Decline by 0-10%

Decline by more than 10%

0%

e

Having kicked the can down the road by a further six months since our last survey, companies appear to have adapted to the generally weak macroeconomic environment. The aggregated financial position index was 54, up from 52 in September. A total of 44% of CFOs questioned replied that their company’s finan50% Over the next 12 cial position was “favourable” although, how the proporas do you months The lending attitude expect levels of tion 40% answering “average” remains largely unchanged of financial corporate acquisitions institutions toward and divestments in while 9% claim their company’s financial position was your company Sweden to change? 30% “very favourable.” We expect a general improvement, potentially based on even stronger company balance 20% sheets.

Chart 7 Chart 3

Swedish CFOs retain positive cash flow expectations for the next 12 months, in line with those in our last survey in fall 2012. Some 56% of CFO respondents still forecast cash flow to increase while 11% project a double digit improvement over the next year. The most significant change compared with the last survey 50% 50% Over the next respondents expecting lower cash is the increasehow do you in 12 50% months expect levels of flows, a sign of uncertain market 40% conditions and dif40% corporate acquisitions 40% ferences and divestments in between markets and industries.

Chart 11a
The number of employees working in Sweden for your company is, in the next 6 months
70% 60% 50% 40% 30% 50% 20%

Chart 7

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

30%

Sweden to change?

40% 10%
0% 30%

30%

30%
20%

20%
20%

20%
10%

10%

10%
10%
Increase significantly Very favourable

10%
Average

ble

0%

0% Not Very so favourable favourable Very Favourable unfavourable

Average

Not so favourable

Very unfavourable

0%

0% Increase No Decrease Decrease No Increase Increase somewhat change somewhat significantly significantly somewhat opinion Favourable Average Not so Very favourable unfavourable

No change

Decrease somewhat

Chart 11b
Decrease significantly

No opinion
60% 50%

0%

Feb 2012

Sep 2012

Feb 2013

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

s

7

40% 30%

Prospects and concerns

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

R/SEK

B forecast

Os’ budget rate edian estimate)

As in previous surveys, demand remains the biggest worry for Swedish CFOs. The greatest change in recent results shows increased concern at the shortage of skilled Chart 13a labour, usually a signal indicating more confidence byHow do you expect looking to hire new companies 50% 60% the OMXS30 to personnel. Issues concerning exchange rates highlighted induring thelast survey remain a our perform 50% 40% next 12 months? major concern, despite recent greater stability. 40%
30%

4. What are the greatest concerns for your company in 2013? 20% Some 57% of CFOs replied that the biggest worry for 10% their company in 2013 is demand, which has risen sharply since September to near November 2011 0% Increased Increased No Decreased Decreased levels. significantly Exchange rates are not thought slightly as important slightly change significantly
60%

30% 20%

3 Ju

l-

13

as in September though relative concerns regarding shortages in skilled labour nearly10% doubled to 9% since our last survey. 0%
Increase significantly Increase slightly

No change

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

50%

70% 40% 60%

Chart 13b
Does you company presently use the corporate bond market for funding and if not, within the next two years do you have plans to finance via corporate

50%

40%

30% 50%
40%

30%

20% 30%
20%

20%

10% 10%
0%

10%

0%

Pay down debt Demand

Strategic Dividend investments Skilled to abroad labour shareholders shortgage

Financial investments Other abroad

Strategic Financial investments investments Exchange in Swedenrates in Sweden

0%

Interest rates

Cost of raw material/ commodities

Labour cost

We are not using We are not using Foreign corporate bonds, corporate bonds, Access and to capitalbut will startcompetition will not start doing so. doing so.

We a corpora and wil doi

Decline by more han 10%

Chart 11a
60% 50% 40% 30%

5. The number of employees in your company in Sweden is, in the next 6 months, expected to:

6. What is your EUR/SEK budget rate for 2013?
9,40 EUR/SEK SEB forecast CFOs’ budget rate (median estimate)

Chart 5

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

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

70% 60% 50% 40% 30%

What is your EUR/SEK budget rate for the financial year 2013?

H fi b c la

20% 10% 0% Very favourable Favourable Average

20% 10% 0%

Not so Increase Very favourable unfavourable

Be unchanged

Decline

Ju

l-

11

Oc

t-

11 Ja

n

-1

2 Ap

r-

12 Ju

l-

12

Oc

t-

12 Ja

n

-1

3 Ap

r-

13 Ju

l-

13

No opinion

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

40%

Some 35% of CFO respondents believe the number of employees in Sweden will decline, well below last September when 44% expected to cut personnel. A total of 53% think the number of employees will 60% remain unchanged while 12% expect it to increase, up 50% 6%-points from September. This is of course positive and in line with our forecast that unemployment will 40% How do you expect peak in 2013 before easing slightly beforecash flow of operating the end 30% in your company to the year. change over the next

Chart 6
12 months?

Among CFOs surveyed, the median EUR/SEK value was 8.5, well below the 2012 estimate of 9.0. As we concluded in our previous survey published last September, companies overestimated the 2012 rate. As a result, export companies were adversely affected last year. SEB forecast a moderately declining EUR/ SEK ratio throughout 2013 down to 8.30. Hence, the 50% companies once again run the risk of underestimating the strengthening of the krona. 40%
30%

C

A c p Nov y m m

20%

30%
10%

Feb 2012
20%
Increase Be unchanged Decline

Sep 2012

Feb 2013

20%

0%

10%

8

10%

50%

Chart 6 Chart 6

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

Financing
Very favourable Very favourable Favourable Average

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

50%

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

Favourable

Average

Not so favourable Not so favourable

Very unfavourable Very unfavourable

0%

Generally, the lending attitude of financial institutions is regarded as favourable, unchanged from our fall survey. However, in several segments financing remains a major concern, potentially driving companies to seek other funding sources.
50%

Increase by more than 10% Increase by more than 10%

Increase by 0-10% Increase by 0-10%

Remain unchanged from Remain current levels unchanged from current levels

Decline by 0-10% Decline by 0-10%

Decline by more than 10% Decline by more than 10%

e

7. The lending attitude of financial institutions toward your company is seen as: 50% 2% of respondents regard lending50% attitudes as “very 40% unfavourable”. Overall, the situation is generally 40% 30% unchanged since September. Correspondingly, over 30% the past month, Nordic investment grade and high 20% yield corporate bond issuance has decreased com20% pared to last fall. Apparently, not10% companies believe all the attitude of financial institutions toward them has 10% 0% improved. Although larger businesses Increase easier enjoy Increase significantly somewhat 0% access to low cost financing through the corporate Increase Increase significantly bond market, smaller firms may still be forced somewhat to rely on bank loans to fund themselves.
Over the next 12 months how do you expect levels of12 Over the next corporate acquisitions months how do you and divestments in expect levels of Sweden to acquisitions corporate change? and divestments in Sweden to change?

Chart 7 Chart 7

50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0%
Very favourable Favourable Average Not so favourable Very unfavourable

No change

Decrease somewhat

Decrease significantly

No opinion

Very favourable

Favourable

Average

Not so favourable

Very unfavourable

No change

Decrease somewhat

Decrease significantly

No opinion

While the proportion of CFOs surveyed answering “favourable” has increased since the last survey, some 8. The probability for counterparties’ default in the next 6 months is expected to:

Chart 9
100%
EUR/SEK SEB forecast CFOs’ budget rate (median estimate)

9. How has the level of financial risk on your balance sheet changed over the last 12 months?
50%

6

100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 2 1 tOc 0%

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

Chart 8 Chart 8

Chart 13a
How do you expect the OMXS30 to perform during the next 12 months?
60% 50% 40% 30% 20% 10% 0%

40%

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

60%

60% 50% 50% 40% 40% 30%

30%

valuation of Swedish companies?

20%

30% 20%
10%

20% 10%
r12 Ju l12 3 3 -1 -1 n Increasepr A l13

0%

Ap

Ja

Ju

Be unchanged

Decline

Increased significantly

Increased slightly

No change

Consistent with the general slight improvement in sentiment, CFOs believe counterparty risk is diminishing overall. Some 86% expect risk will remain unchanged, compared with 95% last September. A total of 7% of respondents thought it would increase, while Assume a current cash surplus 7% forecast it would decline. In September, no CFO position. How would you prefer some expected it to decrease. Also, at that time,to use the 95% money in the next 6 months? thought counterparty risk would continue unchanged, a finding we regarded as positive as companies adapted to the financial and macroeconomic environment. Now however, sentiment is improving even further. Additionally, SEB Trading Strategy forecasts high yield default rates to remain stable this year at 2.5-3%.

Increase

Be unchanged

Decline

Chart 10

Somewhat Most CFOs still believe their balance sheet riskovervalued has not altered during the last 12 months. However, once again sentiment has changed with 34% now believing balance sheet risk has decreased over the last 12 months, compared with 20% that feel it has increased. 70% Broadly speaking, this finding is contrary to the situa60% tion reported in the fall survey. This provides a strong 50% indication that an increasing number of companies 40% are now regarded as more financially stable, while 30% general market conditions have improved. Indeed, in 20% its February policy report the Swedish Riksbank noted 10% signs of increased confidence among companies and 0% local households.
Pay down debt Strategic investments abroad Dividend to shareholders Financial investments abroad Strategic investments in Sweden Financial investments in Sweden

10%Decreased 0% Very slightly overvalued 0% Very overvalued

Decreased Somewhat significantly overvalued

At fair value

Somewhat undervalued

Very undervalued

No opinion

s

At fair value

Somewhat undervalued

Very undervalued

No opinion

Chart 13b
Does you company presently use the corporate bond market for funding and if not, within the next two years do you have plans to finance via corporate

50%

40%

30%

20%

10%

0%

W co

ease 10%

Remain unchanged from current levels

Decline by 0-10%

Decline by more than 10%

Chart 11a
Feb 2012 Sep 2012 Feb 2013 The number of employees working in Sweden for your company is, in the next 6 months
70% 60% 50% 40%

9

Chart 10

Strategic opportunities Chart 5
Chart 6
60% 50% 40% 9,40 30% 9,20

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

50%

9,40

40%

30%

Chart 9
EUR/SEK SEB forecast CFOs’ budget rate (median estimate)

What is your EUR/SEK budget rate for the financial year 2013?

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

70% 60% 50%

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

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

40% 30% 20% 10% 0% Pay down debt

H fi b ch la

20%

9,00 20% 8,80 10% 8,60 0% 8,40 8,20 8,00
Ju l11 Oc t11 Ja n -1 2 Ap r12
Very favourable Favourable

10%

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

40% 8,40 30% 8,20

Very ourable

Ju

Finally we see some real signs that respondents expect increased M&A activity. The 0% Increase Increase Remain Decline Decline 8,00 by more by 0-10% unchanged by 0-10% by more 20% 1 2 2 3 13 11 12 Average market has already shown some evidence of this witht -the recent1 increaset -in numbers of-13 Not so Very 1 12 -1 -1 rrthan 10% from than 10% lll n n Ju Oc Ju Ja Ap Oc Ju Ja Ap favourable unfavourable current levels 10% major deals set to continue. Q4 earnings reports have also boosted confidence in future Chart 11a prospects with several companies sharply increasing their dividend pay-out ratios. 0% 3 2 2 3 13 -1 -1 70%
l1 Oc t Ja n Ap r Ju l1

Strategic investments abroad

Dividend to shareholders

Financial investments abroad

Increased The number ofIncreased significantly slightly

Chart 7
50%

40%

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

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

Very ourable

Very favourable

Favourable

10%

10. Assuming a current cash surplus position, how would you prefer to use the money 50% in the next 6 months? 40% Q4 earnings reports with several companies paying In our previous publication, we observed the con50% 30% out a significant share of earnings to shareholders. tinued priority to pay down debt – How do you expect a trend of several 50% 40% 20% years - representing a key financial operating cashfor CFOs. strategy flow in your a current 70% Assume company to 40% 10% change over the next In this survey, approximately the same percentage of cash surplus 30% 12 months? 60% position. How would 0% respondents would prefer to pay down debt, assuming you prefer to use the 30% Increase Be unchanged 50% money in September 20% a cash surplus, with a larger share than in the next 6 months? 40% 20% now prepared to make strategic investments abroad. 10% Perhaps the reason for this is higher long-term growth 30% 10% 0% opportunities outside of Sweden. Another possible ex20% Increase Increase No Decrease Decrease No significantly that several are preparing significantly somewhat change somewhat opinion planation is for acquisitions, 0% 10% Average Not so Very Increase Remain Decline Decline 60% The number of Increase a view also supported by the results of our survey. favourable unfavourable by more by 0-10% unchanged by 0-10% by more employees working 0% than 10% than 10% from abroad for Strategic your Paying dividends to shareholders is apparently a more 50% Pay down Dividend Financial Strategic Financial current levels company investments is, in the debt to investments investments investments popular preference than in September, as reflected in next 6 months abroad shareholders abroad in Sweden in Sweden

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

No change 60%

Decreased slightly

Decreased significantly

C

Chart 6 Chart 10

A ca p yo m m

Chart 11b

40% 30%

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

C

Chart 8
50% 40%

11. How do you currently rate valuation of Swedish companies?

Chart 11a Chart 7
The number of Over the next 12 employees working in months how do Sweden for your you expect levels of company is, in the corporate acquisitions next 6 months and divestments in Sweden to change?

12. Over the next 12 months how do you 20% expect levels of corporate acquisitions 10% and divestments in Sweden to change?
70% 50% 60%
40% 50%
0% Increase Be unchanged

T e S co n

How do you currently rate valuation of Swedish companies?

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

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

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

Chart 12
What are the greatest concerns for your company in 2012?

80% 70% 60% 50%

0% 0%
Very Not so overvalued favourable Somewhat Very overvalued unfavourable At fair value Somewhat undervalued Very undervalued No opinion

Very favourable

Favourable

Average

Increase Increase Increase significantly somewhat

Be unchanged 40% No Decrease change somewhat 30%

Decline Decrease No significantly opinion

C

10%

0% Increase significantly Increase somewhat No change

100%

80%

60%

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

Our recent survey shows that 47% of Swedish CFOs still regard their respective companies as fairly valued, Decrease Decrease No consistent with our fall survey last year, notwithstandsomewhat significantly opinion ing the sharp increase in the OMXThe number of 30 since Stockholm employees working September last year. Currently, only 21% regard Swedabroad for your company is, in the ish companies as overvalued, in line with the findings next 6 months of our last survey, indicating that CFOs perceive the outlook to be more challenging than the market would suggest. Our understanding Howthat increasis do you currently ing stock market valuations have, whollyrateSwedish or partly valuation of companies? benefitted all traded companies and may be expected to continue to do so despite some isolated areas of overvaluation.

Chart 11b

Chart 8

We see real evidence of expected increases in M&A 20% activity. Net sentiment is certainly higher than at the 10% time of the fall 2012 results, with nearly 50% of CFOs now forecasting increased activity and 31% no change. 0% 60% Demand Skilled Other labour The market has already shown signs of this happenshortgage 50% ing with many large deals in recent weeks, as well as 40% the survey suggesting the trend is likely to continue. According to Bloomberg, the number of Swedish 30% deals taking place in 2012 fell 6% YoY, providing an 60% 20% important basis for improvement this year.
50% 10% 40% 0% 30% 20%

T e a co n

Interest rates

C
Increase Be unchanged Decline

W co co

Chart 12
Increase Be unchanged Decline

80% 10% 70% 0% 60%
Very overvalued

Feb 2012

Sep 2012

Feb 2013

10
20%

What are the greatest concerns for your company in 2012?

Somewhat overvalued

At fair value

Somewhat undervalued

Very undervalued

No opinion

An international outlook Moving beyond the euro to focus on growth
The following section includes key extracts from the most recent Deloitte CFO Surveys in the UK/Europe, North America and Asia Pacific, all conducted during Q4 2012, together with highlights from Deloitte’s 2013 outlook for India and China. • Companies remain focused on maximising indirect cost savings, with strong cash flow apparently rendering financing, liquidity, and working capital issues of minor importance. • In Q4 2012 persistent uncertainty further depressed CFO investment expectations, with new record slow growth in capital spending, R&D, and marketing expectations. Capital expenditure was expected to increase by only 4.2%, below the Q3 survey low of 4.6% and the weakest rate in over 10 quarters. • Once again, industry regulatory and legislative activity was a major concern, particularly affecting the Energy/Resources, Financial Services and Healthcare/Pharmaceutical sectors.

UK/Europe
• The dominant concern for UK CFOs as they enter 2013 is weak growth in the euro area and UK. Recessionary concerns remain high but decreased in Q4 2012 compared to Q3. • Following a 1% Q3 GDP decrease, Dutch CFO optimism was near zero in Q4 with bulls and bears equally divided, yielding a net 0% score. • In Q4 2012, only around 25% of Swiss CFOs expected the country to be in recession within the next two years, compared with 65% a year ago. • UK CFOs reported significantly improved credit conditions YoY in Q4 as well as a slightly greater willingness to increase capital expenditure and make acquisitions. However, cost reductions remain the biggest priority. • In Switzerland, with credit conditions now regarded as favourable, 38% of CFOs have stated they expect their companies to increase their demand for credit over the next 12 months. • In Holland, risk appetite remains low with 88% of CFOs believing this is not the right time to add balance sheet-related risks, compared with 12% who disagree. • UK CFOs believe there is an average 22% chance that at least one country will leave the single currency in the next 12 months, the lowest share since the question was added to the survey in Q4 2011.

Asia/Pacific
• The Chinese economy grew 7.8% in 2012 – the country’s slowest rate of growth since 1999. Clearly, the economy started to turn around in the fourth quarter when growth was 7.9%; this was the first time in seven quarters that growth was faster than in the previous quarter. Although the very high level of government-driven investment is not seen as sustainable, most analysts expect economic growth in 2013 to exceed that of 2012 and ultimately there remains plenty of headroom for consumer spending to grow. • The Indian economy expanded by only 5.3% in Q2 fiscal 2012–2013, though several indicators suggest growth may have bottomed at near decade lows. Inflation remains high, leaving the central bank reluctant to cut interest rates too soon. Despite the generally positive outlook for coming quarters, fairly modest GDP growth going forward is likely. • In Australia, CFOs became net positive regarding their company’s financial prospects in Q4, compared to Q3, with one third expressing greater confidence in their outlook. Over 50% of CFOs surveyed identified falling interest rates as having boosted their confidence. Still, the outlook for acquisitions continued to deteriorate, with only 38% expressing interest in M&A activity over the next 12 months.

North America
• In the US, net optimism (the difference between the percentage of CFOs expressing increasing and decreasing optimism) continued to decline from 0 in Q2 2012, to -16 in Q3 to -21 in Q4, while in Canada it dropped from over 40 in Q2 and Q3 to -6 in Q4. • Potential adverse effects of the fiscal cliff, regarded as the “most worrisome risk” for CFOs in Q4, exceeded global economic stagnation and the European sovereign debt crisis, both of which were of greater concern in Q3. • Employment expectations remained dismal in Q4 with domestic hiring expected to increase by only 1.0% during the quarter. While slightly higher than the 0.6% posted in Q3, 28% of CFOs now expect to reduce employment, a new survey high.

11

Contacts
Deloitte
Tom Pernodd Partner, Deloitte Financial Advisory tpernodd@deloitte.se 075-246 30 60 Peter Ekberg Partner, Deloitte Audit pekberg@deloitte.se 075-246 30 54 Jan Bäckman Partner, Deloitte Consulting jbackman@deloitte.se 075-246 26 89 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 Swedish companies across all industries. The survey was carried out as a web-based questionnaire in February 2013. 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. Respondents with no opinion on specific questions have not been included in the charts or analyses.

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, 2012, the Group's total assets amounted to SEK 2,453 billion while its assets under management totalled SEK 1,328 billion. The Group has about 16,500 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, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence. © 2013 Deloitte AB

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