Profits of doom: 4 out of 10 CFOs see profits flat or declining

Survey shows margins remain pressured.

Asia Pacific’s leading chief financial officers (CFOs) are increasingly optimistic that revenues will rise in 2014 compared to last year, but are less optimistic on the outlook for profits.

In a survey of regional CFOs commissioned by Bank of America Merrill Lynch, 76 percent of respondents said they expect revenues in 2014 to rise, up from 72 percent in the same survey last year. However, just 60 percent of those surveyed expect profits to rise, down from 65 percent in 2013.

“Margin pressure is a real issue this year given the rising costs of doing business,” said Steven Victorin, head of Asia Pacific Corporate Banking and Global Corporate Banking Subsidiaries at Bank of America Merrill Lynch.
“Costs associated with labor, materials and financing have been rising as the Fed normalizes its monetary policy through tapering of its quantitative easing program.

Long-term rates may go up, and certain countries – such as India and Indonesia – already have hiked interest rates. We also have seen depreciation of some currencies last year, which equates to rising imported material costs.”

The Bank of America Merrill Lynch 2014 CFO Outlook Asia report surveyed 639 CFOs and other senior financial executives in the region. Close to 60 percent of them represent corporations with annual revenues of US$1 billion and above.