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Mideast CFO optimism affected by low oil prices

MIDDLE EAST, August 24, 2015

The optimism and risk appetite of chief financial officers (CFOs) in the Middle East has been impacted by the continuation of low energy prices, according to Deloitte’s latest report.

Deloitte, a leading provider of audit, tax, consulting, and financial advisory services, has released its new report the “Global CFO Signals: CFO Sentiment Q2 2015 – Staying focused; remaining vigilant”.

The report includes results of the second-quarter 2015 CFO surveys from Deloitte CFO Programmes across the Americas, Middle East, Europe and Asia-Pacific, risk appetite in the Middle East curbed, with only 33 per cent of CFOs believing it is a good time to take greater risk onto the balance sheet.

With oil at $53 a barrel at the time of the survey, CFO optimism fell to one of its lowest levels in recent years, with only a net 26 per cent across the Middle East reporting positive prospects for their company.

That is down from 47 per cent in the previous survey, which was conducted just before the fall in oil price
 
According to the report, for now the favoured strategies are cost reduction and improving internal economics. However, CFOs are optimistic about at least one thing: they expect oil prices to be higher in a year.

The highlights from the Middle East CFO Survey:

•    The weakened sense of optimism is evident within several financial forecasts. Predictions of private equity activity as well as M&A levels over the next 12 months have both decreased from the previous survey conducted for the second half of 2014.

•    Despite market conditions, new credit is considered to be easily available and at one of its lowest cost levels.

•    High-priority business strategies for the next year revolve around Middle East CFOs’ operator and steward roles.

•    Net 66 per cent of Middle East CFOs predict that energy prices will be higher in a year.

•    Gulf nations did not remain unscathed from market conditions; optimism in the UAE dropped to a net 46 per cent from net 61 per cent in previous survey.

•    Bank borrowing is perceived to be the most attractive source of external funding, with a net 65 per cent of Middle East CFOs preferring bank loans over debt raised.

James Babb, partner and CFO Programme leader at Deloitte Middle East, said: “In response to challenging market conditions and decreased risk appetite, Middle East CFOs appear to have concentrated their efforts toward performing as financial stewards and operators of their organisations rather than as strategists or catalysts.”

“The pivot is evident as high-priority business strategies over the next 12 months aim to protect and preserve the organisation’s financial position via cost reduction (net 86 per cent), organic growth (net 73 per cent) and increased cash flow (net 66 per cent),” he added. – TradeArabia News Service




Tags: Report | Deloitte |

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