SURVEY: CFOs weigh in on mining industry

GE Capital Canada has released its Semi-Annual Canadian Mid-Market CFO Survey, and the respondents' take on the mining industry is less optimistic that it might be. The mid-market companies surveyed had revenues of $117.88 million and an...

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GE Capital Canada has released its Semi-Annual Canadian Mid-Market CFO Survey, and the respondents' take on the mining industry is less optimistic that it might be. The mid-market companies surveyed had revenues of $117.88 million and an average of 43 employees.

Here, in point form, are GE Capital's findings as they relate to the metals, mining and metals fabrication sector:

  • Current sentiment — Metals, mining and metals fabrication CFO sentiment is significantly less optimistic than the overall mean when it comes to the current state of their industry, the Canadian economy and the global economy.
  • Economic growth — 51% say the Canadian economy will stay about the same over the next 12 months (up 11 points), while 27% say it will shrink (up 20 points).
  • Industry growth — 46% expect their industry to stay about the same over the next 12 months (down 13 points), yet 32% expect it to contract (up 25 points).
  • Company growth — More than half (54%) expect to be in a cyclical / limited growth phase over the next 1-to-3 years (up 4 points), making metals CFOs the most pessimistic of all those surveyed. Twenty-four per cent expect a moderate growth phase (down points).
  • Revenues — 43% expect revenues to decrease this year (up 36 points), and 38% expect them to increase (down 29 points).
  • Cost structure — More than half (51%) predict their cost structure will increase this year (down four points), while 32% predict it will stay about the same (up three points).
  • Business concerns — The factors most likely to impact business performance in the next 12 months are energy costs, including the cost of oil and gas (cited by 81% of respondents), and labour costs (cited by 76%).
  • Pricing — Nearly half (49%) CFOs said they plan to keep pricing of their products about the same this year (up 26 points), while 35% said they plan to increase pricing (down 39 points).
  • Hiring — 65% said they have been hiring this year (down 9 points), and 59% said they will be hiring in the next 12 months (down 26 points).
  • Spending areas — If they do consider spending more this year, metals CFOs are most likely to acquire equipment (59%).
  • Credit availability — 59% said that credit from their lender has remained the same compared to 12 months ago (up eight points). Moreover, 51% anticipate that their current lender will maintain credit availability; that’s unchanged from Q1 2012.

The survey included questions asked only of the metals mining and metals fabrication respondents. Here is the list:

  • Hedging — 84% said they do not see their company using hedging in the next 12 months due to the significant volatility in metals prices (up 10 points).
  • Impact of imports — 86% said they do not see an increase in metals-related imports as a competitive threat to their company over the next 12 months (down 6 points).
  • Inventory levels — 68% said their inventory levels are just about right (up 12 points).
  • Order lead times — Compared to three months ago, 38% of metals CFOs said their order lead times were decreasing (down 5 points), and the mean decrease is 19%. At the same time, 30% said order lead times were increasing (down 22 points), and the mean increase is 14%.
  • CO2 emission regulations — 54% said potential new CO2 emission regulations would have a minor or mild impact on their business’s profitability.
  • Trade cases — When asked if they expect new steel/metals trade cases to be filed by Canadian metals companies within the next three to nine months, 41% said no and 38% were unsure.

To see how Canadian CFOs (across the board along with those in the metals industry) compare with those in the United States, visit click here.

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