Mid-Sized-Firm CFOs Expect 2012 Cap-Ex Boosts

Despite economic and internal concerns, slightly more than half in TD Bank’s survey foresee spending rise in 2012, up from 39% this year. Technology is number-one target.

By Roy Harris

More finance chiefs of mid-sized companies expect to boost capital spending next year, sacrificing some of their swollen cash reserves, according to a recent survey of finance executives. The number-one target for the projected spending: technology, by far.

A study by TD Bank, which had a survey company interview 200 executives in the U.S. Northeast and Mid-Atlantic regions, showed that 51% envision increasing their capital expenditures in 2012, up from 39% who foresaw that prospect in last year's analysis by the bank.

Also, three-quarters say they expect their companies’ sales to increase over the next 12 months – with 27% saying the increase will be 10% or more. A sales decrease was seen by only 9%. Still, the executives report being concerned about numerous continuing economic and other problems, including the so-called jobless recovery, which they believe has the highest potential to hurt company finances.

Of the 66% of executives who report their sales increasing over the past 12 months, 29% say the increases were at least 10%. In last year’s survey, only 58% had predicted sales increases, with a quarter of the total saying those increases would be in double-digits.

The survey was conducted in October at companies that had $25 million to $250 million in annual sales. More than two-thirds of respondents were CFOs or held similar finance titles, with the rest being executives who have some influence over financial decisions at their companies.

‘Loathing Uncertainty’

“Given the length of the recessions and the tremendous pent up cash balances, CFOs are making decisions to invest in technology and infrastructure to make them more competitive and productive,” Walter Owens, TD Bank’s head of specialty and corporate banking, tells CFOworld.com. “We also attribute the 12% rise in respondent's anticipated capital expenditures from last year's survey to an increasing, if still muted, optimism.”

He adds, “Unfortunately, very few are willing to invest in new resources reinforcing 'the jobless recovery’.” But, he says, “There has been greater visibility over the past 12 months regarding the economic questions overhanging the U.S. and global economy. That's not to say we're out of the proverbial woods yet, but CFOs who prudently accumulated cash and assets post-2008 are in a prime position to capture market share in this environment -- and CFOs, like investors, loathe uncertainty."

Owens adds that the survey results “reinforce what we’ve been seeing and hearing at the client level.” Smaller companies, as well has large ones, “have hoarded cash since late 2008, with the expectation that worse days were ahead. Now with interest rates at record lows and the Fed promising to stay the course through 2012 into 2013, the negative headwinds are abating and companies are making strategic capital investments so that they emerge stronger.”

Tech Tops Cap-Ex Plans

Still, the survey results clearly show that the financial executives feel surer about their own favorable prospects than they do about the U.S. economy as a whole in 2012. The split was nearly 50-50 among executives who are more optimistic about overall matters than they were last year, with 35% in both more-optimistic and less-optimistic camps, and 31% neutral.