CFOs in the US expect ‘substantial’ impacts on their 2020 financial performance as a result of Covid-19 and are heavily focused on controlling costs to weather the crisis, according to new research.
The findings appear in the same week that companies and investors brace for official US GDP figures, which are expected to show the world’s largest economy shrunk by 4 percent in the first quarter.
The regular survey of finance chiefs, conducted by PwC in the week of April 20, reports that 80 percent anticipate a decline in financial results this year. The most common prediction is for a drop in revenue, profits or both of between 10 percent and 25 percent, although a quarter of respondents expect a sharper decline of more than 25 percent.
The results differ by sector, with consumer markets the most pessimistic, notes PwC.
‘Outlooks for financial results have held relatively steady in the survey over the last month, and are probably indicative of actual impact,’ write the report authors. ‘Companies have had time to evaluate the effects. CFO projections for declining revenue and profits coincide with a widening realization that the US economy is in recession.’
Later today, official figures are expected to confirm that the US economy shrank between January and March for the first time in 24 quarters. The impact of the Covid-19 outbreak, which has shuttered whole industries, is expected to be worse in the second quarter: while predictions vary wildly, some analysts expect a GDP decline of more than 30 percent.
Amid this disruption to the economy, CFOs are prioritizing cost-cutting measures, finds PwC. When asked to name financial actions being considered by their company, 86 percent say implementing cost-containment, a rise from 82 percent in the previous survey conducted two weeks ago.
The second-most popular action is deferring or canceling planned investments (70 percent), followed by changing company financing plans (56 percent).
‘CFOs are considering additional ways to scale back on planned investment and/or other fixed costs amid volatility in demand,’ explains the report. ‘A third (32 percent) expect layoffs to occur in the next month, up from 26 percent two weeks ago. Protecting cash and liquidity positions is paramount.’
Less than half of CFOs say they plan to adjust guidance, but PwC expects this figure to grow over the coming weeks as companies file results during the US earnings season. More than nine in 10 say they will include a discussion of Covid-19 somewhere in their external reporting, notes the report.
The survey polled the views of 305 CFOs and financial leaders.