Q2

2013

The CFO Survey

Just when you thought it was safe to go back in the water

Contents
The Deloitte CFO Survey Confidence rocked by slowdown in China Impact of uncertainty Falling dollar and interest rates provide some relief Credit cheaper and more available 04 06 08 11 14

Appendix 16 Contact us 18

The Deloitte CFO Survey targets the CFOs of major Australian listed companies. It has been conducted on a quarterly basis since the third quarter of 2009. This survey covers the second quarter of 2013 and took place between 26 June 2013 and 12 July 2013. 54 CFOs participated, representing businesses with a combined market value of approximately $220 billion or 16% of the Australian quoted equity market. 2

Following three quarters of escalating optimism, confidence among Australian CFOs has taken a dive, reaching its lowest level since 2009 when we first conducted the Deloitte CFO survey. In stark contrast, CFOs in North America and the United Kingdom continue to ride a wave of improving confidence, enjoying their highest levels of optimism in recent years. CFO sentiment has previously tracked in line across the three regions; this is the first time we have seen a significant divergence. So why have Australian CFOs become so glum? Respondents pinpointed the slowdown in China as the most negative impact on optimism. But should Chinas 7.5% growth ring alarm bells for Australian businesses? This certainly confirms that confidence levels are fragile, and is likely to continue to impact strategic decision business making. Australian Government policy uncertainty also continues to dampen CFO optimism. However, this did not flow through to business decisions, with the majority of CFOs reporting that the forthcoming election was not influencing their plans for acquisitions, divestments, hiring or capital expenditure. This quarters survey also followed continued commentary about Australias economic challenges post the mining investment boom, a series of profit downgrades for major corporates and softer economic data around exports, imports and manufacturing. This may help to explain why CFOs are less positive than they were three months ago. Although optimism is down, the benefits of the lower dollar and interest cuts are slowly starting to emerge. While close to 50% of CFOs said that interest rates and the value of the dollar were having a positive influence, they still view the multi-speed economy as hurting businesses, which indicates that the dollar may continue to drop. Overall, while we have seen a heightened interest in M&A, and although credit is becoming cheaper and more available, CFOs are still waiting for more certainty before they consider getting back in the water. Keith Skinner Chief Operating Officer
For additional copies of this report please contact Kirstie Williams on +61 2 9322 3881 or email cfosurvey@deloitte.com.au

Contacts Keith Skinner Chief Operating Officer Tel: +61 2 9322 7580 email: keskinner@deloitte.com.au Stephen Gustafson Partner Tel: +61 2 9322 7325 email: sgustafson@deloitte.com.au

The Deloitte CFO Survey Just when you thought it was safe to go back in the water
Key points from the CFO Survey CFOs net optimism has fallen to its lowest level since the survey began, following three consecutive quarters of positive growth The slowdown in China has had the biggest negative impact on CFOs optimism, edging out the previous front-runner, Australian Government policy uncertainty, which continues to have a significant negative impact Appetite for risk has dipped again; only a quarter of CFOs believe now is a good time to take risk onto the balance sheet More than half of the CFOs surveyed showed renewed interest in M&A, while organic growth remains the leading business strategy for the year ahead Expectations for the value of the Australian dollar have shifted significantly; half of the respondents expected it to fall beneath US$0.90, compared to zero who expressed the same expectation in the last survey More than half of CFOs said the depreciation of the Australian dollar had improved their companys financial prospects while the majority agreed that it improved Australias global competitiveness Views on interest rates shifted significantly; two-thirds of CFOs expected rates to fall further below 2.75%, compared to 8% who predicted this in the last quarter While the upcoming Federal election is impacting business confidence, it was generally not seen as a reason for deferring capital expenditure, acquisitions, divestments or hiring CFOs reported that credit is cheaper and more available now than any other time in recent years, but companies continue to be cautious in their approach to gearing.

Confidence rocked by slowdown in China Net optimism among CFOs dropped to its lowest level since the survey began, following three consecutive quarters of rising optimism. CFOs are becoming less concerned about U.S. and European economic issues. But the slowdown in China has made a major dent in confidence, with 85% of CFOs citing it as a negative impact, up from 34% in Q1 2013. This makes China the biggest concern for Australian CFOs, reflecting the challenges and concerns that are continuing to emerge post the mining investment boom.

Not withstanding China, Federal Government policy uncertainty continued to be a significant factor having a negative impact on 75% of CFOs. Meanwhile, CFOs in the United Kingdom and North America continue to report rising optimism reflecting the strengthening of their local economies. While CFO sentiment in the three regions has traditionally tracked in line, this is the first time we have seen significant divergence in confidence levels.

Impact of uncertainty CFOs reported that their general levels of economic uncertainty have crept up again; 83% gauged economic uncertainty as above normal, up from 58% last quarter. Most believe that this will be with us for more than another year. Appetite for risk also dipped; less than a quarter of respondents considered this to be a good time to take risk onto the balance sheet. These levels of uncertainty were driven to an extent by the forthcoming Federal election which was having a negative impact on the confidence of close to half the CFOs surveyed. But interestingly, CFOs were not letting the election get in the way of business strategies such as capital expenditure, acquisitions, divestments or hiring. Falling dollar and interest rates provide some relief As expected, falling interest rates and the depreciation of the Australian dollar have had the most positive impacts on CFO optimism, improving the outlook of 44% and 46% of respondents respectively. 52% of CFOs said the lower dollar has improved their companys financial prospects, while 83% said it has improved Australias global competitiveness. CFOs expect the value of the Australian dollar to shift down significantly over the coming year, in the wake of its recent depreciation. Similarly, CFOs are expecting interest rates to fall further. 65% of CFOs expect rates to land below 2.75% in the next 12 months, compared to only 8% who predicted this in the Q1 survey.

Credit cheaper and more available CFOs stated that credit is cheaper and more available now than at any other time since the survey began clearly influenced by the recent fall in interest rates. Bank borrowing has continued to surge in popularity; 79% of the CFOs surveyed viewed it as an attractive or very attractive option. Meanwhile, the appeal of corporate debt, internal funding and equity has remained fairly stable compared to the previous quarter. CFOs were divided on the outlook for gearing, with 28% expecting it to increase and 24% planning to reduce gearing. This suggests that while debt is more available and affordable, companies are still exercising caution and conservatism with their own balance sheets; a possible forward indicator of things to come.

Confidence rocked by slowdown in China

Net optimism among CFOs took a sharp dive from 24% 5 4 to -11%, following three consecutive quarters of rising optimism. This is the lowest level of confidence since the survey began in 2009. Despite this, more than half (52%) of CFOs are broadly unchanged in their feelings about their companys financial prospects. Chart 1 3 2 1 Financial prospects Net percentage of CFOs who are more optimistic about the financial prospects of their company than they were three months ago
80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20%
Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13

51% 45% 45% 41% 25% 8% 0% -5% -5% -11% 24%

25%

4%

-10%

1A

These results have bucked the trends shown by CFOs in North America and the UK, who are continuing on the trajectory of growing optimism. Net confidence among CFOs in the UK has risen for the fourth consecutive quarter to net 18%, which is now above its long-term average1. This comes off the back of reduced concern about the risk of a breakup in the Euro area, and waning perceptions of external macroeconomic and financial risk. For North American CFOs, net optimism continued to rise, reaching 48% in Q22 up from 32% in Q1. This may be attributed to the U.S. emerging from a particularly weak period and now showing stronger signs of growth. This divergence of confidence between Australian CFOs and their North American and UK counterparts has not been seen in the past three years as confidence levels have generally tracked quite consistently across the three regions.

Net percentage of international CFOs who are more optimistic about the financial prospects of their company than they were three months ago
50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50%
Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13

Net % Australia

Net % UK

Net % North America

1B
1 2 

 The Deloitte CFO Survey (UK): Planning for Growth (Q2 2013), Deloitte. CFO Signals: what North Americas top finance executives are thinking and doing (Q2 2013), Deloitte.

Positive impact Negative impact

This quarter, confidence levels were most profoundly 5 4 influenced by the slowdown in China, with 85% of CFOs citing it as a negative impact, up from 34% who felt this way in Q1. This makes China the biggest concern for Australian CFOs. Federal Government policy uncertainty continued to have a significant negative impact on 75% of CFOs, consistent with the past few quarters. CFOs continue to be less concerned about U.S. and European economic issues. 48% of respondents felt the U.S. economy had a positive impact on their confidence while 28% still felt that the European economic conditions made them feel less confident. As expected, falling interest rates and the depreciation of the Australian dollar also had a positive impact on CFO optimism, 5at 44% and 46% respectively. 4 63% of respondents felt that the multi-speed economy is still hurting business, indicating that the dollar may have further to fall.

Chart 2 3 2 1 Impact on levels of optimism Extent to which CFOs net optimism levels have been affected by global and domestic economic factors
40% 20% 0% -20% -40% -60% -80% -100%

3
Q2-12 Q3-12

2
Q1-13 Q1-13

1
Q2-13

U.S. economic uncertainty 60% Positive impact 40% 20% 0% -20%

European sovereign debt

Slowdown in China

2A
Deloitte perspective

Negative impact

-40% -60% -80% -100% Q2-12 Value of Aust. dollar Multi-speed economy Q3-12 Interest rates Q4-12 Q1-13 Q2-13

Fed. Govt. policy uncertainty

2B

Is China really to blame for the gloom? The answer may be a mixture of reality and perception. Chinas recent growth rate of 7.5% is well below previous decades, but is still solid and likely to remain so for some time to come. Despite concerns about the impact of commodity prices on Australias mining revenues as well as the recent threat of unsustainable credit growth, Chinas impact on Australia in the past has been significantly positive. While this impact may lessen, the underlying trend should provide some reassurance to Australian CFOs.
Matt Judkins, Partner, China Services Groups, Infrastructure and Commercial Advisory Lead

Impact of uncertainty
5 4 3 2 1
CFOs general levels of economic uncertainty have crept up again to the highest levels since this time last year. 83% of respondents regarded economic uncertainty as above normal, up from 58% last quarter. Only 17% classified the prevailing economic conditions as normal. Chart 3 Financial and economic uncertainty CFOs views on the general level of external financial and economic uncertainty facing businesses
90% 80% 70% 60% 50% 40% 30% 34% 20% 10% 0% 13% 6% Q2-11 6% Q3-11 7% Q4-11 27% 25% 1% Q1-12 6% Q2-12 Q3-12 28% 23% 18% 7% Q4-12 10% 3% Q1-13 22% 4% Q2-13 49% 44% 43% 38% 53% 54% 51% 57%

45%

Very high level of uncertainty

High level of uncertainty

Above normal level of uncertainty

The largest proportion of CFOs (59%) expected the current level of uncertainty to last between one and two years, with another 20% estimating two to three years. However, an optimistic group of CFOs (15%, up from 11% in Q1) still believe the uncertainty will lessen within a year.

Chart 4 Timeframe for uncertainty CFOs expectations of how long the current levels of uncertainty will last
60% 50% 59% 51% 59%

55%

3
Deloitte perspective

40% 30% 20% 10% 0% Less than one year Q3-12 Q4-12 More than one year Q1-13 Q2-13 More than two years More than three years 12% 11 % 6% 15% 26% 24% 16%

20% 7% 8% 8% 10% 4% 4% 3% 2%

Domestic politics has been driving business uncertainty for several quarters now and wed hoped the election could provide the trigger of confidence needed to jump start the economy. People want certainty and rationality and a consistent narrative. But people are still asking if policy will be any more certain after the election. The recent decisions on things like 457 visas, carbon tax and Fringe Benefits Tax appear to be affecting business and business confidence.
Professor Ian Harper, Partner, Deloitte Access Economics

Risk appetite has dipped again, with just under one quarter (24%) of CFOs believing that now is a good time to take greater risk onto their balance sheets. While this is down from 34% last quarter, it is close to the average risk appetite we have seen over the past two years.

Chart 5 Attitudes towards risk Net percentage of CFOs who believe now is a good time to take risk onto corporate balance sheets
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q2-11 Yes Q3-11 No Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 40% 22% 13% 31% 20% 14% 34% 60% 78% 87% 69% 80% 86% 66% 77% 76%

23%

24%

5 said their companys level of4 48% of CFOs confidence had been somewhat or significantly negatively affected by the upcoming federal election. Close to a third said it had no impact on their business confidence.

2 1 Chart 6 3 Impact of the upcoming Federal election on CFO confidence Extent to which business confidence has been impacted by the upcoming Federal Government election
50% 44% 40% 31% 30%

20%

19%

10% 4% 0% Signicantly negative impact Somewhat negative impact No impact Somewhat positive impact Signicantly positive impact 2%

14

Although the impending election affected CFOs 5 4 confidence levels, the majority did not see it as a reason to defer key business strategies like capital expenditure (87%), acquisitions (81%), divestments (83%) or hiring (85%). This suggests that the corporate sector is not letting the election influence their business decisions.

Chart 7 3 2 1 Impact of the upcoming Federal election on business strategies Extent to which the upcoming Federal Government election was a significant driver in the decision to defer the following business strategies

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 6%

87% 81%

83%

85%

15% 7% 4% Acquisitions

17% 6% 0% Divestments Hiring 9%

Capital expenditure Yes No N/A

15

10

Falling dollar and interest rates provide some relief

Following a cut to the RBAs official cash interest rate in May to an all-time low of 2.75% over 65% of CFOs expect it to fall even further. This is a significant shift from Q1, when only 8% of respondents expected the official cash rate to be lower than 2.75% and 67% expected it to be 3% or higher. In this survey, only 19% expect it to be higher in a years time. Chart 8 RBAs official cash interest rate
50% 48 %

40% 34% 30% 26%

20%

17% 8%

17%

18% 15% 13% 4%

10% 0% 0% < 2.5% Q1-13

0% 2.5% Q2-13 2.75% 3.0% 3.25% 3.5%

2%

0%

> 3.5%

Expectations for the value of the Australian dollar have shifted significantly down by 10 cents in many cases following its recent depreciation. While over half the CFOs surveyed last quarter believed the Australian dollar would land between US$1.00 and US$1.05 in a years time, only 2% held that view in Q2. Now, 50% of CFOs believe the dollar will fall below US$0.90 compared to zero in the previous survey and 44% believe it will land between US$0.90 and US$0.95.

Chart 9 Value of the Australian dollar

70% 60% 50% 40% 30% 20% 10% 0% 0% < U.S. $0.90 11% 3% U.S. $0.90 $0.95 4% U.S. $0.95 $1.00 2% U.S. $1.00 $1.05 0% U.S. $1 .05 $1.10 2% 0% 29% 50% 44% 55%

> U.S. $1.10

Q1-13

Q2-13

11

52% of CFOs said that the recent depreciation of the Australian dollar had improved their companys financial prospects, while 83% agree that it has improved Australias global competitiveness.

Chart 10 Extent to which the recent depreciation of the dollar has improved companies financial prospects and Australias global competitiveness

Improved Australias global competitiveness

13%

70%

17%

Improved the companys nancial prospects

13%

39%

33%

11%

4%

0% Strongly agree

20% Agree

40% Neutral

60% Disagree

80% Strongly disagree

100%

3
Chart 11 Australian business metrics
Revenues Operating margins Operating costs 4% Headcount 4% Discretionary spending Financing costs 2% Operating 4% cash ow Levels of cash holdings Inventory levels 9% 22% 35% 17% 17% 20% 31% 17% 19% 50% 33%

16

Expectations for revenue growth have weakened slightly compared to the previous two quarters, with 65% of CFOs expecting an increase. The focus remains on improving operating cash flows, with decreasing discretionary spending and financing costs expected also. On the employment front; 37% of CFOs expect to increase headcount in the next 12 months, up from 34% last quarter.

13% 28% 56%

52% 35% 15% 30% 39% 37% 24% 43% 69% 44% 41% 81% 78% 70%

17% 33%

15%

4% 4%

26% 33% 37% 43% 20% 22% 22% 24% 20% 4% 2% 2% 2% 7% 2% 4% 7%

Capital expenditure 6% Bank borrowing 2% Bond issuance

Equity issuance 4% Dividends/ 2% share buybacks 0%

10% Increase signicantly

20%

30% Increase somewhat

40%

50%

60%

70%

80%

90%

100%

No change

Decrease somewhat

Decrease signicantly

12

5 renewed interest in M&A among 4 There are signs of 54% of CFOs, up from 40% for the first quarter of 2013, which reflects ongoing consolidation in the economy. Organic growth continued to be a strategic priority for 63% of respondents, and close to half identified introducing new products and services or expanding into new markets and renegotiating finance facilities. On the other hand, it will be a quiet year ahead for capital raisings and asset disposals, with 80% of respondents reporting no planned movement in these areas.

3 2 1 Chart 12 Business strategies Net percentage of CFOs who have identified the following business strategies as a priority over the next 12 months
M&A Organic expansion 13% 6% 43% 28% 52% 80% 80% 43% 20% Increase signicantly Increase somewhat 40% No change 60% Decrease somewhat 48% 80% 4% 100% Decrease signicantly 41% 57% 46% 31% 50% 19% 2% 6% 4%

Introducing new products/ services or expanding 4% into new markets Leverage 2%

Asset disposal 2% 17% New capital raising 4% Renegotiating 6% nancing facilities 0% 17%

7
Deloitte perspective
They say you can lead a horse to water...While CFOs are cashed up with cheaper and more available funding, they are still sitting on their hands, reluctant to make the big investment decisions. CFOs cant see their way clear even though the conditions are all systems go. The transition from the investment phase of the mining boom to the export phase has been bumpier than expected with exports slower to take off and a shortage of business investment.
Professor Ian Harper, Partner, Deloitte Access Economics

13

Credit cheaper and more available

Bank borrowing has continued to surge in popularity following further cuts to interest rates; 79% of participating CFOs viewed it as attractive or very attractive. The attractiveness of corporate debt, internal funding and equity remained fairly stable relative to the previous quarter.

Chart 13 Favoured sources of corporate funding Net percentage of CFOs reporting the following funding sources as attractive
80%

60%

40%

20%

0%

-20%

-40%

-60% Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Equity Q4-12 Internal funding Q1-13 Q2-13

Bank borrowing

Corporate debt

10

Credit costly Credit available Credit cheap Credit unavailable

After the RBA 5dropped interest rates to 2.75% 4 in May, CFOs perception that credit is expensive fell to their lowest level since the survey began 41% said they found credit either somewhat or very cheap. The accessibility of credit also continued to improve; 85% of CFOs said credit was somewhat or very available and only 9% found it hard to get. These results make it clear that credit is cheaper and more available now than any other time since the survey began.

Chart 14 3 2 1 Cost and availability of credit Net percentage of CFOs reporting that credit is available and the net percentage of CFOs reporting that credit is expensive
80%

60%

40%

20%

0%

-20% Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Cost Availability

14

While 50% of CFOs thought Australian balance sheets were optimally geared, 43% still viewed balance sheets as under-geared. Only 28% of CFOs expected to raise their own company gearing levels in the next 12 months, whereas 24% of CFOs expected to reduce gearing. So, although debt continues to be affordable and available, companies are still taking a cautious approach to gearing.

Chart 15 Level of gearing on Australian corporate balance sheets Net percentage of CFOs who expect to increase their own company gearing in the next 12 months

Close to one-third of CFOs reported increases in the 5credit lines over the past 12 4 months, maximum size of while another 30% indicated that maximum loan terms were getting higher. 43% of respondents said they were seeing lower margins over base lending rates a sign of increasing competitiveness in the corporate lending market. More than 70% of CFOs reported no change to loan documentation requirements, covenant requirements, liquidity requirements and minimum interest coverage ratios over the past 12 months.

Chart 16 3 standards and credit 2 terms 1 Bank lending CFOs views on how bank lending standards and credit terms have changed over the past 12 months
31% 7% 4% 7% 11% 4% 9% 13% 7% 6% 11% 9% 13% 19% 37% 43% 30% 57% 78% 57%

Maximum size of credit lines Minimum interest coverage ratios Maximum loan term Margin over base lending rate Covenant requirements

4%

74%

Fees
7% 6% 11%

61%

Liquidity facilities

2%

81%

Documentation requirements

4% 7%

13% 76%

0% Higher

10%

20% Lower

30% No change

40% N/A

50%

60%

70%

80%

90%

13

15

Appendix
A note on methodology Many of the charts in the Deloitte CFO Survey show the results in the form of a net balance. For example, this net balance could represent the percentage of respondents reporting that bank credit is attractive, less the percentage saying bank credit is unattractive. This is a standard way of presenting survey data. To aid interpretation of the results, this table contains a full breakdown of responses to some of the questions covered in this report which have historical significance. Due to rounding, responses to the questions covered in this report may not sum to 100.
Q2 2013 Significantly more optimistic Somewhat more optimistic Broadly unchanged Somewhat less optimistic Significantly less optimistic Very high level of uncertainty High level of uncertainty Above normal level of uncertainty Normal level of uncertainty Below normal level of uncertainty Yes No N/A Very attractive Somewhat attractive Neutral Somewhat unattractive Very unattractive Very attractive Somewhat attractive Neutral Somewhat unattractive Very unattractive Very attractive Somewhat attractive Neutral Somewhat unattractive Very unattractive Very attractive Somewhat attractive Neutral Somewhat unattractive Very unattractive 0% 19% 52% 26% 4% 4% 22% 57% 17% 0% 24% 76% 0% 20% 59% 19% 2% 0% 7% 52% 31% 9% 0% 0% 24% 48% 15% 13% 17% 43% 39% 2% 0% Q1 2013 3% 32% 53% 11% 0% 3% 10% 45% 42% 0% 34% 66% 0% 15% 52% 27% 5% 2% 6% 47% 40% 5% 2% 8% 24% 31% 26% 11% 29% 34% 32% 3% 2% Q4 2012 7% 26% 42% 22% 3% 7% 18% 51% 25% 0% 23% 77% 0% 8% 49% 26% 12% 4% 4% 53% 33% 10% 0% 1% 18% 36% 38% 7% 26% 36% 34% 4% 0% Q3 2012 6% 17% 55% 21% 1% 0% 23% 54% 24% 0% 14% 84% 0% 6% 44% 35% 11% 4% 1% 42% 46% 7% 3% 1% 20% 31% 31% 17% 15% 61% 21% 1% 1% Q2 2012 0% 16% 63% 21% 0% 6% 28% 53% 13% 1% 23% 78% 0% 4% 46% 35% 13% 3% 0% 29% 51% 16% 4% 0% 16% 18% 45% 21% 29% 44% 23% 0% 5% Q1 2012 5% 33% 50% 13% 0% 1% 25% 43% 26% 5% 46% 54% 0% 5% 39% 35% 20% 1% 4% 41% 35% 19% 1% 4% 20% 34% 30% 13% 23% 43% 30% 3% 3% Q4 2011 4% 22% 42% 29% 3% 7% 34% 38% 19% 1% 25% 67% 0% 4% 36% 38% 22% 0% 3% 27% 41% 27% 1% 0% 12% 30% 37% 21% 27% 47% 19% 5% 1% Q3 2011 6% 17% 45% 29% 4% 6% 27% 44% 20% 2% 45% 55% 0% 0% 51% 31% 15% 2% 2% 24% 51% 21% 1% 1% 17% 26% 35% 21% 33% 39% 21% 4% 2% Q2 2011 3% 20% 58% 19% 0% 6% 13% 49% 33% 0% 49% 51% 0% 8% 49% 36% 8% 0% 8% 41% 38% 13% 1% 2% 30% 34% 31% 4% Q1 2011 9% 45% 33% 12% 1% 52% 48% 0% 6% 34% 47% 12% 1% 7% 29% 42% 20% 1% 6% 41% 24% 28% 1% Q4 2010 6% 42% 48% 2% 2% 45% 55% 0% 8% 34% 44% 15% 0% 5% 26% 50% 16% 3% 6% 42% 31% 18% 3% Q3 2010 7% 48% 34% 11% 0% 35% 60% 5% 2% 35% 42% 19% 1% 5% 31% 41% 21% 2% 4% 42% 22% 24% 8% Q2 2010 6% 34% 46% 11% 3% 42% 58% 0% 2% 33% 44% 16% 6% 1% 29% 46% 22% 1% 2% 34% 33% 26% 6% Q1 2010 18% 39% 37% 5% 1% 53% 47% 0% 4% 39% 37% 19% 1% 4% 32% 37% 28% 0% 5% 52% 29% 13% 1% 35% 65% 0% 2% 37% 25% 33% 3% 5% 33% 30% 32% 0% 10% 37% 37% 15% 2% 12% 31% 27% 27% 3% 4% 25% 33% 33% 4% 15% 45% 16% 22% 1% Q4 2009 13% 48% 37% 2% 0% Q3 2009 15% 57% 28% 0% 0%

Chart 1: Compared to three months ago how do you feel about the financial prospects for your company?

Chart 3: How would you rate the general level of external financial and economic uncertainty facing your business?

Chart 5: Is this a good time to be taking greater risk onto your balance sheet?

Chart 13: How do you currently rate bank borrowing as a source of funding for Australian corporates?

Chart 13: How do you currently rate corporate debt as a source of funding for Australian corporates?

Chart 13: How do you currently rate equity issuance as a source of funding for Australian corporates?

Chart 13: How do you currently rate internal funding (from profits) as a source of funding for Australian corporates?

16

Q2 2013 Very costly Somewhat costly Neutral Somewhat cheap Very cheap Very available Somewhat available Neutral Somewhat hard to get Very hard to get Over-geared Optimally geared Under-geared Raise significantly Raise somewhat No change Reduce somewhat Reduce significantly N/A 0% 20% 39% 39% 2% 13% 72% 6% 9% 0% 7% 50% 43% 2% 26% 46% 22% 2% 2%

Q1 2013 5% 26% 39% 26% 5% 6% 61% 19% 10% 3% 3% 58% 39% 2% 19% 40% 29% 8% 2%

Q4 2012 5% 36% 36% 15% 8% 15% 45% 25% 12% 3% 10% 52% 38% 1% 21% 42% 23% 7% 5%

Q3 2012 7% 42% 38% 11% 1% 8% 46% 18% 25% 1% 15% 46% 38% 7% 25% 31% 24% 6% 7%

Q2 2012 8% 50% 30% 11% 1% 3% 61% 11% 20% 5% 6% 54% 40% 4% 28% 41% 21% 3% 4%

Q1 2012 13% 55% 24% 8% 1% 8% 59% 18% 14% 3% 9% 48% 44% 8% 38% 30% 19% 6% 0%

Q4 2011 8% 56% 25% 10% 1% 5% 45% 14% 30% 5% 5% 53% 41% 10% 26% 33% 22% 5% 4%

Q3 2011 7% 51% 37% 4% 1% 7% 60% 15% 17% 1% 2% 49% 49% 12% 33% 36% 14% 4% 1%

Q2 2011 2% 49% 42% 8% 0% 5% 53% 17% 15% 0% 8% 50% 42% 8% 29% 40% 16% 5% 2%

Q1 2011 7% 59% 33% 1% 0% 13% 41% 20% 25% 1% 5% 47% 48% 8% 31% 34% 19% 4% 4%

Q4 2010 11% 56% 32% 0% 0% 15% 52% 15% 16% 3% 6% 48% 45% 3% 34% 39% 15% 3% 6%

Q3 2010 8% 73% 18% 1% 0% 8% 48% 11% 31% 2% 5% 53% 42% 6% 44% 27% 18% 5% 1%

Q2 2010 11% 64% 24% 1% 0% 4% 49% 17% 28% 1% 12% 48% 39% 9% 33% 30% 20% 2% 6%

Q1 2010 13% 49% 33% 5% 0% 7% 54% 8% 24% 3% 15% 53% 32% 5% 32% 42% 20% 1% 0%

Q4 2009 15% 68% 13% 3% 0% 3% 40% 13% 35% 8% 17% 58% 25% 4% 32% 42% 18% 3% 0%

Q3 2009 25% 58% 10% 6% 0% 0% 43% 9% 42% 6% 12% 76% 12% 3% 31% 42% 21% 3% 0%

Chart 14: How would you rate the overall cost of new credit for Australian corporates?

Chart 14: How would you rate the overall availability of new credit for Australian corporates?

Chart 15: What do you think of the level of gearing on Australian Corporate Balance Sheets?

Chart 15: What is your aim for your level of gearing over the next 12 months?

17

Contact us
National/Sydney Keith Skinner Chief Operating Officer Tel: +61 2 9322 7580 email: keskinner@deloitte.com.au Sydney Stephen Gustafson Partner Tel: +61 2 9322 7325 email: sgustafson@deloitte.com.au Western Sydney Helen Hamilton-James Partner Tel: +61 2 9840 7380 email: hhamiltonjames@deloitte.com.au Adelaide Jody Burton Partner Tel: +61 8 8407 7610 email: jburton@deloitte.com.au Brisbane Richard Wanstall Partner Tel: +61 7 3308 7179 email: rwanstall@deloitte.com.au Melbourne Paul Wensor Partner Tel: +61 3 9671 7067 email: pwensor@deloitte.com.au Perth Tim Richards Partner Tel: +61 8 9365 7248 email: atrichards@deloitte.com.au Hobart David Harradine Partner Tel: +61 3 6237 7016 email: dharradine@deloitte.com.au

18

19

This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively the Deloitte Network) is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/ about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence. About Deloitte Australia In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australias leading professional services firms, Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 6,000 people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit Deloittes web site at www.deloitte.com.au.

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited 2013 Deloitte Touche Tohmatsu. MCBD_Syd_07/13_049066

20