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Global CFOs see recession lasting into 2010 -poll

Published 03/04/2009, 11:52 AM
Updated 03/04/2009, 12:00 PM

* CFOs expect recession to last another 13 to 16 months

* U.S. CFOs expect to cut 7.6 million jobs

* U.S. public company earnings expected to drop 22 percent

By Jane Sutton

MIAMI, March 4 (Reuters) - Corporate finance chiefs around the world expect the recession to last well into 2010, according to a survey on Wednesday that found record levels of gloom among the respondents.

Chief financial officers in the United States said their companies were planning dramatic cuts in employment and in spending over the next year, with anticipated layoffs of nearly 6 percent of their workforces -- a loss of 7.6 million jobs. More than half said their firms expected to freeze or cut wages.

The CFOs expected earnings of publicly held companies over the next year would drop by 22 percent in the United States, 11 percent in Europe and 9 percent at Asia, according to the poll conducted by Duke University in North Carolina and CFO Magazine.

The quarterly Global Business Outlook Survey polled 1,268 CFOs from a broad range of global publicly and privately held companies, ending on Feb. 27. The poll has been conducted for 52 consecutive quarters and found record levels of pessimism among the respondents.

On a scale of zero to 100, U.S. respondents rated the economic outlook at an all-time low of 40. European CFOs put it at 43 and Asian respondents at 47.

"This is very troubling," said Kate O'Sullivan, senior writer at CFO Magazine. "Throughout the history of our survey, CFOs have shown a remarkable ability to predict future economic conditions. They anticipated the current recession as far back as September 2007. Given the CFOs' track record, the historic pessimism CFOs are currently expressing certainly indicates a tough road ahead in 2009."

Most U.S. respondents expected the recession to last another 14 months. European CFOs said it would last 16 more months and Asians another 13 months.

They expect capital spending and spending on technology, marketing and advertising to drop.

Among the industries surveyed, service and consulting firms forecast the strongest earnings in 2009, followed by health-care companies. Publicly held manufacturing firms expect earnings to fall 30 percent, the poll said.

Only about one third of U.S. CFOs said they felt the economy had been helped by the economic stimulus actions taken so far by President Barack Obama and Congress.

Credit markets remain extremely tight, the survey said. Among CFOs whose companies have credit ratings of AAA or AA, 40 percent said credit market conditions were hurting their firms. Among those rated B or lower, 77 percent said they had been hurt.

The B-or-lower companies had nearly maxed out their credit lines, drawing on average 70 percent of the maximum. AAA and AA companies had drawn only 27 percent of the maximum, their CFOs said.

"In the current market, many companies have few funding options beyond their credit line. In fact, there has been a bank run of sorts on credit lines, with poorly rated companies drawing funds now, just in case their bank decides not to lend to them in the future," said John Graham, a finance professor at Duke and the director of the survey.

"This action has in part crowded out the ability of banks to lend to other firms, exacerbating the lack of credit elsewhere in the system."

The respondents included 543 CFOs from the United States, 221 from Europe, 258 from China, and 246 from other Asian nations. The survey of European CFOs was conducted jointly with Tilburg University in the Netherlands. (Editing by Pascal Fletcher and Leslie Adler)

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