Deloitte’s Q4 <i>CFO Quarterly Survey</i> suggests Australian CFOs are becoming tentatively more optimistic about their company’s financial prospects in 2013.
The survey of 73 ASX300 CFOs between 11 December 2012 and 14 January found a third are more positive about growth in their businesses and the economy compared to the last quarter. It also reported a rising focus on productivity, with 67 per cent of respondents flagging strategic investments in new information and communication technology (ICT) over the next 12 months.
To gauge how this changing focus on productivity and growth is taking shape, CFO World caught up with Kimberly-Clark CFO Tony McMahon for his outlook on growth, technology innovation strategy and his views on the impact of the federal election in 2013.
McMahon said h Kimberly-Clark’s growth and health over the next 12 months matched the view presented by Deloitte’s findings. “We have seen indications of improvement in recent months and think this could be signify an improved outlook for Kimberly-Clark Australia in 2013. This was a definite step up from one or two years ago,” he said.
While Kimberly-Clark has a history of growth in Australia and has only had three years in the last 50 where it’s not progressed, all three were in the last five years.
One of the drivers for productivity and innovation identified in Deloitte’s quarterly CFO survey is ICT. Of those CFOs surveyed, 67 per cent said they plan to invest in new ICT this year and McMahon is no different. He claimed ICT provided an even greater opportunity for businesses to gain deeper insights into customers and consumers, and formulate tailored programs and measure success.
“As an organisation we’ve always understood that investing in the right ICT will give us a competitive advantage,” he said. An example in 2012 was a project to equip field sales representatives with iPads.
“This has resulted in better communication with our retail customers in store and greater collaboration between the field sales team and the broader organisation using social networking,” McMahon continued. “The initiative has been a great success story as it allows our sales team to provide better customer service, which impacts sales. We’ve also experienced increased engagement with our field sales team as they are now more connected than ever before.
“In today’s world, where new technology is developing much faster before, we recognise it’s important to invest in the right technology for the business, not just the latest trend.”
Kimberly-Clark has a range of initiatives it expects will drive performance in 2013. These fall under four priority areas: accelerating the pace of bring innovation to market; further increasing the company’s focus on investment into brands while pursuing new cost reduction programs; driving the shift from a commodity to premium business; and building successful partnerships with consumers and customers.
Initiatives already achieved this year include Kimberly-Clark’s new $28 million nappy production line in Ingleburn, which was opened by the NSW Premier, the Honourable Barry O'Farrell in February. McMahon said the investment will allow business to produce the Huggies pants range locally including Huggies Nappy-Pants, Pull-Ups Training Pants, DryNites Pyjama Pants and Little Swimmers Swimpants.
“By manufacturing locally we can develop innovative products tailored specifically for our Australian and New Zealand consumers and respond more flexibly to market demand,” he explained.
Last year, Kimberly-Clark completed a $6.5m upgrade to the meltblown extrusion manufacturing line at its Albury Mill to expand its capability to produce nonwoven fabrics used in Huggies nappies, medical applications including Kimguard Sterile Wrap, and the Viva Clever Cleaning range. As well as expanding its product capabilities, the upgrade represented a step forward in the company’s push to slash its greenhouse gas emissions by converting from coal-based electricity to natural gas.
In 2011, Kimberly-Clark also announced a $30m investment in a cogeneration project at its Millicent Mill, where the Kleenex range of products is produced. The gas turbine generator, which is expected to be up and running within months, will make the mill largely self-sufficient in power and is expected to reduce carbon dioxide emissions by 80,000 tons per annum.
“This investment will help to insulate our tissue operations from the continuing spiral in energy prices in Australia which is impacting local manufacturing competitiveness,” McMahon said.
While the outlook from CFOs looking at their own balance sheet might be improving, one external factor all Australians will be watching is the federal election. Some businesses anticipate a new government could shake-up the Australian economy further, but McMahon expected macro-economic conditions are unlikely to change and predicted the dollar will remain strong.
“Subject to a global shake-up, I see an economy slowing with less investment in the mining sector and other sectors remaining flat,” he continued. “Irrespective of which political party forms Government following an election, we would hope there will be continuing emphasis on maintaining a successful Australian manufacturing sector and on reforms necessary to maintain and grow the global competitiveness for local manufacturing.”
Whatever the conditions, the CFO’s job will continue to be a strategic partner to the CEO with shared responsibility to create value for the organisation. McMahon said.
“Responsibility for ROI metrics optimising cash management, managing business and commercial risk, and being a partner in the overall stewardship of the organisation, also remain critical,” he concluded.
McMahon’s top three operational concerns in 2013
- Pricing pressure as consumers search for greater value
- Increase competition from imported products currently benefiting from the strong Australian dollar
- Maintaining a pipeline of continued innovation for the future.
McMahon’s top three priorities in 2013
- Delivering great customer service
- Delivering results
- Building employee engagement.