CFOs Rein In Capex After 2015’s Tough Finish - Wall Street Journal


The Wall Street Journal reported recently that CFOs for large companies are starting 2016 with more restraint on capital spending (i.e., capex). CFOs are concerned with “sluggish industrial demand and uncertainties about the American consumer.”

While the article focused on large companies, CFOs for small businesses as well as mid-sized companies are also increasingly concerned. This is true even in the San Francisco Bay Area and Silicon Valley despite the past few years of rapid growth and profits.

Here is an excerpt from the blog post summarizing the article:

“A half-dozen large companies from medical-products giant Johnson & Johnson and tobacco maker Altria Group Inc. to Internet portal Yahoo, Inc. have announced plans to cut about 14,000 jobs in recent weeks. Others, including railroad Norfolk Southern Corp. and oil producer Chevron Corp., are pulling back on their spending plans.

“The cautious approach suggests that executives remain wary as the strong dollar and weak growth in developing markets hurts their foreign sales, and the stock market’s slide and fears of a downbeat economy unsettle investors and consumers at home, despite improvements in housing and employment.

“Industrial and manufacturing companies were most emphatic about reining in spending, or at least holding the line. Norfolk Southern reported lower coal shipments amid low energy prices, and said retail inventories remained high, reducing shipping demand further. Executives said the company reduced capital spending by $100 million last year “to adapt to the shifting economic environment,” and executives said they are poised to reduce it further if necessary.”

Read the full post

#capex #budgeting

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