CEO INSIGHTS – Week Ending 03 May 2019 By NAOS Asset Management

"More than half of the markets in the [Asia Pacific] region saw double-digit growth, led by a sharp increase in China, reflecting the continued strength of prestige beauty. Nearly every one of our brands rose strong double digits in China, as did all distribution channels."

Tracey Travis, CFO, The Estee Lauder Companies Inc 

As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses. 

Resources & Mining

"We don’t see any short-term or even mid-term solution for the multi-year shortage of iron ore and pellets created by the serious problems in Brazil, and what we see now should be the new normal for the foreseeable future."

Laurenco Goncalves, CEO, Cleveland-Cliffs Inc 

Travel & Hotels

"Everyone we're talking to is saying the travel industry overall is hurting.  Between the housing downturn and the election coming up, there's plenty of factors influencing the market at the moment."

Graham Turner, CEO, Flight Centre 

"We are planning now for the year ahead and it is not obvious yet that things are going to improve any time soon."

Graham Turner, CEO, Flight Centre 

"In Australia, RevPAR [revenue per average room] is now in negative territory at minus 1.6% … and the upcoming general election in May, which means that corporate consumption is not there."

Accor, CEO, Sebastian Bazin 

"My Sydney hotels are at 90 per cent occupancy rates and yet my revenue has dropped 10 per cent. We're pretty much at the top of circle [in terms of occupancy rates] and that's when you keep rates up. But look what is happening with rates."

Jerry Schwartz, CEO, Schwartz Family Hotels 

"In Australia, the first quarter was also weaker than you would normally expect the first quarter to be."

Axel Hefer, CFO, Trivago NV [global online travel agency]

Equipment Hire

"We [recently] highlighted that Coates Hire was experiencing some weakness in project commencements against what was budgeted. This trend has continued into the third quarter, particularly in Queensland, which has also been impacted by unseasonably wet weather and resultant floods."

Market Announcement, Seven Group Holdings 

Retail

"Trading continues to be subdued as a result of a number of factors, including: decline in housing prices and churn, weak consumer confidence, the upcoming federal election [and] credit availability within the housing sector."

Market Announcement, Beacon Lighting Group Ltd 

"Retail is clearly entering into a downward cycle. There’s no doubt though that the retail landscape is rapidly evolving as consumers and investors become more discerning in their choices. We believe that the future of the shopping centre is changing from being just a marketplace to being what we like to call the urban living room.”

Susan Lloyd-Hurwitz, CEO, Mirvac Group 

"There is a structural shift going on globally and there is a question mark over what that means for retail owners. In Australia, e-commerce has not penetrated to what it will do over time.”

Anastasia Clarke, CFO, GPT Group  

Renewable Energy

“Now, in our country, we still have a policy framework evolving in terms of the public side for renewable energy investment but what we are seeing increasingly is industry step up much more in terms of using renewable energy for its needs.”

Shemara Wikramanayake, CEO, Macquarie Group 

Equity Markets

“Last year in Australia we had 159 IPOs and I'm looking at my colleagues who had a field day...It's the third-highest in the world behind the NASDAQ , and the Hong Kong Stock Exchange."

Shemara Wikramanayake, CEO, Macquarie Group

Waste

"Australia is also performing well thanks to an increase in waste being treated. This effect will progressively diminish as some volumes are linked to construction activity.”

Suez Group, CEO, Jean-Louis Chaussade  

Consumer Lending

“We are certainly putting our foot in the water with this acquisition [commenting on its participation in the installment lending market to consumers i.e. Afterpay]. Remember, it's not us extending the credit, we are just creating the platform between the merchant and the institution -- the bank or the Fintech which may in turn pass the loan on to a bank, that's what we are really doing."

Ajay Banga, CEO, Mastercard 

Beauty

"More than half of the markets in the [Asia Pacific] region saw double-digit growth, led by a sharp increase in China, reflecting the continued strength of prestige beauty. Nearly every one of our brands rose strong double digits in China, as did all distribution channels."

Tracey Travis, CFO, The Estee Lauder Companies Inc  

Banking

"Lending growth is going to be really hard to generate and we don’t see that changing for quite a while."

Shayne Elliot, CEO, ANZ Bank Ltd 

"More people are getting into hardship. More people are getting behind on their loans."

Shayne Elliot, CEO, ANZ Bank Ltd 

"The rates of growth are not stellar, and obviously with interest margin pressure it’s hard to get more than a handful of percentage points of revenue growth. But I haven’t given up on growth, I think the economy is continuing to grow."

Phil Chronican, CEO, NAB 

Alcohol

"We know that in our big developed markets, industry volume is under pressure. It's not new news."

Mark Hunter, CEO, Molson Coors Brewing Company 

US Economy

"It is fair to say that I think labor inflation [in the US] is going to continue to be a challenge. We will continue to look for ways to be as efficient as we can in our restaurant operations to try and help mitigate any of that inflation. But I think that's going to be a continuing challenge for us and the industry."

Kevin Ozan, CFO, McDonalds Corporation 

China/US Trade

"There’s an improved trade dialogue between the U.S. and China, and from our point of view, this has affected consumer confidence on the ground there [China] in a positive way."

Tim Cook, CEO, Apple Inc 

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Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.