NAOS CEO Insights

CEO INSIGHTS – Week Ending 06 March 2020 By NAOS Asset Management

March 6, 2020

“The payback time in Australia when you invest in a full solar system is the fastest payback time we’ve seen in any other IKEA country” Jan Gardberg, CEO, IKEA Australia

CEO INSIGHTS – Week Ending 06 March 2020 By NAOS Asset Management

“The payback time in Australia when you invest in a full solar system is the fastest payback time we’ve seen in any other IKEA country” Jan Gardberg, CEO, IKEA Australia


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.  
 
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Domestic Property

“We are not sure where the bottom is. We think it is getting closer. But the next 12 months looks challenging from a housing point of view” Peter Wilson, CEO, Reece Ltd

“The renovation market is quite resilient — and that is largely driven by house prices. The non-residential and commercial part is also really buoyant” Peter Wilson, CEO, Reece Ltd

Energy & Resources

“The payback time in Australia when you invest in a full solar system is the fastest payback time we’ve seen in any other IKEA country” Jan Gardberg, CEO, IKEA Australia

“The energy transition is being moved [among other reasons] by sheer competitiveness of wind and solar. And of course, by policy efforts to curb, climate change. This translates into a major window of opportunity of I would say at least 10 years, for which we are in a very privileged position” José Manuel Entrecanales, CEO, Acciona SA [global construction conglomerate]

Domestic Economy

 “Higher food inflation is likely to continue in Australia and New Zealand” Brad Banducci, CEO, Woolworths Ltd

“I think we’ve moved on beyond having further interest rate decreases benefit us directly or benefit our customers or consumers” Alison Watkins, CEO, Coca-Cola Amatil Ltd

Building & Construction

“Our improved visibility is driven by the acceleration of our development pipeline in the Australian market” José Manuel Entrecanales, CEO, Acciona SA [global construction conglomerate]

US Economy

“The US consumer is in excellent shape. The economy is strong, jobs are plentiful and the consumer sentiment remains high” Dick Hayne, CEO, Urban Outfitters Inc [multinational youth focused retailer]

Coronavirus

“We’re seeing that many of the cities around China, people are actually going back to work. We’re seeing some of the shops in Beijing are opening up. When you’re going on the freeway now, you’re actually seeing traffic jams versus, say, two, three weeks ago, where the roads were pretty empty...we started seeing activity pick up a little bit two weeks ago. And then also, this week, we’re also seeing continued pickup” Herman Yu, CFO, Baidu Inc [Chinese technology multinational]

“It feels to me that China is getting the coronavirus under control. You look at the numbers, they’re coming down day by day by day” Tim Cook, CEO, Apple Inc

“In terms of what we are seeing currently all our factories by tomorrow will be back up and running, 85 per cent last week were back up and running, and 80 per cent of fabric mills we understand are up and running” John King, CEO, Myer Holdings Ltd

Aviation

“Chinese airline customers, it’s about 10% of our backlog today. Flights touching China is about 20% of our engine flying hours. How much of that should we take into account? I can’t tell you, but what I can tell you is that year-to-date, flights touching China are down by approximately between 15%ish in January and 50% in February” Warren East, CEO, Rolls Royce Holdings plc

Automotive

“Last November, we expected the third consecutive year of decline in global light [commercial] vehicle production in 2020, market conditions so far in 2020 are confirming this view” Wolfgang Schäfer, CFO, Continental AG [German automotive tyre & parts manufacturer]

“There are consumers being accepted under the responsible lending agreements, but the financiers are scared stiff of the regulator reviewing them after the event, so they are still tightening credit” Martin Ward, CEO, AP Eagers Ltd

“The sustained period of decline in new vehicle sales is providing a catalyst for major structural change in the automotive retail industry. We will see a further rationalization of dealership locations, consolidation of ownership and the faster adoption of non-traditional methods of auto retailing” Martin Ward, CEO, AP Eagers Ltd

Food & Beverage

“Up until the last 8 or 9 days, there was subdued demand in all of the major markets [for berries], but I'm pleased to report we've seen a significant uptick starting early last week and is continuing. So, we are seeing a good uptick in demand and that's correlating with the good uptick in pricing” Harry Debney, CEO, Costa Group Ltd

“Ironically, the breaking of the drought has put more pressure on red meat prices because we're seeing farmers hold their breeding stock out of the kill yards, and so actually, supply has really shrunk. So it seems paradoxical, but the biggest price for us we've seen in beef was actually the last three weeks” Brad Banducci, CEO, Woolworths Ltd

Technology

“You've seen announcements from all the major platforms, the continued enormous acceleration globally from Microsoft, Amazon and you saw Google's announcement for another US$10 billion in data center investments in the coming year. The markets react and we're seeing a lot of growth” Craig Scroggie, CEO, NextDC Ltd

 
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.