NAOS CEO Insights

CEO INSIGHTS – Week Ending 10 July 2020 By NAOS Asset Management

July 10, 2020

“Eleven of Australia’s top 15 most valuable red meat export markets are expected to enter recession in 2020, creating a range of factors that are expected to impact red meat sales” Market Announcement, Meat & Livestock Association Australia

CEO INSIGHTS – Week Ending 10 July 2020 By NAOS Asset Management

“Eleven of Australia’s top 15 most valuable red meat export markets are expected to enter recession in 2020, creating a range of factors that are expected to impact red meat sales” Market Announcement, Meat & Livestock Association 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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Aviation

“Airlines will start to allocate their available capacity for long haul travel to countries from October and November of this year and if we are not in that conversation then we miss the cycle… Once airlines establish route networks and if those networks are profitable, there’s no motivation for them to switch the metal to fly back down to Australia and we get locked out of the market for a long period” Geoff Culbert, CEO, Sydney Airport Ltd

“This crisis dwarfs all others in aviation history, and there’s no end in sight” Sara Nelson, President, Association of Flight Attendants

“The reality is that United simply cannot continue at our current payroll level past October 1 in an environment where travel demand is so depressed” Market Announcement, United Airlines Inc

Travel & Leisure

“Australians holidaying in their own backyard this year will be critical to helping our tourism industry get back on its feet” Simon Birmingham, Federal Tourism Minister

“We’re hopeful of a strong resurgence in the domestic market and frankly we need it” Lyell Strambi, CEO, Melbourne Airport

Energy & Resources

“Whilst the aviation sector remains heavily impacted, retail [petrol] sales have begun to recover as restrictions have been relaxed and domestic flight schedules are beginning to return” Robert Hill, Chairman, Viva Energy Group Ltd

“A weaker [petroleum] refining margin environment has continued in 2020 as a result of higher crude premiums followed by the global impacts from Covid-19” Scott Wyatt, CEO, Viva Energy Group Ltd

“Renewables are the cheapest cost of new [power] generation. We have an ageing energy generation fleet that has to change, we also have commitments to decarbonise the country over time. When you put the two together, there should be no other economic solution than renewables” Mike Cannon-Brookes, CEO, Atlassian Corporation

Banking, Payments & Lending

“In FY20 there was a shift to debit card usage by customers globally with 87% of customers in ANZ, 89% in the US and 96% in the UK now using debit cards on Afterpay” Market Announcement, Afterpay Ltd

“We will be making changes to allow more time and breathing space for customers who aren’t in a position to return to full payments again in October” Gary Thursby, CFO, Westpac Banking Corporation Ltd

Food & Beverage

“Over the last three years, and particularly in the last 18 months, we've seen a really substantial increase in online [food] expenditure” Michele Levine, CEO, Roy Morgan Research Institute

“The 2020 Australian vintage was impacted by extreme heat, in particular during key stages of the growing season, resulting in a smaller volume, higher cost vintage for TWE, with total intake approximately 30% lower than the prior year” Market Announcement, Treasury Wine Estates Ltd

“Eleven of Australia’s top 15 most valuable red meat export markets are expected to enter recession in 2020, creating a range of factors that are expected to impact red meat sales” Market Announcement, Meat & Livestock Association Australia

Domestic Economy

“Uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans” Dr Phillip Lowe, Governor, Reserve Bank of Australia

Retail

“Our e-commerce business continues to do really well growing nearly 70% in the month of June even as brick and mortar stores reopen. This is more than three times the growth rate we were seeing pre-COVID, which speaks to the stickiness in the consumer shopping trend” Harmit Singh, CFO, Levi Strauss & Co.

“Consumer shopping behavior has been changed for good” Charles Bergh, CEO, Levi Strauss & Co.

“We also believe that it is highly likely that certain aspects of customer behavior may change permanently” Stefano Pessina, CEO, Walgreens Boots Alliance Inc [world’s largest pharmacy chain]

Transport & Logistics

“This [the delivery market] is a business that Amazon is in, this is a business that Walmart is in… so I do think that the category and the markets are going to start overlapping with a lot of other players [but] the total addressable markets are huge” Dara Khosrowshahi, CEO, Uber Inc

Technology

“If we step back and just look at what we've gone through, we started this year with bushfires, we struggled through to the health crisis and that kind of fastly evolved into an economic crisis. So it's just [been about] triage for our clients. I think the whole IT industry just jumped into that mode to some degree” Katrina Troughton, Managing Director, IBM Australia

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.