NAOS CEO Insights

CEO INSIGHTS – Week Ending 13 March 2020 By NAOS Asset Management

March 13, 2020

“The Chinese government has reaffirmed recently their growth targets and one of the levers at their disposal to achieve those targets is to stimulate the economy through infrastructure investment. And that infrastructure investment tends to be steel-intensive...which means strong demand for steel and strong demand for iron ore” Elizabeth Gaines, CEO, Fortescue Metals Group Ltd

CEO INSIGHTS – Week Ending 13 March 2020 By NAOS Asset Management

“The Chinese government has reaffirmed recently their growth targets and one of the levers at their disposal to achieve those targets is to stimulate the economy through infrastructure investment. And that infrastructure investment tends to be steel-intensive...which means strong demand for steel and strong demand for iron ore” Elizabeth Gaines, CEO, Fortescue Metals Group Ltd


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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Airlines

“Many airlines are cutting capacity and taking emergency measures to reduce costs. Governments must take note. Airlines are doing their best to stay afloat as they perform the vital task of linking the world’s economies. As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times.” Alexandre de Juniac, CEO, International Air Transport Association

“I think this will be a survival of the fittest and I think Qantas is one of the fittest and most dynamic airlines in the world. We know we can ride this out. Not all airlines around the world will” Alan Joyce, CEO, QANTAS Airway Ltd

Healthcare

“In terms of supply of medicines from China, so far we have not seen any impact, but we are closely monitoring the situation with suppliers” Mark Hooper, CEO, Sigma Pharmaceuticals

Agriculture

“[Cattle] prices are just crazy at the moment and … we will continue to be in out and of the market [operating] while it remains at this level” Coll MacRury, CEO, Southern Meats Pty Ltd [major NSW abattoir]

“Some [abattoirs] may go to shutting down completely, they may go to three days a week, or two shifts to one shift, there's a number of levers they can pull” Patrick Hutchison, CEO, Australia Meat Industry Council [peak industry body for meat processors]

Marketing & Advertising

“You can see that in the data we've shared, just how much e-mail [marketing] has reduced as a percentage of our traffic over the last 5 years” Rich Williams, CEO, Groupon Inc [NASDAQ online marketplace]

Payments & Spending

“We sort of laid out the idea that there's a 10x growth opportunity ahead of us because of the inflection point that we're at right now. And this inflection point is driven by the fact that we have a world of connected devices” Vasant Prabhu, CFO, Visa Inc

“We think it has never been easier, cheaper or faster to build [payments] issuance and acceptance than it is today. There's still plenty of cash to digitize” Vasant Prabhu, CFO, Visa Inc

“The shopping frequency is off the charts for the last few days” Richard Galanti, CFO, Costco Wholesale Corp

Chinese Manufacturing & Logistics

“In terms of supply chain, closures of many manufacturing facilities extended well beyond the typical one week Chinese New Year holiday, which was the last week in January. In many cases factories over there were closed for one to two additional weeks. That's now improving each week” Richard Galanti, CFO, Costco Wholesale Corp

“Capacity [in Chinese manufacturing] is up to around 60%. We heard today from the [People’s Bank of China] Governor Yi Gang that they are aiming by the end of the month to go up to 90%. Of course, we have to caveat that, subject to no revival of the epidemic as factories reopen. But at this point, the news from China is, there is a stepping up in production” Kristalina Georgieva, Managing Director, International Monetary Fund

Technology

“Given this coronavirus, I think overnight almost everybody understands they needed a [video conferencing] tool like this. This will dramatically change the landscape” Eric Yuan, CEO, Zoom Video Communications Inc [NASDAQ listed communication software company]

“In the intermediate term, I firmly believe the disruption caused by the virus will raise awareness of the benefits of blended [digital] learning solutions like ours” John Hass, CEO, Rosetta Stone Inc [global education technology company]

NBN

“HFC [hybrid fibre coaxial internet technology] remains a large concern. The amount of outages that are going on the network compared to any other of the access technologies suggest it’s not up to operational standards” Craig Levy, COO, TPG Telecom Ltd

Energy & Resources

“We are still seeing strong demand for seaborne iron ore, there is no change in payment terms, our customers are still producing steel so largely it's business as usual” Elizabeth Gaines, CEO, Fortescue Metals Group Ltd

Infrastructure & Construction

“The Chinese government has reaffirmed recently their growth targets and one of the levers at their disposal to achieve those targets is to stimulate the economy through infrastructure investment. And that infrastructure investment tends to be steel-intensive...which means strong demand for steel and strong demand for iron ore” Elizabeth Gaines, CEO, Fortescue Metals Group Ltd

“On the demand side, at this time we are not seeing the virus caused any impacts to active projects both in the U.S. or the U.K., and we are not seeing any holdup in projects slated to begin in the near future” Bruce Young, CEO, Concrete Pumping Holdings Inc [multinational concrete pumping/waste management company]

Travel

“While forward bookings beyond three months remain in line with previous expectations, cancellations are now occurring at short notice prior to travel” Market Announcement, Webjet Statement from Webjet Ltd

Retail

“So a look upon the fundamentals that we've spoken to you about many times, athleisure is here to stay and sportswear a permanent component of the fashion landscape” Kasper Rorsted, CEO, Adidas AG

“We're seeing a structural shift in the consumer mindset, rising sports participation rates as well as awareness for health and sustainability. And there is no doubt even in the current environment that health -- a focus on health will get an even greater focus moving forward” Kasper Rorsted, CEO, Adidas AG

 
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.