NAOS CEO Insights

CEO INSIGHTS – Week Ending 19 June 2020 By NAOS Asset Management

June 19, 2020

“Although demand will recover in time, some refineries around the world will no doubt close as a result of the more permanent demand impacts and challenging economic outlooks in their respective markets, the question for us is whether Australian refineries should again fall victim to this rationalisation” Scott Wyatt, CEO, Viva Energy Australia

CEO INSIGHTS – Week Ending 19 June 2020 By NAOS Asset Management

“Although demand will recover in time, some refineries around the world will no doubt close as a result of the more permanent demand impacts and challenging economic outlooks in their respective markets, the question for us is whether Australian refineries should again fall victim to this rationalisation” Scott Wyatt, CEO, Viva Energy 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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Food & Beverage

“We’re seeing cafes increasing now and other channels. There’s some more confidence out there” Rolando Schirato, Managing Director, Vittoria Coffee

“History has proven many times over that during a recession...people are much more careful about where they spend their dollars and that just means more meals at home versus away from home” Steven Spinner, CEO, United Natural Foods [US listed international food wholesaler]

“We added more plant-based milk beverages [to our product offering], knowing consumers are increasingly looking for those alternatives” Patrick Grismer, CFO, Starbucks Inc

Technology

“Now, the conversations that I have [vs. three years ago], have really shifted, and almost every single CFO that I talk to says that they absolutely are going to move financials to the cloud” Robynne Sisco, CFO, Workday Inc [Finance/HR global software company]

“The shift to remote work has driven a surge in demand for digital documents, with use of web-based PDF services, up nearly 40% quarter-over-quarter” Shantanu Narayen, CEO, Adobe Inc

“We’ve all had the internet for years...but now because we’ve all been locked in, people are doing things online they haven’t had to do before” Michael Kelly, CEO, Fineos Corp Holdings PLC [ASX listed insurance software provider]

Energy & Resources

“Although demand will recover in time, some refineries around the world will no doubt close as a result of the more permanent demand impacts and challenging economic outlooks in their respective markets, the question for us is whether Australian refineries should again fall victim to this rationalisation” Scott Wyatt, CEO, Viva Energy Australia

Manufacturing

“It’s important that Australia maintains manufacturing capability and provides a level of self-sufficiency for the country. In some sectors lower-priced gas is a key component of that. And in a country that has such a significant natural resource, we should be able to capitalise on that” Scott Wyatt, CEO, Viva Energy Australia

Agriculture

“The wool industry as a whole is struggling with the fact that about 80 per cent was going to one country [China] to process the product, and when that country steps aside from the market it swings the supply and demand balance out of kilter, and pushes the prices down” David Jochinke, CEO, Victorian Farmers’ Federation

Automotive

“We've been pleasantly surprised how demand has come back” Mary Barra, CEO, General Motors Company

Aviation

“Quite a lot of [airplane deliveries] will be deferred. We have already notified both Boeing and Airbus that we will not be taking any airplanes this year or next year. All the other aircraft that we have on order that were supposed to be delivered to us within the next two or three years, will now be pushed back to as long as nearly eight to 10 years” Akbar al-Baker, CEO, Qatar Airways

“We foresee reduction in maintenance, repair and overhaul demand of 60% or more for commercial aero engines [in 2020] and production will fall 40-50%” Kevin Michaels, Managing Director, AeroDynamic Advisory [global aerospace/aviation specialist consultants]

Travel & Leisure

“One of the greatest challenges that we're looking at is what does COVID-19 mean to the overall food and beverage portfolio on an airport facility as it relates to sit-down restaurants, queuing and other aspects” Roger Fordyce, CEO, Hudson Ltd [international airport retailer/newsagency]

“The market’s going to be smaller, we’re going to be a lot smaller than we have been” Graham Turner, CEO, Flight Centre Travel Group Ltd

Health & Wellbeing

“[The fitness industry] will never look the same as it did pre COVID-19. The phased reopening will test the fitness industry as costs are turned back on and members are phased back into gyms and fitness studios. More people than ever will be willing to invest in personal trainers” Steve Pettit, CEO, Australian Institute of Fitness

Residential Property

“People are not spending in cafes and restaurants, they are not going on overseas holidays, so they are investing in their house. Some of it might be coming out of superannuation money, and they see it as a good opportunity to improve the value of their home and change their spending habits from where they would usually go” Glen Robinson, CEO, Beacon Lighting Group Ltd

“During this period, we’ve seen strong demand for DIY paints, especially transformation paints” Mike Schneider, Managing Director, Bunnings Warehouse

Global Economy

“Stimulus spending has been a big driver [of the sales rebound]” Doug McMillon, CEO, Walmart Inc

Superannuation

“One of the mistakes that the detractors of the [asset management ] system made was that they assumed that because the hospitality, leisure and tourism industry have been switched off [during COVID-19], that this equated to no cash inflow” Sam Sicilia, CIO, Hostplus

Payments & Lending

“It’s hard to say exactly what the [economic recovery] is going to look like, but we think it’s going to be digital, domestic spending is going to be important, and debit cards [rather than credit] are going to be important” Charlotte Hogg, CEO, Visa Europe Inc

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.