NAOS CEO Insights

CEO INSIGHTS – Week Ending 2 August 2019 By NAOS Asset Management

August 8, 2019

"Our view of the demand fundamentals remains robust. We are highly confident in our industry outlook which now forecasts the demand for approximately 44,000 new airplanes over the next 20 years. That's up from approximately 43,000 in our previous forecast, doubling the size of the global fleet." Dennis Muilenburg, CEO, The Boeing Company

CEO INSIGHTS – Week Ending 2 August 2019 By NAOS Asset Management

"In terms of accessing the freight corridor between Melbourne and Sydney, there’s a massive 70% cost penalty for rail [versus road transport] — this rips the guts out of our industry.” Dean Dalla, CEO, Pacific National Rail Freight

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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Infrastructure

“Volumes linked to the treatment of infrastructural waste, which was particularly dynamic last year, clearly, slowed down as these projects came to an end." Julian Waldron, CFO, Suez Recycling Group

Global Aviation

"We continue to see a complex geopolitical environment and competitive market, particularly on widebodies [twin aisle aircraft]." Guillaume Faury, CEO, Airbus

Global Auto

“Increased U.S. tariff costs and delayed timing of anticipated commercial truck tire price increases, as well as weakness in the China new vehicle and Europe replacement tire markets, are expected to impact the remainder of the year.” Brad Hughes, CEO, Cooper Tire & Rubber Company

Motorcycles

“Our scooter sales were up 29 per cent last calendar year, it is our fastest growing sector and largely thanks to more food delivery services.” Dave Ahmet, CEO, Motorcycle Holdings

Agriculture

“Generally, demand [for beef] is increasing as supply is increasing alongside it, but in Australia global demand is rising for our product even as production is decreasing – on the back of tougher seasonal conditions.” Hugh Killen, CEO, Australian Agricultural Company Ltd

“It’s been a difficult year, with external headwinds impacting performance in three of our four major markets.” Greg Hunt, CEO, Nufarm Ltd

“This is an extremely difficult year for GrainCorp due to the significant disruptions we’ve seen in global grain markets, compounded by the drought in eastern Australia. The extraordinary circumstances in eastern Australia are highlighted by the fact we expect to ship 2.3 million tonnes of grain from South and Western Australia to meet east coast domestic demand.” Mark Palmquist, CEO, GrainCorp Ltd

Banking & Finance

“They [the major banks] are hurting, losing revenue and have a lot of catching up to do. That means they are aggressively moving rates in a bid to reset themselves. These new [lower] rates show they are beginning to warm up after a period of hibernation.” Jonathan Street, CEO, Thinktank [domestic commercial property lender]

“Homeowners are no longer taking what they are given. They are negotiating upfront and reviewing their loans regularly to make sure they are getting a good deal.” David Hyman, CEO, Lendi [home loan platform]

Global Consumer

“We continue to see a particularly softer consumer. There's a lot of indications that consumer confidence has trended on the lower side over the last couple quarters, actually the lowest it's been in five years in the U.K., that, coupled with what we see is increased competition and highly fragmented market, particularly in the home and garden category which is popular this time of year.” Miachael Randolfi, CFO, Groupon

Technology

“That [referring to Atlassian's exponential growth] is a barometer for just how much demand there is globally for companies moving to agile [work places].” Andy Penn, CEO, Telstra Ltd

“As I've said before, transit integration [integrating Apple products into transport services] is a major driver of a broader digital wallet adoption, and we're going to keep up this push to help users leave their wallet at home in more and more instances.” Tim Cook, CEO, Apple

“More and more enterprise customers are seeing the value of replacing legacy [telephone] systems with a unified cloud-based solution. We don’t believe on-premise technology can compete with the cloud in addressing needs of modern mobile and distributed workforces.” Vlad Shmunis, CEO, RingCentral Inc

Domestic Capital Markets

“Whatever the dynamic is, I think Australia has struggled to give oxygen to companies that are really being quite disruptive and looking to grow over the longer term.” Andy Penn, CEO, Telstra Ltd

Domestic Housing & Construction

“Genworth expects the moderating trend in metropolitan housing markets to slow in the second half of the year (particularly in Sydney and Melbourne) with increased stability in house prices heading into the latter part of the year.” Genworth ASX Announcement

“The revised guidance is a consequence of a further softening of conditions in the residential and civil construction markets, continued competitive pressure in Queensland and South Australia, sustained increase in raw material costs and one-off shipping costs associated with the cancellation of import orders for cementitious materials given the softening volumes in Victoria.” Adelaide Brighton ASX Release

“From May through to today we’ve not seen any recovery in that [residential construction] sector. And in fact it has deteriorated.” Nick Miller, CEO, Adelaide Brighton 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.