NAOS CEO Insights

CEO INSIGHTS – Week Ending 22 May 2020 By NAOS Asset Management

May 22, 2020

“The retail world that would have existed in the year 2030 has been pulled into 2020. Brick and mortar retailers that were thinking of moving online have done so at an incredible clip over the last 8-10 weeks” Harley Finkelstein, COO, Shopify Inc

CEO INSIGHTS – Week Ending 22 May 2020 By NAOS Asset Management

“The retail world that would have existed in the year 2030 has been pulled into 2020. Brick and mortar retailers that were thinking of moving online have done so at an incredible clip over the last 8-10 weeks” Harley Finkelstein, COO, Shopify Inc [multinational e-commerce software company]


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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Transport, Freight & Logistics

“Most importantly, vehicles are returning to pre-Covid-19 levels which will drive more demand through our business [panel repair] due to a likely slower transition to people making use of public transport” Andy Hopkins, CEO, AMA Group Ltd

“There has been an extraordinary, quite a rollercoaster ride, but [oil] tanker earnings have been very strong amidst an unprecedented world situation” Robert Macleod, CEO, Frontline Ltd [world’s largest oil tanker shipping company]

“Under the normal circumstances, a drop in [oil] demand might lead to lower freight rates, this time it led to a surge for places to store [and] on ships was one solution. These were not normal circumstances and the speed, and the severity of the drop had an opposite impact on tanker rates as a record increase in oil and water saw freight rates firm significantly” Robert Macleod, CEO, Frontline Ltd [world’s largest oil tanker shipping company]

Aviation

“We have published today a new forecast about the potential recovery of the air traffic, and what we see is that things should come back to normal in 2023, which is later than our previous forecast” Alexandre de Juniac, CEO, IATA [International Air Transport Association]

“To get people travelling again, we're looking at very low airfares to encourage people to take those trips” Alan Joyce, CEO, Qantas Airways Ltd

“Traffic levels will not be back to 100%. They won’t even be back to 25%...Maybe by the end of the year we approach 50%...I believe it's three full years before we return to the traffic levels that we had just in 2019, and then probably another two before we begin to return to the growth rates that we used to have” Dave Calhoun, CEO, The Boeing Company

Tourism & Leisure

“Our current booking trends indicate that there is demand for cruising” Jason Liberty, CFO, Royal Caribbean Cruises Ltd

“I think we are seeing week-by-week improvement. It’s encouraging, but we are still at greatly reduced levels. And the numbers candidly are not terribly meaningful right now. Directionally, they are meaningful and they are hopeful” Peter Kern, CEO, Expedia Group Inc

Agriculture

“Successive rainfall events across major cropping areas on the east coast have had a positive impact, lifting farmer confidence and driving strong demand for crop inputs” Mark Allison, CEO, Elders Ltd

“Wool export to China is operationally sound, however the impact of reduced end-market demand in Europe and North America will likely continue to place downward pressure on price and volume” Mark Allison, CEO, Elders Ltd

Mining & Resources

“The mining sector continues to operate, largely uninterrupted” Nick Miller, CEO, Adelaide Brighton Ltd

Building & Construction

“It is clear that housing approvals will decline” Nick Miller, CEO, Adelaide Brighton Ltd

“Looking to the next financial year, we are planning for an environment that will see a shrinking economy, substantially reduced customer demand across all our businesses and sustained lower levels of productivity” Ross Taylor, CEO, Fletcher Building Ltd

Domestic Property

“As Australia’s biggest employer which contributes over 13 per cent of GDP, the property industry can be a powerhouse behind economic recovery and growth with the right policy settings and market incentives from the federal, state and territory governments” Ken Morrison, CEO, Property Council of Australia

Technology

“The work from home, study at home, e-commerce, online gaming and telehealth will become the new normal and expand the total PC [personal computer] and smart devices market size” Yang Yuanqing, CEO, Lenovo Group Ltd [world largest PC manufacturer]

Financial Markets

“It is difficult to make assessments for future credit costs [losses]. So, as I said, based on the scenario, we estimated credit costs, and we made comparisons to the Lehman crisis. Back then, the peak was in 2009, [¥]760 billion of credit costs were incurred against that, this time, we are estimating [¥]450 billion” Tetsuya Yonehana, CFO, Mitsubishi UFJ Financial Group [world’s 5th largest bank]

Global Economy

“We’re seeing some signs of a recovery, but it comes off of a deep hole, with limited visibility as to its speed and shape” Dara Khosrowshah, CEO, Uber Inc

Global Retail

“It is a big advantage being an omnichannel retailer and I think that is showing right now. We had backups in our fulfillment centers too” Brett Biggs, CFO, Walmart Inc

“The retail world that would have existed in the year 2030 has been pulled into 2020. Brick and mortar retailers that were thinking of moving online have done so at an incredible clip over the last 8-10 weeks” Harley Finkelstein, COO, Shopify Inc [multinational e-commerce software company]

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.