NAOS CEO Insights

CEO INSIGHTS – Week Ending 25 February 2022 By NAOS Asset Management

February 25, 2022

“Speaking of customers, the sheer level of demand in many of our regions has meant that we've not always been able to live up to our own high expectations of timely delivery and customer service” Mark Vassella, CEO, BlueScope Steel Ltd

CEO INSIGHTS – Week Ending 25 February 2022 By NAOS Asset Management

“Speaking of customers, the sheer level of demand in many of our regions has meant that we've not always been able to live up to our own high expectations of timely delivery and customer service” Mark Vassella, CEO, BlueScope Steel 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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Automotive

“EV penetration in Australia is currently very low at about 0.2% of the total fleet and while EVs as a percentage of new cars sold has increased to about 2% of annual sales, it will require a significant ramp up in sales to reach the estimated 15% penetration of the passenger fleet by 2030” Matthew Halliday, CEO, Ampol Ltd

“Daily private vehicle travel is expected to be, on average, 16% more than pre-pandemic, which that number has doubled since July 2021 in our survey” Scott Charlton, CEO, Transurban Group Ltd.

Financial Markets

“Recent volatility in equity markets makes long-term corporate credit even more attractive, especially as bond returns go up relative to equity returns. Currently between $5 billion and $10 billion is borrowed each year from the US private placement market by Australian companies, which could be lent by Aussie super funds” Anthony Pratt, Executive Chairman, Visy Industries

“Money is so cheap you can’t give it away. There’s too much liquidity, that is not the issue. The issue is generating a decent return from a bank’s perspective” Shayne Elliott, CEO, ANZ Banking Group Ltd

Inflation

“We think it’s back to normal. In reality the last 15 years with cheap credit and access to capital coupled with technological advancements have really suppressed inflation to an unusually low point and now those factors are unwinding and that’ll basically revert back to a normalised inflation dynamic” Ryan Stokes, CEO, Seven Group Ltd

“With consumer confidence and wages and inflation going up, that means the economy is travelling well. People use rate rises as a fear thing. Actually, a rate rise is an indicator life is getting back to normal” Ahmed Fahour, CEO, Latitude Group Holdings Ltd

Media & Advertising

“The global economy is expanding. Inflation is the result of pent-up consumer demand and shortages in a number of markets, and I think that talks to a very healthy broadly consumer-led recovery during the year with challenges around topics like inflation and supply chain, none of which by themselves is negative to advertising spend” Mark Read, CEO, WPP PLC

Streaming & TV

“The key to these platforms, which is true of free to air channels and cable channels is you spend enough [on new content production] that you could nourish an audience that they want to spend time with you and that they feel that you're the place that they want to be and you're important, used by many people in the family” David Zaslav, CEO, Discovery Inc

Freight & Logistics

“Unfortunately we do think freight rates will remain volatile, near the high end. There aren’t enough ships, they have to decarbonise which adds to the cost, while containers are not in the right place. These problems are likely to continue for a while” Mike Ferraro, CEO, Alumina Ltd

Construction

“I mean, everything we hear from our Pro [trade] customers is they’ve got more work than they can handle…We hear that all over the country” Edward Decker, COO, The Home Depot, Inc

“Actually one of our biggest cost pressures right now is in construction, construction of new stores or our new DCs [distribution centres]” Brad Banducci, CEO, Woolworths Group

“Speaking of customers, the sheer level of demand in many of our regions has meant that we've not always been able to live up to our own high expectations of timely delivery and customer service” Mark Vassella, CEO, BlueScope Steel Ltd

Travel & Leisure

“We’re optimistic that this time we’re less vulnerable to the borders closing again. In fact, there shouldn’t be a reason for that to occur” Alan Joyce, CEO, Qantas Airways Ltd

“When we look out over the back half of the year, we see some things that are a little bit more optimistic than now” Marc Swanson, CEO, SeaWorld Entertainment Inc

Retail & E-Commerce

“We know recent sales trends have continually improved as customer caution has shown signs of receding” Anthony Heraghty, CEO, Super Retail Group Ltd

“An increase in digital sales really ramped up during the crisis, especially when the stores were closed. The surprise was when the stores reopened, the trend didn't really dip down.” Axel Dumas, Executive Chairman, Hermès International S.A.

Healthcare

“The thing that drives testing is not just the amount of people who have had omicron, but the people who are exposed. As the community opens up, there are more types of flu and other diseases that circulate, so people will need testing to figure out whether it is COVID-19 or not” Malcolm Parmenter, CEO, Healius Ltd

Semiconductors

“Conditions accentuated by the pandemic, such as scarcity, long lead times, price increases and supply chain instability are likely to stay around and continue at some level over the next few years” Aram Mirkazemi, CEO, Altium Ltd

Technology

“Agricultural technology in particular is advancing rapidly” Sean Hallahan, CEO, Costa Group Holdings 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.