NAOS CEO Insights

CEO INSIGHTS – Week Ending 26 June 2020 By NAOS Asset Management

June 26, 2020

“We've had 10 weeks operating like the size of Christmas” Christine Holgate, CEO, Australia Post

CEO INSIGHTS – Week Ending 26 June 2020 By NAOS Asset Management

“We've had 10 weeks operating like the size of Christmas” Christine Holgate, CEO, Australia Post


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 & Logistics

“We've had 10 weeks operating like the size of Christmas” Christine Holgate, CEO, Australia Post

“Commercial traffic continues to display a great resilience to date” Market Announcement, Transurban Group

“There has been a material flattening and decline in demand experienced during May and June 2020 resulting in a significant reduction in freight tasks. This flattening generally coincides with an end to COVID-19 related panic buying for many products, and as widely reported a decrease in economic activity and conditions within the domestic economy” Market Announcement, Lindsay Australia Ltd

“As a result of our forecasts we concluded that a significant decline in ocean transport volume and a restrained stance on customer’s investments will be unavoidable in the foreseeable future” Market Announcement, Mitsui OSK Lines [Japan's Largest Ship Owner]

Employment

“Since early May 2020, there has been a consistent trend of improving weekly billings and in June 2020 we are now observing weekly billing declines that are in the range of -40% to -50% across SEEK ANZ and SEEK Asia vs pcp [previous corresponding period]” Market Announcement, Seek Ltd

Domestic Economy

“I think we should all be worried about what happens post September [current end of Job Keeper/Job Seeker]” Rob Scott, CEO, Wesfarmers

“I think it’s likely that we're going to see interest rates at their current level for years....We do face a world where there'll be a shadow from the virus for quite a few years. People will become more risk-averse they won't want to borrow, in Australia we're going to have lower population dynamics” Dr Phillip Lowe, Governor, Reserve Bank of Australia

Financial Markets

“I think the virus will change the way corporations look at their balance sheets. Running your company to the max leverage for earnings per share has a hidden cost. Having equity and being well capitalised has values that are intangible” Ken Moelis, CEO, Moelis & Company Inc

Payments & Lending

“A lot of people have been wrong predicting the death of cash, but I definitely feel we are going to see an acceleration in the demise of cash. We already see 60% of our users would prefer not to handle cash” Daniel Schulman, CEO, PayPal Holdings Inc

Retail

“The issue is consumer confidence...we'll need at some point consumers to believe the virus is over for retail to return to normal” Grant Kelly, CEO, Vicinity Centres

“It has been very pleasing to see customer traffic rebound and to have most of our centres operating largely at pre-pandemic levels” Darren Holland, CEO, Aventus Group

“Consumers want modern, seamless experiences, online-to-offline, so we’re accelerating our approach” John Donahoe, CEO, Nike Inc

“We also know that a lot of people who didn't do much online prior to the pandemic got comfortable doing it if they wanted to eat and so the consumer behavior change is what perhaps was a longer term trend that we're going to be mindful of” Kurt Darrow, CEO, La-Z-Boy Inc

Commercial Property

“I'm not sure too many retailers would want to see a landlord take a per cent of online sales [for rent calculation] when most retailers are fulfilling from warehouse” Rob Scott, CEO, Wesfarmers Ltd

Travel & Leisure

“The reality is we are getting bookings for [2021] and it’s at a great pace” Arnold Donald, CEO, Carnival Cruise Line Company

“We have seen an incredible rebound in retail demand and dealer demand since early May across all our businesses” Michael Happe, Winnebago Industries Inc

“We are working on international operations not starting in any real size...until July next year” Alan Joyce, CEO, Qantas Airways Ltd

Automotive

“We're starting to see signs of recovery in the auto sector evidenced by the reopening of the production facilities” John Chen, CEO, BlackBerry Ltd [major software provider to automotive industry]

Energy & Resources

“The [gas market] experience on the east coast over the last decade shows us that increasing production does not improve prices for local businesses or households...In the last decade gas production on the east coast has tripled, and at the same time prices have tripled” Jeanne Johns, CEO, Incitec Pivot Ltd

Technology

“[This] crisis is unique in two ways, first it has created the largest ever change in human behavior, at scale, and almost instantaneously, requiring companies to fill new demand trends, change how they engage with customers and adapt quickly to volatile market conditions, all of which require a strong digital foundation just as they also face massive cost pressures” Julie Sweet, CEO, Accenture plc

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.