NAOS CEO Insights

CEO INSIGHTS – Week Ending 8 March 2019 By NAOS Asset Management

March 11, 2019

"At the national level, the average farm cash income for dairy farmers is projected to decrease from $160,900 per farm in 2017–18 to $93,000 in 2018–19." ABARES Commodity Report March Quarter 2019

CEO INSIGHTS – Week Ending 8 March 2019 By NAOS Asset Management

"At the national level, the average farm cash income for dairy farmers is projected to decrease from $160,900 per farm in 2017–18 to $93,000 in 2018–19."

ABARES Commodity Report, March Quarter 2019
 
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.
 
 

Domestic Economy

“Growth in the economy was subdued, reflecting soft household spending and a decline in dwelling investment.....the approvals for dwelling construction indicate that the decline in dwelling investment will continue”

Bruce Hockman, Chief Economist, Australia Bureau of Statistics

“The moderation [in growth] from 1H 2018 in part reflects the impact of the drought, lower mining investment and as we continue to move from the construction to the production phase, as well as a decline in residential construction activity from record levels"

Josh Frydenberg, Treasurer of Australia

Resources

"I think generally as well given the uncertainty, global and macro-economic uncertainty, I think a lot of people just are being very, very careful about their capital expenditure plans and that generally will have an impact, particularly in the resource industries as we move into 2019"

Andrew Bonfield, CFO, Caterpillar Inc

Construction

"We're still seeing good growth obviously in construction equipment in particular and that's been a big driver obviously of the last couple of years for Caterpillar"

Andrew Bonfield. CFO, Caterpillar Inc

Telecommunications

"The introduction [of 5G] over 2019-20 may slightly lift smartphones sales, but it is unlikely to be enough to reverse the trend of the lengthening replacement cycle as the category reaches maturity"

Andy Penn, CEO, Telstra

Retail

"Economic growth is still consistent and strong, employment is very high [and] we see this environment like almost any that we can be successful in"

Andrew Gregory, CEO, McDonalds Australia

"A number of macro challenges exist that may impact discretionary spend, for example, uncertainty in the lead up to the federal election and concerns around the housing market"

Myer ASX Release 06/03/2019

"Industry voices speculated on the slowdown of Greater China - that was not the case for us in the fourth quarter 2018. So, we have seen a very robust above group average performance in this part of the world. By the way, some smaller Asian markets, for example, Japan also showed very strong results"

Mark Langer, CEO, Hugo Boss

"I think tax helped a little bit, I think prices generally coming down has helped a little bit, particularly in the staples that we sell. So I think it's been a reasonable year for the US consumer"

Greg Foran, CEO, Walmart US

Property

"In Australia we feel that with the softening of the residential market, site values are coming down in strategic locations and this is opening up the opportunity for us to invest in new sectors such as seniors' housing and multi-family. Both these sectors are of interest to us"

Andrew Schwartz, CEO, Qualitas

“We are seeing more moderate growth in the residential building market in Australia, while non-residential commencements remain strong. Business momentum in the US continues, with construction and investment in infrastructure returning to long-term averages”

Peter Wilson, CEO, Reece

Energy

“As the energy market evolves and shifts towards decentralisation and as governments embrace the principles of ‘Industry 4.0’, we believe there will be more opportunities for commercial and industrial customers to take great control over the way they consume energy”

Amber Fennell, GM Business Energy, Origin Energy

“Commercial and industrial gas users have been telling us for some time that at current wholesale gas prices, their operations are not sustainable in the medium to longer term. They are increasingly likely to relocate from the east coast or wind-up their operations”

 Rod Sims, Chairman, ACCC

“Business and household operating costs are increasing due to high energy bills, and businesses are being forced to either lay off workers and close their doors, or to pass costs on to the already burdened Australian consumers — an unfortunate consequence for a country rich in energy resources”

Louis Vega, Managing Director Australia, Dow Chemicals

“The recent rapid escalation in the cost of energy has made the east coast of Australia an increasingly unattractive proposition for investment”

Rod Sims, Chairman, ACCC

Agriculture

"At the national level, the average farm cash income for dairy farmers is projected to decrease from $160,900 per farm in 2017–18 to $93,000 in 2018–19."

ABARES Commodity Report, March Quarter 2019

Lending

"In all the years of being involved in the home loan business, I have never seen such difficult borrowing conditions"

Mark Bouris, Chairman, Yellow Brick Road Ltd

Data Centres

"I think we're going to see incremental multinational growth into that [data centre] market"

Andrew Power, CFO, Digital Realty
 

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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.