CEO INSIGHTS – Week Ending 1 November 2019 By NAOS Asset Management

Environment

“Going to China regularly, the one thing you see every year is a continued focus on the environment. That is not going away and it is becoming more of a focus in how they run their business.'' Graham Kerr, CEO, South32

Payments

“The trends in the BNPL [buy now pay later] space continue unabated as consumers continue to seek alternatives to traditional forms of credit.” Market Announcement, Sezzle Inc

Steel

“The fundamental and interrelated causes of the [scrap steel price] crash remain the same as those we discussed in September. Automobile sales are down, global manufacturing is down, China’s growth and world growth are slowing, and unresolved trade wars remain. These factors have combined to cause a significant drop in the demand for steel and [scrap metal] zorba-related products.” Alistair Field, CEO, Sims Metals

Waste Management

“Due to a combination of lower economic activity, softness in commodity prices versus the first half of FY19 and a reduction in local Queensland volumes following the introduction of the landfill levy, we expect earnings in the first half of FY20 to be in line with the first half of FY19.” Vik Bansal, CEO, Cleanaway Waste Management Ltd

Domestic Economy

“In Australia, a slower property market and weaker currency are impacting demand, and we continue to expect market volumes there to be slightly negative.” Jonas Samuelson, CEO, AB Electrolux

Energy

“Australia has been down as well. We see some pressure on the residential market in Australia.” Emmanuel Babeau, Deputy CEO, Schneider Electric S.E. [global specialist in energy management]

Insurance

“In Canada, [insurance premium] pricing is up around 8% with property increases more than 10% and finally in Australia, New Zealand pricing is up around 5% to 6% about a point lower than what we had been seeing over the previous two years, but still a substantial increase.” J. Patrick Gallagher Jr, CEO, Arthur J Gallagher [global insurance broker]

“Nearly every organization, industry and economy are confronting greater challenges than ever before. And most of these risks are underserved, if addressed at all, because they’re not well understood with less historical experience and use of available data to predict, measure or manage these challenges.” Greg Case, CEO, AON Insurance Group

Tire & Auto

“In 2019, the global automotive market is expected to decline by around 4% compared to last year versus 3% as previously anticipated.” Deputy Managing Director, Renault

“As we anticipated, the operating environment of the global tire industry improved during the quarter. The decreases in consumer OE [original equipment] demand that have weighed on the industry in recent quarters have stabilized albeit at lower levels. Consumer replacement demand was stronger in most major markets. And for the first time in three years our price versus raw materials equation turned positive, representing an inflection point in the industry cycle.” Richard Kramer, CEO, The Goodyear Tire & Rubber Company

“So I think the last quarter [for commercial vehicles] was pretty bad as you can see. And in fact the total industry volume in September was the lowest in a September over past 10 years.” Girish Wagh, President, Tata Motors

Global Economy

“Regarding business conditions across the globe, the U.S. consumer and retail environment remains relatively strong. Unemployment is low and we expect a healthy fall holiday season. In contrast, the industrial and manufacturing sectors have weakened somewhat over the past few months, resulting in more tempered growth expectations across the more cyclical parts of our work portfolio.” Steve Rendel, CEO, V.F. Corp [global apparel & footwear conglomerate]

 “The U.K. remains weak, but growth has now improved for two quarters after hitting a low in March.” Vasant Prabhu, CFO, Visa Inc

“Brexit uncertainty and weaker construction activity continue to be headwinds in the UK.” Heath Sharp, CEO, Reliance Worldwide

Horticulture

“In addition, the prolonged and extreme dry and hot conditions across many of our operations are manifesting in actual and projected deterioration in fruit sizing and yield in citrus, avocados and blueberries, exacerbating price declines.” Harry Debney, CEO, Costa Group Ltd

Food & Dairy

“While our branded consumer food business is continuing to grow we are seeing softening in demand for products destined for certain export markets which will adversely impact earnings in FY2020.” Paul van Heerwaarden, CEO, Bega Cheese Ltd

Domestic Retail

“The difficult trading conditions of the latter months of 2019 financial year have persisted into the 2020 year. Store traffic is down compared to the same period last year, and same store sales are down around 8%.” Anthony Scali, CEO, Nick Scali

“We are seeing men becoming more like women in terms of their daily health and beauty regimes. This has been true overseas for some time now, and Australia is simply following the trends that have existed in markets like the US, UK and Europe over the last 5-10 years.” Cameron Fox, CEO, Shaver Shop

Telecommunications

“For the long-term health of the [telecommunications] industry, infrastructure competition [against the NBN] has to be encouraged, rather than penalised.” Kevin Russell, CEO, Vocus Group Ltd