NAOS CEO Insights

CEO INSIGHTS – Week Ending 20 March 2020 By NAOS Asset Management

March 20, 2020

“We view the impact of the coronavirus as a transitory event and fully expect consumer spending globally to come back once this event has passed” Sachin Mehra, CEO, MasterCard Inc

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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Chinese Supply & Manufacturing

“With regard to China, after a delay to surgeries during February, a small but growing number of surgeries have recommenced over the past few weeks, although they remain well below the previous run rates. Cochlear’s Chinese suppliers have resumed production of components” Dig Howitt, CEO, Cochlear Ltd

“The indicators in our China portfolio have been climbing up since then [mid-February]. One of our China assets has fully recovered back to pre-coronavirus levels and others are still building back to where they were before the crisis started” David Layton, Co-CEO, Partners Group Holding AG [US$100bn global private equity firm]

Global Logistics

“But today, the way we're [now] seeing the shipping lanes clearing up, we're getting products into our factories” Joe Almeida, CEO, Baxter International Inc [global healthcare company]

“We had trouble getting logistic companies to pick up shipments and the ports were slow for a while, but now it is returning to normal levels. We are encouraged by what we've seen in recent weeks in China” Patrick Miller, CEO, Commercial Vehicle Group Inc [global parts provider for heavy duty vehicles]

Global Construction

“As a reminder, demand for our construction equipment products is driven by the level of large-scale infrastructure development projects such as highways, dams, hospitals, airports and industrial development as well as mining, forestry and commodities industries around the world. We estimate the construction market we serve in North America, Asia and Europe may decline 10% to 15%” Patrick Miller, CEO, Commercial Vehicle Group Inc [global parts provider for heavy duty vehicles]

“While we have not yet seen a significant deterioration in demand for our products as a result of direct and indirect COVID-19 impacts, other than in our USG Boral China business, we are now starting to see signs of impacts in our other markets. We expect market conditions will worsen” Mike Kane, CEO, Boral Ltd

Foreign Exchange

“Volatility related to market uncertainty from COVID-19 has stimulated [foreign exchange] trading activity across both the Consumer and Corporate segments. This has resulted in strong turnover and transaction volumes in February and March to date” Market Announcement, OFX Group Ltd

Financial Markets

“In a normally functioning market we're comfortable lending our shares as we genuinely believe it adds to market efficiency. However, we are now in a market gripped by panic, we believe that restricting the ability to short sell is in the best interests of promoting a more orderly market” John Pearce, CIO, UniSuper

Travel & Accommodation

“Hilton has been around 100 years. We’ve never closed a hotel that wasn’t going to be demolished or rebuilding. The bulk of our hotels in the major cities are closing as we speak” Chris Nassetta, CEO, Hilton Hotels & Resorts


“We are now seeing a growing number of health authorities either recommend or enforce surgery deferrals” Dig Howitt, CEO, Cochlear Ltd


“Let's be clear. Nobody knows at this point the severity and duration of corona. Nobody can reliably quantify the knock-on effects” Frank Witter, CFO, Volkswagen AG

“The automotive industry is transforming at a very rapid pace, for example, within the areas of mobility services and digitalization. Therefore, we are continuously looking into options to strengthen our core business” Frank Witter, CFO, Volkswagen AG

Telecommunications & Technology

“We are seeing significant traffic increases across the network and are working with various video-conferencing organisations and their clients to make the user experience even better. It is expected this trend will only intensify over the coming months and even years as organisations see the benefits of being in the cloud” Bevan Slattery, Chairman, Megaport Ltd

“There's going to be really a fundamental structural change [for the workplace] in how we transcend some of these geographic boundaries” Satya Nadella, CEO, Microsoft Corp

Domestic Infrastructure

“I won’t sugar coat it, tier one contractors in Australia are not making any money, and governments across Australia keep having successive project cost blowouts. We are in the midst of Australia’s biggest infrastructure boom, but as an industry, we are teetering on the brink of collapse” Joe Barr, CEO, John Holland Pty Ltd

“While they have projects worth hundreds of billions in planning along the east coast, it is unclear if there will be an industry left to build them” Joe Barr, CEO, John Holland Pty Ltd

Printing Industry

“Shrinking volume and margins of traditional print threatens the survival of many printer [companies] that [have] got to become more efficient, more flexible, faster and leaner” Jim Continenza, Executive Chairman, Eastman Kodak 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.
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