CEO INSIGHTS – Week Ending 14 June 2019 By NAOS Asset Management
June 14, 2019
"With [low] interest rates and tax cuts, we're very optimistic customers will continue to do things that make their homes and businesses better."
Michael Schneider, Managing Director, Bunnings
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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"In Australia, the economics really didn't make sense for some farmers and milk has further declined because of the economic and weather-related issues. So we're seeing a huge drop beyond the seasonality in terms of milk production out of Australia." Lino Saputo, CEO, Saputo [Global Diary Processor]
"Adverse conditions which started in 2018 seemed to become the new normal. These global scale headwinds include persistently competitive conditions, volatile markets, as well as elevated costs such as those related to our warehousing and logistics." Lino Saputo, CEO, Saputo [Global Diary Processor]
“The rising cost of living is a real problem for people too. Higher electricity bills, petrol costs, you name it, it has families feeling the pinch.” Sally Tindall, Director of Research, Rate City.com [ Financial Comparison Website]
"The performance of the classifieds business in Australia has proven resilient in the current economic environment." Market Announcement, Carsales
“As major cities grow, the heavy reliance on private car ownership will not be sustainable." Eric Allison, Global Head, Uber Elevate [aerial ride sharing]
“There was a bit of a perfect storm of challenges, with pre-federal election jitters, the fact Easter was in April and then the whole general political carry on overseas with Brexit and Trump and exchange rates. We think it [softness in travel demand] will be fairly one-off.” Jayson Westbury, CEO, Australian Federation of Travel Agents
Food & Beverage
"We compete in a great industry. We believe there’s a compelling opportunity. It's multicategory, $1.5 trillion base. It has been outpacing the growth in other consumer product categories over the last 3 years which we expect to continue." John Murphy, CFO, The CocaCola Company
"While the percentage growth on health and wellbeing is very high percentage wise, the amount of dollars that indulgent categories or more indulgent categories throw out year in year out is quite remarkable...There is nothing wrong with being in chocolate or being in categories that are more indulgent and those are growing very nicely around the world again." Luca Zaramella, CFO, Mondelez [An American Multinational Confectionery, Food, and Beverage Company]
"This is a $US15 trillion market that we're going after - the movement of people, food and freights. And I think that if we invested with any less aggressive of a profile we'd be cheating our shareholders." Dara Khosrowshahi, CEO, Uber
Advertising & Media
"The year on year declines in the Agency market experienced in the second half of 2018 have continued into the first half of 2019, impacting digital revenues, however the market is now showing early signs of an improving trend compared to the same period last year." Michael Boggs, CEO, NZME [New Zealand Media and Entertainment]
Domestic & Global Retail
"These [promotional] pricing levels, along with cautious consumer sentiment, are placing pressure on many industry participants." Market Announcement, Kmart Group
"With [low] interest rates and tax cuts, we're very optimistic customers will continue to do things that make their homes and businesses better." Michael Schneider, Managing Director, Bunnings
"It is a very dynamic market they [Coles] operate in and I think all retailers have to keep innovating and challenging themselves and reviewing cost structures." Rob Scott, CEO, Wesfarmers
"While Asia is experiencing weaker trends, we believe this softening to be market driven, and not brand specific and we still see very good long-term potential in the region." Carlos Alberini, CEO, Guess Inc
Finance & Markets
“The risk of mortgage prison, where households are stuck in their existing arrangements despite lower rate alternatives being on offer, will become more common.” Sally Tindall, Director of Research, Rate City.com [Financial Comparison Website]
"[The plan is to create] the NASDAQ of the Pacific." Dominic Stevens, CEO, ASX Ltd
"In Australia it is difficult to find local partners who can take on the risks associated with a contract of $6 billion to $10 billion." Enrique Blanco, Australian MD, Ferrovial [Global Infrastructure 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.