NAOS CEO Insights

CEO INSIGHTS – Week Ending 16 August 2019 By NAOS Asset Management

August 16, 2019
"So many manufacturers are moving out of China at breakneck speed. You don't see it in the China-reported GDP growth numbers yet. I suspect that sooner or later it will be visible” Magnus Nicolin, CEO, Ansell Ltd

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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Trade Wars

"We put through a price increase in January to account for the first [US] tariff, and prices increased again recently to cover the increase in tariff" Jim Clayton, CEO, Breville Group Ltd

"Thermal coal markets and prices have softened due to a number of factors – low seaborne LNG prices, Chinese import restrictions and the negative impact on global GDP from trade tensions between the United States and China." Whitehaven Coal ASX Announcement


"Our Australian Ingredients business is adapting to the new norm of continued drought, reduced domestic milk supply and aggressive competition in the Australian dairy industry." Miles Hurrell, CEO, Fonterra Co-Op Group

“Packaging volumes were down on the pcp [previous corresponding period], impacted by weak agricultural demand due to drought conditions in Australia and generally subdued demand in the dairy, food and beverage sectors in Australia and New Zealand.” Sanjay Dayal, CEO, Pact Group Ltd

Labour Market

"The strength in coal prices combined with a number of large infrastructure projects has increased the competition for skilled labour resources. This has had some impact on the ability to fill roles in a timely manner which has had some impact on operating productivity during FY2019." Whitehaven Coal ASX Announcement

Domestic Economy

“The economy is still growing… we have very low levels of unemployment, wage growth has been a little bit stubborn and hasn’t really been there, but this is not the end the world - we are just going to go through a bit of a reset. The outlook is reasonably positive for housing. I don’t think it’s back to the races like we’ve had for the last five or seven years but, you know, steady conservative growth.” Shayne Elliott, CEO, ANZ Bank Ltd

"It is reasonable to expect the Australian economy to return to around its trend growth rate next year" Dr Phillip Lowe, Governor, Reserve Bank of Australia

“Without a doubt, the consumer is fickle, and the environment is volatile.” Anthony Hegarty, CEO, Super Retail Group Ltd

“There is no doubt we saw a drop in economic activity in the second half of last year. But we have seen some pickup from June into July & August.” Vik Bansal, CEO, Cleanaway Waste Management Ltd

Domestic Housing

“The Developer market reflected significant weakness in NSW and Victoria. Financing constraints and other regulatory issues have shifted market demand from investors to owner-occupiers, and from large high-rise developments to smaller boutique projects which require a lower level of marketing support." Jason Pellegrino, CEO, Domain Holdings Australia


“International passengers grew 1.9%, with strong passenger flows from the US, India, Vietnam and Japan. There were continued domestic headwinds with a decline in passengers attributable to capacity reductions and subdued demand.” Geoff Culbert, CEO, Sydney Airports Ltd

Chinese Economy

"Challenging trading conditions in our channels to China are expected to continue during the first-half of FY20. The impact of changes to China’s e-commerce laws ... are expected to result in profit for the first-half being below the prior corresponding period." Blackmores ASX Announcement

Global Economy

"While consumer spending remains healthy, there is significant noise in the macroeconomy, tariffs, currency fluctuations, declining international tourism to name a few" Jeff Gennette, CEO, Macy’s Inc [department store conglomerate]

Technology, Media & Telecommunications

"Cybersecurity continues to be the top priority for our customers" Chuck Robbins, CEO, Cisco Systems Inc

"We continue to see pressure on deal sizes, longer sales cycles and deferral of transactions." George Kurian, CEO, NetApp Inc [Fortune 500 global software company]

"So, our assumption is that the macro environment will remain difficult for the rest of the year, and that the situation of the heavy supply of advertising inventory [advertising space to sell] will continue for the rest of the year, and potentially into next year." James Mitchell, Executive Vice President, Tencent Holding Ltd [Chinese based global technology, search & social media conglomerate]

Commodities Markets

“FY19 was a very challenging year, with earnings impacted by higher raw material and energy costs and weaker demand conditions in some sectors. Pleasingly pricing improved in the second half, and resin costs reduced." Sanjay Dayal CEO Pact Group

"Raw material prices, in particular, carbon prices remained high from the previous year." Naoki Hishinuma, CFO, Bridgestone Corporation

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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