CEO INSIGHTS – Week Ending 23 June 2017 BY NAOS Asset Management

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“Amazon will have a huge effect on Woolworths and Coles. All of us in the fresh food retail business will have to be very much more focused” Cathy Harris, Chairwoman, Harris Farm Markets

As part of the NAOS investment process, we pay particular attention to the comments made by company CEO’s 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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Mining

“The mining methods of the past have changed. We’re controlling mines from office buildings instead of the mine sites…I was talking to a customer last week about autonomy and they have a goal to be fully autonomous on every mine site by 2025. And they have thousands of pieces of equipment. So, you’ve got these bold goals being placed out there. So, clearly the momentum is moving”

Denise Johnson, President,  Caterpillar

Energy

“The new baseload for us is going to be large scale renewables, firmed up by open-cycle gas and, eventually, when storage comes down, that’s what it will be. Technology is driving this — we don’t see any baseload other than renewables. You’ll hear people say, ‘no coal can compete’… But I’ve looked at the numbers and come to decisions (that) are going to direct billions of dollars of investment. I’ve looked at it pretty hard”

Andy Vesey, CEO, AGL Energy

“It is really only in the past 6-12 months that there has been some policy and...bipartisanship over the renewable energy target. As that new capacity comes online and brings more supply to the market it will put downward pressure on prices”

Kane Thornton, CEO, Clean Energy Council

“We are taking immediate action to put downward pressure on power prices and ensure reliable and secure energy for all Australians. We will be implementing our gas regulation that affects exports … as one of the factors that affects the high price of energy at the moment is a shortage of gas”

Malcolm Turnbull, Prime Minister, Australia

Tourism

“International traffic growth of 8.1% versus the prior corresponding period (pcp) is the highest May growth rate we have seen in 9 years. Domestic traffic also grew strongly at 2.7% above the pcp, contributing to overall traffic growth of 4.5%”

Kerrie Mather, MD, Sydney Airport

Manufacturing

“Australian-made is back in fashion. It has done a full cycle. People care about that crafted and bespoke item that is handmade’’

Vanessa Katsanevakis, CEO, Sussex Taps

“We are experiencing so much growth, and all the builders that we know say it is booming” 

Vanessa Katsanevakis, CEO, Sussex Taps

Domestic Economy

“In Australia, it is likely that growth over the next couple of years will be a bit stronger than it has been recently. The pick-up in the global economy is helping us” 

 Philip Lowe, Governor, RBA

“As things currently stand, it looks likely that average growth in per capita incomes over the next quarter of a century will be lower than over the past quarter of a century”

 Philip Lowe, Governor, RBA

Commercial Property

“There is a strong demand for quality developments from developers with a strong track-record in Sydney”

Iwan Sunito, Chairman, Crown

“The peak [in commercial property] is probably two to three years away”  

Darren Steinberg, CEO, Dexus

“There is strong breadth and depth of capital for Melbourne and Sydney CBD offices”

Darren Steinberg, CEO, Dexus

“Sydney is going to be the preferred global destination for investment capital for the next three to five years”

Ian Hetherington, National Head of Capital Transactions, Savills Australia

Retail

“Amazon to my knowledge haven't even bought a block of land in Australia. Let's assume I buy a block of land tomorrow. I've got to buy it, pay for it, put in a development application. If that happens within three years, that's very quick”

Gerry Harvey, Founder, Harvey Norman

“I reckon that really dialling up the newness, the uniqueness of our range, and in particular ­products that aren’t available on Amazon anyway … is the right way to defend ourselves against Amazon”

Richard Umbers, CEO, Myer 

Fresh Food

“If I was active in Australia in retail today, I’d be thinking very carefully about the potential impact of Amazon on the retail market ... and in particular the foods market”

Roger Corbett, Former Chairman, Woolworths 

Employment

“When we look at where we are in the world, it used to be jobs where natural resources were, then where the companies were, the factories or headquarters. And today, jobs are where the talent wants to live”

Paul D’Arcy, Global Senior Vice-president of Marketing, Indeed

Domestic M&A

“We see really strong signals and there is still significant offshore capital looking for opportunities. Australia is still very much seen as a stable and attractive market”

Kate Towey, Partner, Allens 

“We are seeing things taking a lot longer to come to market and that is a direct result of the planning, strategy and funding … acquirers want to get a degree of certainty before they go ahead”

Kate Towey, Partner, Allens 

Telecommunications

“Many Australians still experience the poor quality and slow speeds of legacy ADSL services”

David Shafer, Executive Director, Kogan Mobile

 

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