CEO INSIGHTS – Week Ending Friday 20/01/17 BY NAOS Asset Management

“We like the momentum that we’ve got going into 2017” John Gerspach, CFO, Citigroup

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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Food & Beverage

“The infant milk formula market will continue to be overshadowed by the regulatory environment due to the newly released IMF (infant milk formula) recipes registration rules”

Luo Fei, CEO, Biostime

“It's hard to see growth in national beer volume for the industry”

Tim Cooper, MD, Coopers Brewery

Retail

“In general across the board nearly every single category saw great performance - consumer electronics as well as categories outside of that, from kitchen wear to manchester to powertools; sporting equipment and many of the categories where we have private label offerings and have finally been able to spread our wings”

Ruslan Kogan, Founder, Kogan

“In terms of a standout compared to previous years it was drones, because it’s something that’s become a hot item in demand recently. But our business did very well across the range”

Ruslan Kogan, Founder, Kogan

“Lower foot traffic and sales in the Oroton Factory Outlet stores due to increased presence of International brands and their more aggressive promotions”

Oroton Market Update

"Sales in the GAP stores in the lead up to Christmas continued to be softer than last year due to very aggressive discounting across the apparel market which had been impacted by the colder start to Spring and by a women’s range that did not perform well”

Oroton Market Update

“These overall holiday-period sales results were somewhat lower than we had anticipated”

Frederic Cumenal, CEO, Tiffany & Co

“A highly promotional competitive environment had a negative impact on our fourth-quarter margins”

Brian Cornell, CEO, Target (USA)

Banking Technology

“The traditional boundaries of what industry I’m in are fading away. I’m always telling my team that if you aren’t eating someone else’s lunch, you are doing it wrong. We are technology companies with a balance sheet”

Ashok Vaswani, Head of Barclays UK, Barclays

“For the time being, the likes of Facebook and Google are on the fringes of banking because they don’t want to be regulated. But sooner or later they will jump into our arena. They will try to take some parts of the value chain. That is the real challenge”

Francisco Gonzalez, Chairman, BBVA

“What will the banking system look like in five years time? There will be fewer players. Consolidation will be done by those who have mastered technology. If you don’t master technology you won’t survive”

Francisco Gonzalez, Chairman, BBVA

General Banking

“We feel as front-footed about our franchise as we ever have. I’d say there was increased optimism around the world”

Harvey Schwartz, CEO, Goldman Sachs

“We like the momentum that we’ve got going into 2017”

John Gerspach, CFO, Citigroup

“Citigroup cost of credit should be somewhat higher in 2017, driven by loan growth and seasoning”

John Gerspach, CFO, Citigroup

“The cost of providing our fixed rate home loans has increased over recent months”

Antony Cahill, COO, NAB

“It’s fair to say that the year ended a lot better than it begun. There’s more reason to be optimistic at the beginning of 2017 than 2016. The surge in consumer confidence after the U.S. election, the recent and anticipated Fed rate hikes, the strengthening U.S. economy, and potential corporate tax reform are positives for our business”

James Gorman, CEO, Morgan Stanley

Commodities

“Should spot and domestic (wholesale gas) contract prices move consistently into the $8-$10 a ­gigajoule range, alongside trend increases in other costs, the price of gas for residential customers in Australia’s five largest cities could increase by more than 50 per cent by 2020”

Report by NAB

“The main component of US oil output – tight oil – is forecast to grow”

Report by OPEC

“Whitehaven expects pricing for semi soft coking coal to be higher this quarter following the increases in the settled benchmark prices for metallurgical coal agreed in late December. Spot metallurgical coal prices in the March Quarter have weakened since the start of the year and prices for each thermal coal grade have retreated from their mid-November highs. However, Whitehaven expects prices for high quality thermal coal to remain well supported over 2017”

Whitehaven Coal Market Update

Global Economy

“Looking forward, economic sentiment is clearly becoming more positive since the U.S. election. In general, we'll benefit from pro-growth policies as will our clients”

Michael Corbat, CEO, Citigroup

“[During the second half of the year] the global economic outlook improved, reflecting solid economic reports, particularly in U.S. The prospect of diverging monetary policy and more pro-growth policies in United States drove both activity levels and asset prices higher. Ultimately, this drove improved client sentiment and a better environment”

Harvey Schwartz, CEO, Goldman Sachs

“At this point, no one actually knows what will become U.S. policy, but I believe that there are pent-up capital and investment opportunities which corporates are poised to act on given the right circumstances. This could boost GDP growth in the U.S. and beyond given the significance of our economy globally. So we enter the year with a healthy amount of optimism about the prospects of growth strengthening”

Michael Corbat, CEO, Citigroup

Other

“That [the SME sector] is actually our segment, that's where we're doing most of the work. I think, traditionally the market has been left a little bit behind, so existing players have not paid too much attention to that. Maybe corporate was well served, but not so much small businesses. Our aim is to use the NBN to provide the full connectivity suite to that segment”

Inaki Berroeta, CEO, Vodafone Australia

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