CEO INSIGHTS – Week Ending 21 Apr 2017 BY NAOS Asset Management

“Everyone's looking at Telstra's share price but I think the real story is how this [TPG's entry into the mobile market] will affect Vodafone" Damian Kay, CEO, Inabox

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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Retail

“Amazon Web Services launched an Australian region in 2012, we launched a Kindle Store on Amazon.com.au in 2013, and we now have almost 1,000 employees in the country. The next step is to bring a retail offering to Australia, and we are making those plans now"
Amazon Market Statement

“Amazon's been in this market for some time. So, when it comes to health and beauty, what we've learned is that they haven't focused as heavily in that space; not to say that we'll underestimate their entry into the market”
Richard Vincent, CEO, Australian Pharmaceuticals

“Like most other retail sectors, we've seen ongoing subdued spending since the Christmas trading period. In our case, the effect of this was the softening of our comparable store sales growth rate to 0.4%"
Richard Vincent, CEO, Australian Pharmaceuticals

“A large portion of the recent sales uplift relates to customers buying selected products in our stores for resale to consumers in Asian markets”
Shaver Shop Market Announcement

“International retail sales were down primarily due to softer than expected sales within Asia Pacific. We expect some continued challenges in Asia Pacific, but we anticipate the region will return to growth in the second half of the year”
Matthew Levatich, CEO, Harley-Davidson

Oil

“Between 2014 and this year, about a trillion dollars in oil and gas investments were deferred or cancelled: 800 billion in development and 200 billion in exploration. That equates to between 5 and 10 million barrels per day of oil supply which otherwise would have materialized. Another troubling factor in the equation involves exploration. The volume of conventional oil discovered around the world over the past four years has more than halved compared with the previous four-year period”
Amin Nasser, CEO, Saudi Aramco

“While the short-term market points to a surplus of oil, the supplies required in coming years are falling behind substantially”
Amin Nasser, CEO, Saudi Aramco

Housing

“Three decades ago an average first-home buyer needed an average deposit of about twice their annual income, but in Sydney or Melbourne they may now need almost five times their pay”
George Frazis, Consumer Bank CEO, Westpac

Commodities

“China's crude steel production grew over 6% for the first two months of the year and iron ore imports increased over 12% in January and February, compared with the same period last year”
David Liu, Director of Sales & Marketing, Fortescue

“Despite challenging weather conditions at our West Australian and Queensland operations, we delivered solid production in the first quarter of 2017”
Rio Tinto Market Announcement

Food & Beverage

“Consumers used to love and trust the big [food] brands – now they have big doubts, big questions”
Jean-Yves Heude, Former CEO, Kellogg’s Australia

“Some [craft beer] breweries open and go nuts. Others struggle. There is still room for more to enter”
Chris McNamara, CEO, Craft Beer Industry Association

Global Economy

“We continue to be positive about growth in general and the U.S. economy”
Mike Corbat, CEO, Citigroup

“The US economy continues to show consumer and business optimism, and our results reflect that”
Brian Moynihan, CEO, Bank of America

“Financial stability risks in China remain elevated. The level of debt in China has risen significantly ... Growth in the large stock of corporate debt remains rapid”
Reserve Bank of Australia

“Worker shortages and increased labour costs were restraining growth in some sectors, including manufacturing, transportation and construction”
Federal Reserve

Banking & Financial Markets

“Institutional Equities and Equity Capital Markets had a more challenging year with overall revenues down by 16%"
Bell Financial Group Market Announcement

“I think the other thing going in our favor here that I'm beginning to see, is there's an extraordinary stretch in valuation between U.S. equities now and European equities, which is a message that we're giving to our clients and is being well received”
Philip Wagstaff, Global Head of Distribution, Henderson group

“Mobile devices now account for one out of every five deposit transactions and represent the volume of nearly 1,000 financial centres”
Paul Donofrio, CFO, Bank of America

“Deposit balances remained strong and customers opened more checking accounts than they closed”
Timothy Sloan, CEO, Wells Fargo

“Our average deposit cost increased 7 basis points from a year ago and 5 basis points from the fourth quarter. We've not made any material changes in rates paid on consumer and small business banking deposits, and we've seen very little market response with the majority of our peers holding rates steady”
John Shrewsberry, CFO, Wells Fargo

“Overall, the credit environment remains benign”
Marianne Lake, CFO, JPMorgan

“We reported one of our strongest quarters in recent years. All our businesses performed well in improved market conditions”
Jonathan Pruzan, CFO, Morgan Stanley

Logistics & Rail

“Overall, our businesses delivered a solid performance in the third quarter despite ongoing macroeconomic uncertainty, softer FMCG demand in Southern Europe and the USA, and robust competition in most markets”
Brambles Market Announcement

“We turned a corner in March and are now seeing positive volumes, which makes us cautiously optimistic that the demand environment is improving”
Keith Creel, CEO, Canadian Pacific

Telecommunications

“Everyone's looking at Telstra's share price but I think the real story is how this [TPG's entry into the mobile market] will affect Vodafone"
Damian Kay, CEO, Inabox

“Increasingly, customers are choosing alternatives to the old copper-based [Public Switched Telephone Network] as their use of digital voice applications increase. Already, around 50% of New Zealand homes and businesses are using other technologies like Voice over Fibre, Voice over Wireless, using their mobile for voice communications or relying on messaging applications”
Spark Market Announcement

Airlines

“International passenger growth in the first quarter of 2017 has remained strong at 5.7%. In addition to the full year impact of services that commenced last year, over 620,000 annualised new international seats have already been announced in 2017. The additional services have been focused on Asia, with new and increased capacity to China, Vietnam, Korea, Indonesia and Hong Kong”
Sydney Airport Market Announcement

“The recent actions taken by the US government relating to the issuance of entry visas, heightened security vetting, and restrictions on electronic devices in aircraft cabins, have had a direct impact on consumer interest and demand for air travel into the US”
Emirates Announcement

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