CEO INSIGHTS – Week Ending 16 June 2017 BY NAOS Asset Management

 “The only certain outcome is that it [A Channel Ten collapse] would result in even less media diversity than we have in Australia – already the world's most concentrated media market” Mitch Fifield, Communications Minister

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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Grocery Deflation

“It’s already an overpriced grocery market in my view and I’ve been saying that for nine years ... I still look at products here that are made overseas and they are crazy prices. We need to bring those prices down”

 John Durkan, MD, Coles

Logistics

“Courier services is a growing category and is working well with our customers – now we are thinking about what other opportunities there are to expand that” 

Mark Ward, MD, Officeworks

Agriculture

“You look at the trading environment in grains in recent years, it has been difficult so any rationalisation [between a Glencore & Bunge merger] would not be unexpected” 

Terry Enright, Chairman, Australian Export Grain Innovation Centre

“Juice suppliers have been operating on maybe an oversupply mentality for so long that they think that they think they can just pay 15-20 cents a kilo for this fruit. But the growers have had better options to send it overseas, so that's what they've done. It's just tightened up that market and dried up all the supply”

Ben Cant, Director, Citrus Australia

"On the whole, the [Citrus] industry is quite buoyant and I think we've had three straight years of breaking our export records”

Ben Cant, Director, Citrus Australia

Vitamins

“Our pricing strategy has not shifted since the start of the year. Any discounts in the market are managed by retailers as part of their planned promotional activity”

Oliver Horn, MD, Swisse Wellness

Media

“The government has consistently warned for sometime that Australian media organisations are facing challenges, are facing new competitors and they need to be unshackled from the laws and regulations that were crafted in the 1980s”

Mitch Fifield, Communications Minister

Retail

“Consumers are facing significant pressure on the family budget as low wage growth takes its toll, coupled with increased living expenses. In addition to this, consumers are increasingly becoming savvier with their spending by researching for the best deal. The globalisation of retail also continues and competition for the customer dollar is coming from increasingly diverse channels”

Paul Zahra, Former CEO, David Jones

“To not just survive but thrive in the new environment, retailers must do three things: have a seamless omni-channel presence, be a global entity and, most importantly, have a unique value proposition”

Paul Zahra, Former CEO, David Jones

“Consumers are saying, Im not secure in my job, I’m not secure in my income capacity, so therefore if I do have money I am best to put that into the bank and leave it there because there will be sales, deals, coming”

John Schroder, CEO Commercial Property, Stockland  

“There is an assumption that all retailers in Australia will go out of business when Amazon arrives. No one in the world will beat Amazon, but I'm not trying to beat Amazon, we're just trying to compete with Amazon”

Mark Ward, MD, Officeworks

“The market will not increase with the arrival of Amazon, there will be a little bit taken from everyone… There are lots of businesses in the world that compete with Amazon because they have a clear strategy, they have a clear customer set and they have a clearly differentiated proposition”

Mark Ward, MD, Officeworks

“Our analysis concludes that the market disruption [from Amazon] will not be as detrimental to Super Retail Group as implied by some market commentary and the recent share price fall”

Peter Birtles, CEO, Super Retail Group

“Overall weakness in the baby business, as well as slower growth in the toy category and very aggressive price discounting by our competitors were significant contributors to our disappointing results”

Dave Brandon, CEO, Toys R Us


“I think there's a real problem in underlying retail spending at the moment ... generally speaking there's a lack of confidence in the current political process and because of that we're seeing a lack of people spending”

Russell Zimmerman, CEO, Australian Retail Association

Energy

“The Energy Supply Outlook analysis suggests gas supply remains tight. However, the latest industry projections of gas production are just sufficient to meet current projections of gas demand… Domestic gas supply and ­demand remain finely balanced”

Audrey Zibelman, CEO, Australian Energy Market Operator

“The benefits of switching to wholesale power are really exciting. You have the option to set an optional ceiling price on your electricity rate, and, you still get access to the lows of the market. Plus, you’ll have a team of experts at hand to guide you through the process and advise you on the best solutions for your business, at that exact moment” 

Matthew van der Linden, Founder, Flow Power

 Commodities

“The differential between the quarterly benchmark [coal] price and our average realised price for the second quarter is larger than usual. After steel mills filled their requirements immediately following the Queensland cyclone, there were very few prime hard coking coal spot sales during the four week period from mid-April”

Trek Resources Company Announcement

US Equity Market

“When share prices are low, as they were in the fall of 2008 into early 2009, actual risk is usually quite muted while perception of risk is very high. By contrast, when securities prices are high, as they are today, the perception of risk is muted, but the risks to investors are quite elevated”

Seth Klarman, Founder, Baupost Group

Domestic LBO Market

“We have seen institutional funds continue to grow and support the local leverage loan market. There has been a healthy mix of domestic credit funds and international funds dedicating resources locally”

Chris Champion, Co-head of Financing, Goldman Sachs Australia

Foreign Investment

“If you were to look five years ago at our global CEO survey and ask where you as a CEO wanted to invest outside your home country, Australia was at least on that list. Today when you ask that question ... because of the internet’s accessibility, CEOs are listing 50 different countries”

Bob Moritz, Global Chairman, PwC

“If you look at some of the changes happening in other countries — to draw in investment, tourism, workers, Australia is going to have to keep pace. Your competitiveness has the risk of ­decreasing”                      

Bob Moritz, Global Chairman, PwC

 

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