NAOS CEO Insights

CEO INSIGHTS – Week Ending 18 May 2018 By NAOS Asset Management

May 18, 2018

Under construction

“There have been significant delays experienced by customers receiving confirmation of bank approvals, as a consequence of the recent Banking Royal Commission, resulting in commencement of construction being delayed” Tamawood Market Announcement

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.

Housing

“While they [homeowners] can service [their] mortgages, it has consumed a larger share of their income for longer than they might have intended” Guy Debelle, Deputy Governor, RBA

“I don’t think we have a cohort of homeowners hanging on to their properties by their fingertips. There’s not a lot of evidence from default rates or delinquency rates” Guy Debelle, Deputy Governor, RBA

Fitness

“There’s never been as many health clubs as there are now” Bill Moore, CEO, Fitness Australia

Advertising Revenue

“While print advertising remains challenging, we saw an overall improvement in advertising trends in the third quarter” Robert Thomson, CEO, News Corp

Banking

“Volume growth this period has been reasonable, with solid growth in home lending and SME lending, partly offset by a reduction in Corporate and Institutional” Gary Lennon, CFO, NAB

“Lending margins are flat, with repricing benefits offset by increased competition and mix changes in home lending” Gary Lennon, CFO, NAB

Media

“In the third quarter, we again saw strong results across the Company, with revenue growth in every Segment” Robert Thomson, CEO, News Corp

Retail

“As reported by a number of other retailers, the unseasonably warm start to winter has impacted sales, particularly in winter apparel, shoes, and accessories, which may impact profit in the fourth quarter” Myer Market Announcement

“It is encouraging to see the continued improvement in bricks and mortar” Jeffrey Gennette, CEO, Macy’s

“This is the most competitive retail environment I've ever seen” Jeffrey Gennette, CEO, Macy’s

Craft Beer

“Beer consumption itself is relatively flat in most marketplaces around the world. But the craft side continues to grow. We saw in 2017 it grew at 5%. It appears to be pretty consistent as we're going through 2018” Mark Palmquist, MD and CEO, Graincorp

Energy Drinks

“According to IRI in Australia, Monster's market share in value grew from 7.1% to 9.1% in March 2018, compared to the same period last year” Rodney Cyril Sacks, CEO, Monster Beverage

Agriculture

“Broadacre turnover was down in the North and West, in particular, corresponding to a decline in cattle prices and seasonal conditions not conducive to sales, which has led to a lack of inventory in the market” Mark Allison, CEO and MD, Elders

“Carryouts [volume of grain supply over demand] are not only tight but a lot of the carryout is sitting on nonfarm storage” Mark Palmquist, MD and CEO, Graincorp

Beef

“International demand for U.S. Beef remained strong. Our Beef exports were up 22% versus the same quarter last year, and despite all the conversation about trade and tariffs, we haven't seen a significant impact on our Beef business” Thomas Hayes, CEO, Tyson

US Economy

“Over the past few weeks as spring has finally arrived through the U.S. and Canada, we are seeing strong customer demand [for home improvement products]” Craig Menear, Chairman, CEO and President, Home Depot

“As we look ahead, positive trends in employment and wages, and continued strength in the housing market are expected to drive ongoing residential growth. Residential building permit activity remains high, especially in the single-family category” Steven Young, Executive VP and CFO, Duke Energy

Thank you for reading.

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.

NAOS Insights CEO Insights

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