CEO INSIGHTS – Week Ending 10 August 2018 By NAOS Asset Management

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"Overall we remain very optimistic about the long-term prospects of Australia. We are seeing GDP growth above trend. We have seen a continuing fall in unemployment. Inflation remains low. You look to the long-term prospects and of course there have been some big shifts in the economy over recent years, but we are seeing investments in infrastructure, we see good potential from population growth, and of course some of our Asian neighbours which will continue to drive a good focus on growth in the local Australian economy." Matt Comyn, CEO, Commonwealth Bank of Australia

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.

Australian Economy

"At the end of the day, NBN is a new technology the industry needs to get behind because it is going to make a significant difference in the ability for Australians to get connected to the internet." Allen Lew, CEO, Optus

Housing Finance

“The indication there is really that we are starting to see first-time home buyers come back into the market. In particular, they tend to be that target audience for the greater than 90 per cent LVR space, and that's kind of our core product that we offer.” Georgette Nicholas, CEO, Genworth Australia

Engineering

“There's no cause to be panicking at this stage and talking dramatic skills shortages, but the trends are upwards… We are seeing far more sustainable growth [than during the resources boom], the more we move away from the boom-bust cycle the better” Brent Jackson, EGM, Engineers Australia

Banking

"Business conditions are stable and the credit environment benign, however we will continue to monitor the impact of the drought." Michael Cameron, CEO, Suncorp

Mortgage Broking

"The current structure is not broken. The removal of trail [commissions] will simply hand more power to the major banks and non-major lenders and consumers will pay the price." David Bailey, CEO, Australian Finance Group

Energy Prices

“In this environment, we recognise that many Australian households are facing cost-of-living pressures because of the higher energy bills that have resulted from higher market prices. For that reason, we are investing to create new supply in the market.” Andy Vesey, CEO, AGL

Renewables

“The new target being set will see [the power sector] contribute about one-twentieth of the emissions reduction required to meet our Paris commitments. It’s a sector that can do so much more." Steven Oswald, Country Executive, GE Renewable Energy Australia & NZ

Supermarkets

“Certainly, one of the reasons why we extended the free plastic bags was because customers were taking some time to adjust to that and there was no doubt there was an impact [to sales]." Anthony Gianotti, CFO, Wesfarmers

Beer

“Every consumer today drinks on average one bottle of beer less a week than they did 20 years ago. If this is not a wake-up call that we have to do something, I don’t know what is.” Ronald den Elzen, US CEO, Heineken

“There are lots of trends out there that people feel beer doesn’t belong in.” Carlos Brito, CEO, AB InBev

Fleet Management

“Grays Online auction activity is being affected both by a ten-year low in bank-initiated insolvencies in Australia and the current buoyant construction sector where large plant and equipment is being deployed for longer periods in infrastructure projects, resulting in reduced auctioned equipment disposals.” Eclipx Group Ltd Market Announcement

US Economy

“We are encouraged by the strength of the U.S. economy, including low unemployment and healthy housing demand.” James Peters, CFO, Whirlpool Inc.

“There is general inflation that comes with a strong economy and a pressure on input cost, and you see it coming across oil. You see it coming across packaging materials, and you see it coming across cotton. This is natural inflation, and so it will touch all products.” Gerald Evan, CEO, Hanesbrands

“In terms of strength, I mean, it's boom times out there. So go anywhere you want, look -- count the construction cranes, try to hire. Some of the local labor markets trying to get a hold. Anyone of those measures that you wanted to look at, the conditions are about running as hot as I could remember in a long, long time.” Thomas Gayner, CEO, Markel Corporation

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.

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