CEO INSIGHTS – Week Ending 25 May 2018 By NAOS Asset Management

The Internet of Things, Big Data and Artificial Intelligence will disrupt and transform virtually every industry and area of the economy over the next decade. In just the past six months, cloud service providers have increased their capital investments significantly” Gary Dickerson, CEO, Applied Materials

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.

IT

“From a macro perspective, the IT market remains robust. Asia-Pacific grew 9% in constant currency, with strong growth in China, Australia, and Singapore” Timothy Stonesifer, CFO, HP

Travel & Tourism

“Passenger numbers have strengthened at Sydney Airport, increasing 2.6% in the month of April over the prior corresponding period” Sydney Airport Market Announcement

Wine

“I think they [Chinese customs] are just being a bit more particular about things like documentation, that type of stuff… We find ourselves having to redo some paperwork and redo some documentation but we haven’t had any stock turned away. We are still in growth in China. It isn’t to do with sales, but it’s just getting documentation right” Jeff McWilliam, CEO, McWilliams Wines

“We are hearing from our importers there is a slow down at the Chinese ports. I don’t think its political, more just stuffing around with red tape, and its affecting us in getting our wine into warehouses and to our importers. I was first told about it a few weeks ago. We are hopeful it just goes away, but speaking to my importers the problem seems to be there and it is affecting more than just us” Darren De Bortoli, CEO, Bortoli Wines

US Economy

“For our business, raw material costs across the board are all up double digits” Matthew Marsh, CFO, James Hardie

“We’re seeing an acceleration on the rate of inflation across a number of ingredient and packaging items. For example, we expect double-digit increases on steel and aluminium. A lot of that is driven by the impact of anticipated tariffs” Anthony DiSilvestro, CFO, Campbell Soup Company

“We expect that solid macroeconomic fundamentals, such as strong employment and income gains, will sustain home improvement market expansion and that the home improvement industry is poised to grow its share of overall consumer spending” Robert Niblock, CEO, Lowe’s

“[Vehicle] miles driven are up slightly on a year-to-date basis” Thomas Greco, President and CEO, Advance Auto Parts

Consumer Discretionary

“Our global performance was stronger than we anticipated, as it also benefited from demand that we attribute to Chinese and other foreign tourists, in all regions except Europe, which we believe was more currency related” Alessandro Bogliolo, CEO, Tiffany & Co

Bricks & Mortar Retail

“We are convinced that the ability to touch and feel the merchandise, and the inspiration that our shopping experience elicits leads to instant gratification, all important factors for shoppers” Ernie Herrman, CEO, TJX

Commodities

“More smelting capacity is coming on stream in China, Asia and the Middle East which will increase demand for alumina. I expect that the Chinese winter cuts to production will once again be put into effect in late 2018, which should support the alumina price” Mike Ferraro, CEO, Alumina

Electricity

“As consumers take a more active role in the way they source and use electricity, I can see a future where network costs actually comprise a larger proportion of a lower overall bundled total electricity cost for customers” Rick Francis, MD and CEO, Spark Infrastructure

Smartphones

“Smartphone sales have been below expectations, particularly for high-end models” Gary Dickerson, CEO, Applied Materials

Global Equipment Demand

“The economic environment for the construction, forestry and road building industries looks good and it continues to support increased demand for new and used equipment” Max Guinn, President, Worldwide Construction & Forestry, John Deere

“While global trade concerns weigh on farmers, overall sentiment is holding as commodity prices move upward and equipment demand shows broad-based improvement” Brent Norwood, IR, John Deere

China

“The Chinese authorities have managed the task of keeping the economy on a reasonable growth trajectory for quite a few years. I'm optimistic they will continue to do that” Phillip Lowe, Governor, RBA

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.