CEO INSIGHTS – Week Ending 22 July 2022 By NAOS Asset Management

Biosecurity

“Whenever people ask me what the greatest risk to the business is, I always say biosecurity…We are an exporting nation and rely on the confidence of our customers, so it’s an important way of thinking around food business in Australia” Barry Irvin, Executive Chairman, Bega Cheese Ltd

Infant Formula & Childcare

“As a result [of the US infant formula crisis], we envisage the USA will become a lead export market opportunity on par with China in the future” Kristy Carr, CEO, Bubs Australia Ltd

“Team member shortages remain the sector’s greatest challenge, exacerbated in CY 2022 by higher levels of sick leave” Market Statement, G8 Education Ltd

Streaming, Gaming & Entertainment

“Digitised entertainment and media [such as streaming & gaming] has entwined itself in our daily lives, and people are consuming content across more devices, at all times of the day, in all types of places” Dan Robins, Entertainment & Media Director, PwC Australia

“Looking forward, streaming is working everywhere. Everyone is pouring in. It's definitely the end of linear TV over the next 5, 10 years” Reed Hastings, Co-CEO, Netflix Inc

“So, as we look at our segments moving forward, I think what we feel fortunate as a company in is that we have very resilient segments across toys, games and entertainment. These tend to be small luxuries that consumers value pretty highly” Christian Cocks, CEO, Hasbro Inc

Social Media & Advertising

“In our studies, something like almost 40% of young people, when they’re looking for a place for lunch, they don’t go to Google Maps or [Google] Search. They go to TikTok or Instagram” Prabhakar Raghavan, Senior Vice President, Google Inc

“Most sophisticated marketers who have lived through past recessions know that if they cut back too dearly, they lose sales as the recoveries start to happen. So people are very cautious about serious cutbacks” John Wren, CEO, Omnicom Group Inc

Inflation

“We see inflation deeply entrenched in the economy…In my dialogue with CEOs operating big global businesses, they tell me that they continue to see persistent inflation in their supply chains” David Solomon, CEO, Goldman Sachs Group Inc

“I do think these inflationary pressures will be here to stay. I don't see a lot of decreases on the near-term horizon” Joseph Wolk, CFO, Johnson & Johnson Inc

Consumer Debt

“Leading indicators such as payment rates, deposit levels, utilisation, and revolving debt trends do not yet indicate signs of stress” Charlie Scharf, CEO, Wells Fargo Inc

Domestic Economy

“If we take the 2.5 per cent midpoint of the inflation target as a reasonable estimate of medium-term inflation expectations, this suggests the neutral nominal [cash] rate is at least 2.5 per cent” Philip Lowe, Governor, Reserve Bank of Australia

Defence & Military

“The value of deterrence has never been greater really than at this point now. And that shift happened over literally 3 or 4 months” James Taiclet, CEO, Lockheed Martin Inc

Resources

“Broader market volatility continues, and we expect the lag effect of inflationary pressures to continue through the 2023 financial year, along with labour market tightness and supply chain constraints” Mike Henry, CEO, BHP Group Ltd

“With [job] vacancy levels also at record highs and not showing any signs of easing, we do not expect the industry’s existing labour force to offer any real relief to this forecasted future demand. Demand for skilled labour will far outstrip supply” Steve Knott, CEO, Australian Resources & Energy Employer Association [AREEA]

Oil Markets

“On one hand, the demand outlook for the next 12 to 18 months is deteriorating...On the other hand, due to years of underinvestment globally and the potential need to replace Russian barrels, broader supply constraints can realistically keep commodity prices at elevated levels, even in a scenario of moderate demand disruption” Lorenzo Simonelli, CEO, Baker Hughes Co [global major oil field services companies]

Lithium & Batteries

“After sharp price increases in the previous quarters, lithium carbonate prices stabilised in the second quarter [of 2022], as supply starts to keep pace with demand” Market Statement, Rio Tinto Ltd

“I can’t think of a technology that is more important than lithium-ion batteries right now…The world cannot build battery cells fast enough” Robyn Denholm, Chairman, Technology Council of Australia / Tesla Inc.

Industrial Property

“We have not seen real rental growth for years and years, but in the last 18 months there has been very strong rental growth because of very high occupancy rates” Phil Pearce, CEO, ESR Australia [third largest listed real estate investment manager globally]