CEO INSIGHTS – Week Ending 4 May 2018 By NAOS Asset Management

“The [shipping] industry, at some point down the track, will be required to address greenhouse gas emissions” Angela Gillham, CEO, Maritime Industry 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.

Domestic Economy

“There is little on the economic horizon to suggest that the overall credit environment will deteriorate” Shayne Elliott, CEO, ANZ

“The economy continues to grow, unemployment is low, as is corporate leverage. Household debt has increased further but at a slowing rate. Wage growth remains slow with some early indications of growth. So, there is a risk to household disposable incomes as more borrowers have switched on interest-only lines to P&I” Shayne Elliott, CEO, ANZ               

“My sense is that the WA economy has already turned and we are starting to see a lot of new development and growth in the economy, so the next few years are critically important for us to be able to put in place the long-term infrastructure for the state” Nev Power, Chairman, Perth Airport

“From an individual state and territory perspective, NSW and Victoria remain the strongest performers, although there has been some easing in their growth rates” Genworth Insurance Market Announcement

Retail

“It’s particularly pleasing to see positive sentiment and improving sales results across our Retail Town Centres, reflecting the success of our remixing and redevelopment activity. Over the quarter we’ve seen comparable speciality sales increase to $9,092 per square metre, up 3% since December 2017” Mark Steinert, MD, Stockland

Healthcare

“We have seen a continued period of soft hospital utilisation. We expect this to continue in the second half” Medibank Private Market Announcement

Agriculture

“Import demand for dairy softened across all regions for the month [of April]. China imports [are] down for the first time since May last year” Market Announcement by the Fonterra Share Fund

“Our view is that farmers are unlikely to receive higher farmgate [milk] prices unless they have improved bargaining power in their negotiations with processors” ACCC Statement

“Namoi Cotton estimate the 2018 Australian cotton crop will, at this stage, still produce approximately 4.6 million bales, representing a 23% increase in volumes from the 2017 season” Namoi Cotton Market Announcement

“With strong commodity prices and record low interest rates expected to continue, it appears demand for Australian farmland will remain strong” Alexandra Gartmann, MD, Rural Bank

Airlines

“Group Domestic Unit Revenue increased by 8% compared to the prior corresponding period. This reflects strong demand across key markets, including continued recovery of the resources sector and gains within the small-to-medium enterprise segment” Qantas Market Announcement

Food

“We still see, as we have said for the last couple of years, a very competitive, but rational marketplace… We did see deflation soften somewhat during the quarter, and as we called out, it was somewhat driven by fruit and veg prices… We still have material deflation in fruit and veg but, in particular, avocados and bananas have gone back into inflation” Bradford Banducci CEO, Woolworths Group

“We are encouraged by snacking category growth, especially in emerging markets” Dirk Van de Put, CEO, Mondelez

“The market [chocolate sales in Australia] is doing well for the first part of the year” Dirk Van de Put, CEO, Mondelez

Paper

“We are now clearly seeing improving global demand [for printing paper], with the Southern Hemisphere and Eastern Europe more than offsetting slower secular declines in Western Europe and North America” Glenn Landau, CFO, International Paper

Property markets

“We are at the very peakish end of housing and, in particular, for multi dwelling… Demand for concrete in Australia is at a very high level” Rosaline Ng, CFO, Boral

“Housing market conditions have continued to moderate and are expected to ease further in 2018 as macro-prudential measures continue to take effect and new housing supply comes onto the market” Genworth Insurance Market Announcement

“Residential trading conditions remain generally positive, particularly in Melbourne and Queensland. In line with expectations, Sydney has seen a slight moderation in demand from its peak. We continue to see strong demand from our core market of first homebuyers and owner-occupiers” Mark Steinert, MD, Stockland

“All states experienced a decline in new delinquencies with the exception of Western Australia” Genworth Insurance Market Announcement

Mortgage Broking

“If there is not a mortgage broking industry that is viable, consumer choice and competition goes out the window, and all that means is that power is given back to the big four banks again” David Bailey, CEO, AFG

Lending

“We've restricted growth in some higher margin but higher risk parts of the market. These include commercial property and unsecured personal loans” Michelle Jablko, CFO, ANZ

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.