CEO Insights - Week Ending 23th December 2022 By NAOS Asset Management

"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 tends 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."

If you do not already subscribe and wish to receive this weekly publication of “CEO Insights” via email please click here. 

Inflation

“I would not call it [current conditions] deflationary, but it [inflation] has moderated to a meaningful degree” Michael Happe, CEO, Winnebago Industries Inc

Agriculture & Resources.

"In the industry and market we operate in has a lot of tailwinds, we've got a tailwind with just more mouths to feed, more population...Second one is the fact that as economies mature and get more prosperous, they add more meat into their diet. Meat is a multiplier on the demand for grain” Eric Hansotia, CEO, AGCO Corp [global agricultural machinery manufacturer conglomerate inc. Massey Ferguson Tractors]

“In our sector, essential supply chains have continued to operate and the key sectors we serve, especially resources and agriculture, continue to see strong demand from the Asia Pacific. We see this demand sustaining for a long time to come” Andrew Harding, CEO, Aurizon Holdings Ltd

Travel & Transportation

“We’ve seen our recession. Consumers are prioritising their spend, where they’re making choices, and they’re prioritising investing in themselves and experience” Ed Bastian, CEO, Delta Air Lines Inc

“We’ve never seen it quite like this. Yes, we’ve always been known for our outlying islands, but this year even the mainland has proved to be a sweet spot with the Australian consumer, and is almost fully booked out” Rick Hamilton, CEO, Tourism Whitsundays

“People involved in the auto industry are largely a silent majority. That silent majority is wondering whether EVs are really OK to have as a single option. But they think it's the trend so they can't speak out loudly” Akio Toyoda, CEO, Toyota Motor Corp.

Housing Sector

“Around 23 per cent of all Aussie home loans – worth almost $500 billion – are currently on fixed rates and will switch to variable rates by the end of 2023. These borrowers will experience significant interest rate increases which will further squeeze household disposable incomes” Steve Johnston, CEO, Suncorp Group Ltd

“December is experiencing an earlier than usual seasonal decline as agents and vendors defer listings into the 2023 calendar year. This trend contrasts with December 2021, when listings activity was unusually long, extending into late December” Market Statement, Domain Holdings Group Ltd

“North America, Asia Pacific and Europe, [we expect] to experience housing market slowdowns in calendar 2023” Aaron Erter, CEO, James Hardie Industries plc

Education, Literacy & Universities

“There's also a strong consensus that [there is] pandemic-related declines in students' reading skills” Peter Warwick, CEO, Scholastic Corp

“But to be perfectly honest, I don’t think the geopolitical issue [with China] has had a huge impact on the international education sector” Phil Honeywood, CEO, International Education Association of Australia

“[Issues behind why Chinese students are not coming back to Australian universities] include the unavailability and prohibitive costs of direct flights to Australia, as well as a growing appetite for studying top university courses online” Phil Honeywood, CEO, International Education Association of Australia

Media & Design

“I think there are 2 things happening in the macroeconomic environment, that are actually going to be tailwinds. The first is the fact that it is the golden age of design. Everybody would like to express themselves. There are more screens on which all of this content is being consumed” Shantanu Narayen, CEO, Adobe Inc

Corporate Sector 

“[Regardless] of industry, as the macro uncertainty has increased, they're [businesses] being a little bit more cautious. So, we're seeing some delays in decision-making. We see changes in the pace of spending, and we're seeing some pausing of the smaller deals” Julie Sweet, CEO, Accenture plc

“All businesses are operating in a complex environment, and it is hard to see that changing in 2023” Steve Vamos, CEO, Xero Ltd

Manufacturing

“That’s [challenging macro environment] going to flow through the economy, and we’re going to see some signs of softening activity output slowing…We’re seeing profitability beginning to pull back” Andrew McKellar, CEO, Australian Chamber of Commerce and Industry

Building & Construction

“This combination [falling demand and soaring costs] is creating a perfect storm of lower-than-expected demand coupled with higher-than-expected input costs, which is putting significant pressure on our current and future financial returns” Aaron Erter, CEO, James Hardie Industries plc

Retail

“There is still some underlying strength in the retail sector” Paul Graham, CEO, Australia Post 

“The trend towards humanisation and premiumisation in the pet food category are strong and will continue to grow in the US and around the world” Jeffrey Harmening, CEO, General Mills Inc

Domestic Economy

“From our global perspective, Australia has performed better than comparable economies and shown great resilience” Graham Chipchase, CEO, Brambles Ltd

Source: Mostly from this week's NAOS' Weekly "CEO Insights" email. All images have been added by me.

CEO Insights - Week Ending 16th December 2022 By NAOS Asset Management

"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 tends 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."

If you do not already subscribe and wish to receive this weekly publication of “CEO Insights” via email please click here. 

Quick Service Restaurants

“In markets where we started putting kiosks in, we are seeing a rapid shift of consumers to move from front counter to kiosks” Sabir Sami, CEO, KFC Division of Yum! Brands (see here: Senior Officers and Leadership Team (yum.com))

“They [Generation Z] don't watch TV so much. They're on these [phones]. We all know this. really, it was a learning for us for how do we connect with our core consumer” Mark King, CEO, Taco Bell Group

Workplace & Employment

“Pre-pandemic, ~1% of all jobs posted on LinkedIn were remote. As of today, that number is ~14%...but that's not the fascinating part. What's fascinating is north of 50% of all job applications on a daily basis on LinkedIn go to that 14% of remote jobs” Ryan Roslanksy, CEO, LinkedIn Corporation

“The beginning of the pandemic saw a high level of pay restraint and bonuses cancelled in many companies. Over the past two years we have seen bonus ‘catch-up’ in a number of companies, which is not always aligned to investor outcomes” Louise Davidson, CEO, Australian Council of Superannuation Investors

Domestic Economy

“I can’t over emphasise the impact that cost-of-living pressures are having in the community” Shayne Elliott, CEO, ANZ Banking Group Ltd

Chinese Economy

“Everybody in China wants to get rich quick, and in the past they might have gotten rich quite fast, but there is a role for professionals to stop people acting silly. Taxi drivers in China think they can make a fortune out of equity markets or private equity or derivatives – people don’t understand basic risks” Sharon Wan, CEO China, Hong Kong & Taiwan, Auto & General Insurance Company [major global insurance provider]

Source: Auto & General (afr.com) Plain Text Link: https://www.afr.com/companies/financial-services/the-entrepreneur-hoping-to-teach-china-s-middle-class-to-invest-well-20221212-p5c5s7

US Economy

“We see longer term support for housing prices. There's currently 1.5 million to 2 million undersupply of homes, which is expected to persist for some time. And we expect this supply/demand imbalance to continue to support home prices in the medium term” Marvin Ellison, CEO, Lowe's Companies Inc [one of the world’s largest hardware store retailers]

“We still have some ways to go. Restoring price stability will likely require maintaining a restrictive [monetary] policy stance for some time” Jerome Powell, Chairman, US Federal Reserve

Retail

“The US, from where we see it, is a little bit weaker than it's been the last couple of years. Europe has actually been doing really well and Asia is really picked up” Brian McGee, CFO, GoPro, Inc

Technology

“I think one of the things many companies learned during COVID was those companies that did not get on some sort of a track to get a digital connection with their customers, employees and suppliers that were at a huge disadvantage” Safra Catz, CEO, Oracle Corporation

“[Cybersecurity] is not something that the government can just fix or is even their role to fix. Unless people, individuals, and businesses, take the necessary action and prioritise this, they will be at significant risk” Andy Penn, Former CEO, Telstra Group Ltd

“We have arrived in a world where we have so much [software] code, and we have such a high complexity, that we need another approach, we need a new approach to allow us to go the next step on the ladder” Thomas Dohmke, CEO, GitHub [global software company owned by Microsoft]

Banking & Payments

“We all know today that paying for goods and services is mostly cashless and there is a myriad of ways to pay and get paid...I have been in banking for 30 years and it’s fair to say I have never seen the pace of change and innovation we are experiencing in this area. Essentially, there is a technology arms race in the payments space” Shayne Elliott, CEO, ANZ Banking Group Ltd

Travel & Transport

“Secondly, demand is bigger than supply. It’s at unbelievable levels internationally and domestically because people were locked up for so long and everybody was surprised at how rapidly demand rebounded to be excess of what it was in 2019” Alan Joyce, CEO, Qantas Airways Ltd

Commodities & Agriculture

“The [energy] market is working, and the government’s interfering is actually causing significant disruption and significant uncertainty on both sides of the table” Meg O’Neill, CEO, Woodside Energy Group

“The planting window for the CY23 crop has now closed, and while it has been disrupted by heavy rain falls and flooding activity across the Riverina, the Group is expecting ample Riverina rice supply in CY23” Market Statement, Ricegrowers Ltd

Consumer Behaviour

“We don’t see this as the peak [of pet ownership], we actually see this trend started many years ago, and we expect it to continue for many, many more years” Brad Banducci, CEO, Woolworths Group Ltd

“Australians are trending a little bit down, in terms of their giving, which is a worrying trend” Jodi Kennedy, GM of Philanthropy, Equity Trustees Ltd

Source: Mostly from this week's NAOS' Weekly "CEO Insights" email. All images have been added by me.

CEO Insights - Week Ending 09 December 2022 By NAOS Asset Management

"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 tends 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."

If you do not already subscribe and wish to receive this weekly publication of “CEO Insights” via email please click here. 

Food & Beverage

“We have a correlation between economic crisis and increased consumption of champagne. It’s happened every single time” Kyla Kirkpatrick, CEO, Emperor Champagne

Image Source: http://luxesocietyasia.com/wine-dine/up-close-with-kyla-kirkpatrick-ceo-and-founder-of-emperor-champagne-club/

“I do think the consumer is pretty healthy. And for all indications of our own business, we are not seeing any kind of trade down. In fact, we've actually seen stronger performance even at the higher end of our portfolio” Lawson Whiting, CEO, Brown-Forman Corp [one of the world’s largest spirits & wine groups]

Travel

“I know this isn’t an answer that a lot of people would like to hear, but the realities of the industry are very important. If the oil price increases, then ticket prices will have to increase to reflect that increase” Willie Walsh, Director General, International Air Transport Association [IATA]

“When China relaxes restrictions and reopens then the issue of access to Russian air spaces becomes a killer question for European carriers. I think we have to look to the reopening of Russian air space so the European carriers can access Asia” Willie Walsh, Director General, International Air Transport Association [IATA]

Luxury

“[In] good times people buy chocolate to celebrate and say thank you. Next year there may be some tightening of the belts, but people want to afford a little luxury” Michael Schai, CEO, Lindt & Sprüngli Australia & New Zealand

Commodities & Resources

“Australia has a source of energy [in the Perth Basin] which is equivalent to gas costs coming out of Qatar and Russia, and that generates a strong impact, in terms of the competitiveness of people who consume that energy for their end products” Stuart Nicholls, CEO, Strike Energy Ltd

Macroeconomic

“I don't see indications of a recession or any demand slowdown” Gregory Brown, CEO, Motorola Solutions Inc

“I think importantly, just given some of the inflationary pressures that are in the marketplace today…that those inflationary pressures will suggest that rates will be higher for longer, meaning that it's unlikely if we're in a recession that we're going to see a lot of rate cuts anytime in the near future” Gary Shedlin, CFO, BlackRock Inc

“The path to achieving the needed decline in inflation and achieving a soft landing for the economy remains a narrow one” Philip Lowe, Governor, Reserve Bank of Australia

“You’ve actually got most of the macro factors working against business in many respects at the moment” Jason Preston, Chairman, McGrathNicol [Advisory and Restructuring Firm] 

Consumer Credit

“And the only place we see any levels of stress, which is primarily from the high inflation of fuel and food and those kind of things, is it the subprime consumer. So the near-prime and prime consumers are very strong. And we haven't seen any impact on our volume as a result of a slowdown. We don't see an economic slowdown” Mark Begor, CEO, Equifax Inc

Healthcare

“All 3 of these [our] business areas are benefiting from very favourable market trends, growing in aging populations, an increasing prevalence of chronic conditions following this and increased disposable income. And we know that people with a high disposable income tend to be more interested in hygiene and health” Magnus Groth, CEO, Essity AB [world’s leading hygiene & health conglomerate] 

Workplace & H.R

“Secondly, as it relates to [office lease] renewals, there is a big backlog of renewals. And one thing we know is that occupiers are in fact, taking space, some of them on a defensive basis [thinking] we don't know how much we're going to need, but we know we're going to need some, so we are going to take space” Robert (Bob) Sulentic, CEO, CBRE Group Inc

“Executive Search [recruitment for executive level positions], we've been now seeing this, as you know, for several months. There's been a moderation from the very heightened levels that we saw 1.5 years ago” Gary Burnison, CEO, Korn Ferry Inc

Cryptocurrency

"Crypto is a sideshow and you guys spend too much time on it...crypto tokens are like pet rocks...I don't understand why people allow these things...I think the regulator should stop beating up on banks and focus on things like crypto” Jamie Dimon, CEO, JPMorgan Chase & Co

Supply Chain

“The champagne shortage is real” Kyla Kirkpatrick, CEO, Emperor Champagne

“You can actually go into a car dealership and buy a car. A few months ago there was no chance of that” Andrew Irvine, CEO Business Bank, National Australia Bank Ltd

Source: Mostly from this week's NAOS' Weekly "CEO Insights" email. All images have been added by me.

CEO Insights - Week Ending 02 December 2022 By NAOS Asset Management

"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 tends 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."

If you do not already subscribe and wish to receive this weekly publication of “CEO Insights” via email please click here. 

Residential

“Given the cooler and wetter conditions in some markets, sales in outdoor-related categories have been softer” Mike Schneider, MD, Bunnings Warehouse

Agriculture & Machinery

“The order books continue to fill when we open them” John May, CEO, John Deere & Co

Food & Beverage

“KFC’s value proposition remains the strongest in the QSR [quick service restaurant] market, benefitting from strategic decisions to keep price increases at or below inflation and competitive relative to peers” Drew O'Malley, CEO, Collins Foods Ltd

“We’re not really seeing any sign of trading down,” she said. “All the early indications [for Christmas] are good” Agi Pfeiffer-Smith, CEO, Dan Murphy's

Supermarkets

“Any softening of consumer spending is likely to accelerate market share gains by the supermarkets and other mass retailers over higher priced florists” Hugh Toll, CEO, Lynch Group Holdings Ltd [Australia’s leading grower & wholesaler of flowers]

Macroeconomic

“I don't think inflation is going away anytime soon. I don't think we're going to see maybe the spikiness that we had this year. But I think inflation is going to moderate a little bit, but it's going to be with us” Gregory Lewis, CFO, Honeywell International Inc

Domestic Economy

“Australia was absolutely smashed – more than any other OECD country – because of state borders [being closed]. The task of recovery is far greater in Australia” Brenton Cox, CEO, Adelaide Airport

“Australia has the potential to be a leader as the world transitions to a cleaner decarbonised future. But if we’ve learnt anything in our 150 years in Australia, we need to take a big picture and whole economy view” Peter Halliday, CEO, Siemens Australia

Supply Chain

“And we're starting to see improvements in pricing, the freight costs and the price of wholesale product, which will be beneficial for us if these trends continue” Mark Coulter, CEO, Temple & Webster Group Ltd

“We don't think about the supply chain being impaired, to be honest…As it relates to the current period where supply chain pressures are really behind us” Martin Waters, CEO, Victoria’s Secret Co.

Social

“Gen Z is really comfortable using online for meeting people, right? I mean their whole life is conducted online. So, the notion of somebody in Gen Z saying, would you meet somebody for friendship, for romantic purposes or something between online, you get a resounding yes from pretty much every Gen Z-er out there. So, the stigma really has fallen away” Gary Swidler, CFO, Match Group Inc [world's largest dating service company/owner of Tinder]

Healthcare

“There are well-publicised headwinds currently affecting the economy and the healthcare sector, including: staffing shortages in frontline roles, GP shortages and a decline in GP bulk billing rates, and higher than historical number of tests requested per GP referral after a hiatus in regular testing during COVID-19 outbreaks” Market Statement, Healius Ltd

Commodities & Resources

“Looking ahead, we expect that coal prices will remain well above historical averages, as uncertainty remains about security of global energy supply. The supply demand imbalance was clear prior to the Russian invasion of Ukraine which only caused a further supply shock to the global energy market” Rob Bishop, CEO, New Hope Group Ltd

Interest Rates

“This is the toughest thing. You have to slow down the economy. You have to slow down inflation & the way you do that is raising interest rates. The intended outcome of [the US Federal Reserve’s] policies doesn’t feel good when you are trying to buy a home” Brian Moynihan, CEO, Bank of America Ltd

“I’m certainly sorry if people listened to what we said and then acted on that and now regret what they had done. Looking back, we would have chosen different language” Phil Lowe, Governor, Reserve Bank of Australia

Consumers

“I think it's still pretty tough out there for the consumer. I think they've held on for a pretty long time and they've kind of blown through savings, taking up debt on their credit cards. They're starting to feel it. And I think they're looking for ways to cut back on some expenses” Gary Swidler, CFO, Match Group Inc [world's largest dating service company/owner of Tinder]

Sustainability

“Mars Wrigley’s switch to paper-based packaging sets an excellent example to all businesses in Australia of the critical role innovative packaging formats that are more readily recyclable play in meeting the 2025 National Packaging Targets” Chris Foley, CEO, The Australian Packaging Covenant Organisation

Technology

“People are really thinking about, okay, this is how we're going to work now…making sure that they have the right systems in their conference rooms is really important, inclusivity and collaboration, making sure that they can foster that within their company so that nobody feels left out” Kelly Steckelberg, CFO, Zoom Video Communications Inc

Source: Mostly from this week's NAOS' Weekly "CEO Insights" email. All images have been added by me.