CEO INSIGHTS – Week Ending 11 October 2019 By NAOS Asset Management

"The recycling sector is undergoing significant structural changes with a move to increase recycling within Australia to support a transition to a circular [elimination of waste] economy." Vik Bansal, CEO, Cleanaway Waste Management Ltd

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.  

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Food & Beverage

"We’re not seeing a reduction in demand for our categories on a global level."  Ramon Laguarta, CEO, PepsiCo

“Evolving market conditions and market uncertainty have reduced the relevance of a three-to-five-year outlook." Ritch Allison, CEO, Dominos Pizza Inc

"So we look at an industry that's under pressure from labor costs -- an industry that is transitioning volume from dining in to delivery without any increase that we can see in terms of overall growth in the restaurant industry. So a lot of restaurant companies are trading orders from a more profitable to a less profitable channel, while wage rates are going up." Ritch Allison, CEO, Dominos Pizza Inc

"For consumers and for restaurants it is healthy [that] there are a number of viable delivery partners." Ed McManus, CEO, Deliveroo Australia

Media & Advertising

“The pressure in the legacy [advertising] sector is huge.” Sir Martin Sorrell, Chairman, S4 Capital [also founder of WPP PLC, the world’s largest advertising conglomerate]

Domestic Economy

"We don't see any signs or indications we are flipping over into a recession, short of some major global event." Lindsay Maxsted, Chairman, Transurban Group

“There are lots of positives in the Australian economy, but on the other hand, growth is slowing, business confidence is low, consumer confidence is falling." Shayne Elliot, CEO, ANZ Bank Ltd

Travel & Leisure

"The sentiment's not great at the moment." Graham Turner, CEO, Flight Centre Travel Group

Retail

"As it relates to the underlying factors of competition, we feel that we haven't seen any giant changes in the competitive landscape out there. There's still a lot of competition and there's a lot of headlines out there, but at the end of the day, we're still pretty darn competitive ourselves." Richard Galanti, CFO, Costco Corporation Inc

"We believe our category is a little less discretionary - people are having babies and the birth rate is fairly constant. What we've seen is normal buying behaviour through the period." Matt Spencer, CEO, Baby Bunting Ltd

Aerospace

"The aerospace market is booming ahead. We are talking about a $US6.8 trillion ($10 trillion) market over the next 20 years - it's a sensational amount of demand.” Michael Arthur, President, Boeing International

“Our outlook says in the next 20 years, 44,000 new aeroplanes are going to be bought, and that's about double the worlds current fleet. The key point for Australia is that the highest proportion of these are coming to Asia Pacific - 17,000 planes which means this is a significant marketplace." Michael Arthur, President, Boeing International

Automotive

“I am cautiously optimistic we have seen the bottom of the motorcycle market.” Dave Ahmet, CEO, Motorcycle Holdings

Currency & Trade War

"We see good opportunities in China as a result of the trade war with the US." Mark McInnes, CEO, Premier Investments Ltd

“We are noticing a lot of Chinese suppliers are moving into adjacent countries for production. They're going into South-East Asia and Vietnam to avoid the tariffs." Anthony Heraghty, CEO, Super Retail Group Ltd

 “The incremental increase of tariffs announced or already implemented are putting a dent on growth everywhere. We may see spillover in consumption.” Kristalina Georgieva, Managing Director, International Monetary Fund

Domestic Property

“I don't see cap [capitalisation] rates softening. If anything, based on current sales evidence, particularly in office and industrial markets, cap rates are going to continue to compress." David Harrison, CEO, Charter Hall Group

Waste Management

"The recycling sector is undergoing significant structural changes with a move to increase recycling within Australia to support a transition to a circular [elimination of waste] economy." Vik Bansal, CEO, Cleanaway Waste Management Ltd

Resources

"Australia's relationship with China is critical. China produces a little over half the world’s steel, with 928 million tonnes produced in 2018. While other markets are also well established, their volume is substantially less than China's. For example, Japan is the world's second largest producer yet only represents 6% of world production." Elizabeth Gaines, CEO, Fortescue

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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.