CEO INSIGHTS – Week Ending 14 February 2020 By NAOS Asset Management

“The experiences that we have had with similar situations [coronavirus] in the past with SARS, MERS, etc, showed that after a period of disturbance, consumption resumes stronger than before” Jean-Paul Agon, CEO, L'Oreal S.A.

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 & Agriculture

“This rain has come at almost the exact right time of year. As we near the end of summer, rain now is ideal for pasture growth in the autumn months” Fiona Simson, President, National Farmers Federation

“When you look at the overall milk production developments that are occurring in Australia because of the severe weather and the high input costs that producers have to deal with – lower water and less feed availability is causing some strain in the system – which is leading to a lot of culling of cows, reduction in farm sizes and people getting out of the farming business” Lino Saputo, CEO, Saputo Inc [global dairy conglomerate]

“This [plant-based food] story however is way, way, way, beyond the burgers” Mark Schneider, CEO, Nestle S.A.

Coronavirus

“The experiences that we have had with similar situations [coronavirus] in the past with SARS, MERS, etc, showed that after a period of disturbance, consumption resumes stronger than before” Jean-Paul Agon, CEO, L'Oreal S.A.

“With respect to factories, we’re continuing to see closures, changing timelines of when they might re-open and trying to assess what it means for production fulfilment, capacity and the prioritization of which product to make” Patrik Frisk, CEO, Under Armour Inc

Domestic Economy

“We’re seeing signs that it [toll road traffic] has bottomed out in Victoria and in Queensland we’re seeing something of a rebound. Hopefully that’s sustained and hopefully that means Sydney will rebound as well” Scott Charlton, CEO, Transurban Group

Packaging & Recycling

“[The] whole recycling industry worldwide is in crisis [due to the China Sword Policy – a recycling import ban]. We have lost half of the demand with a stroke of a pen” Tony Khoury, Director, Waste Contractors and Recyclers Association

“What we’re seeing – and I think we talked about it last time, is there is a trend towards smaller packages. And that might be a way the consumer is also approaching snacking categories with portion control being a key driver” Ramon Laguarta, CEO, PepsiCo Inc

Tourism & Travel

“Right now, there's very few tourists coming in [to Australia] from China, if any” Alistair Symington, CEO, Blackmores Ltd

“I think this is the biggest crisis we have faced in a decade. The loss of business around Chinese New Year is irrevocable. It will come back, but when? Many businesses have been pushed to the absolute brink and possibly beyond” Daniel Gschwind, CEO, Queensland Tourism Industry

Global Property

“In a slowing global economic environment, demand for industrial assets from customers and investors remains robust, particularly in the limited supply urban infill markets where the Group operates” Greg Goodman, CEO, Goodman Group Ltd

Childcare

“Notwithstanding short-term fluctuations, the childcare market continues to remain well balanced with underlying demand meeting new supply” Market Announcement, Charter Hall Social Infrastructure REIT

Health & Beauty

“Other factors have contributed to the acceleration of the [beauty] market growth this past 2 years: First, the digital revolution in beauty …  Second, the leapfrog of traditional distribution and the spectacular extension of reach, thanks of the development of e-commerce …  Third, the incredible appetite for beauty of the new generations in the new markets …  And fourth, the strong premiumization of the market on every continent, every category” Jean-Paul Agon, CEO, L'Oreal S.A.

Technology

“We are still in early innings of the global cloud communications transformation story” Vladimir Shmunis, CEO, RingCentral Inc

“You have heard me talk before about the fourth industrial revolution where a convergence of new technologies including 5G is enabling a rapid evolution of automation and robotics. While this will bring tremendous new opportunities, it also poses challenging questions on issues such as the impact on the workforce and the ethics of AI [artificial intelligence]” Andy Penn, CEO, Telstra Ltd

Energy & Resources

“We all want energy that is reliable and affordable, but that is no longer enough. It must also be cleaner” Bernard Looney, CEO, BP plc

“Developers, contractors and bankers [of solar projects] have all struggled to come to terms with the risk of large power loss factors, grid stability problems, connections problems and equipment performance issues” Grant Fenn, CEO, Downer Group

Automotive

“New car sales are obviously weaker in Australia at the moment, but if you talk to any dealer, used car sales are up, and consumers are finding used cars attractive” Cameron McIntyre, CEO, Carsales Ltd

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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.