CEO INSIGHTS – Week Ending 17 April 2020 By NAOS Asset Management

“We've seen news from Renault, [and] a couple of other car makers who are either preparing to bring their machines and their production lines online or are committed to do so already. So, we expect that manufacturing will start in April even, or in some factories in May it will continue. We don't expect those factories to run at full capacity, but they will slowly ramp up their capacity” Harold Goddijn, CEO, TomTom NV

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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Healthcare

“In China we are starting to see a return to a more normal rate of surgical procedures” Alex Gorksy, CEO, Johnson & Johnson

“I’m talking to a lot of health systems, a lot of CEOs from health systems, and they are already talking about how they are planning to start to work with some of those elective procedures” Robert Ford, CEO, Abbott Laboratories

Supermarkets

“Demand for toilet paper finally appears to be tapering, with this week’s sales expected to be around 15-16 million rolls. That’s still 45% up on last year, but with supply up 70% on last year, there is increasingly more on-shelf” Brad Banducci, CEO, Woolworths Group Ltd

“We are very concerned about fresh meat. We have fresh meat today, but there are indicators that it will be a problem in the future” Mark Griffin, President, B&R Stores Inc [US supermarket chain]

Energy & Resources

“I've been in the oil game for 36 years and this is the worst situation I have seen in this industry” Peter Coleman, CEO, Woodside Petroleum Ltd

Finance & Lending

“While we continue to receive ongoing and significant demand, we are beginning to see initial signs of a levelling out of requests for help after the huge spike in the past few weeks” Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

“For developers with projects still under construction but with currently unsold properties, it could be difficult to finalise sales at a profitable price. Developers will then be left holding inventory — and debt — on their balance sheets with little or no revenue. This is a key risk for lenders” Financial Stability Review, April 2020, Reserve Bank of Australia

Payments

“[Credit Card] spend in aggregate was down 13% in the month of March year-over-year, and we're seeing trends like that continue here in April” Jennifer Piepszak, CFO, JP Morgan Chase & Co

Global Economy

“If confidence does deteriorate and the shelters-in-place stay on for longer, it wouldn’t surprise me if the loss estimates would have to go up. There’s more downside than upside given the uncertainty in this environment” Charlie Scharf, CEO, Wells Fargo & Company

“As long as the duration and scale of the pandemic and economic slowdown remains uncertain, I expect markets will continue to be fragile. The resulting stress on the global economy is real and will take time to recover” James Gorman, CEO, Morgan Stanley

Airlines 

“It certainly feels like we’re at the bottom…the real question is how long you stay at the bottom” Doug Parker, CEO, American Airlines Inc

Automotive

“We've seen news from Renault, [and] a couple of other car makers who are either preparing to bring their machines and their production lines online or are committed to do so already. So, we expect that manufacturing will start in April even, or in some factories in May it will continue. We don't expect those factories to run at full capacity, but they will slowly ramp up their capacity” Harold Goddijn, CEO, TomTom NV

“The fully automated driving car is going to take longer than we all had hoped” Harold Goddijn, CEO, TomTom NV

Industrials

“If you think about in the world right now, most of the dominant trade channels that we operate in are functioning, hardware, home improvement, grocery, club, mass merchant, those trade channels are operating, albeit at a different level” Garry Ridge, CEO, WD-40 Co

“Since the outbreak of COVID-19, our pallets businesses have successfully met an unprecedented surge in customer demand” Graham Chipchase, CEO, Brambles Ltd

Technology

“The products we offer are addressing urgent needs. Stay-at-home is driving PC sales. Remote design and collaboration technologies are needed. Gaming is replacing other entertainment and hitting record levels. The shift from physical to digital will further accelerate cloud computing use” Jensen Huang, CEO, NVIDIA Corporation [global graphics/processing chip manufacturer]

“One of the challenges of doing more digital is we will see more people being challenged by cyber-attacks” Katrina Troughton, CEO, IBM Corp Australia/NZ

Television, Media & Advertising

“The majority of our original productions, like virtually all productions across the world, have been paused” said Matt Strauss, Chairman, Peacock [NBC/Universal digital streaming service]

“Everyone was comparing this crisis to 2009 but this is not the right reference...There is no comparison. It’s going to be steeper” Arthur Sadoun, CEO, Publicis Groupe SA

Telecommunications

“From a carrier network perspective at Symbio [company subsidiary], in the last month we have witnessed an 88% growth in inbound voice carriage” Rene Sugo, CEO, MNF Group Ltd

Retail

“It will certainly educate a lot of people as to the benefits of e-commerce...there will be a lot of people who were previously only shopping in shopping centres and now they’re left with no option but to shop online and it’s inevitable they’ll do that a few times and say ‘why haven’t I been doing this all the time?’” Ruslan Kogan, CEO, Kogan.Com 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.