CEO INSIGHTS – Week Ending 2 December 2022 By NAOS Asset Management

“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]

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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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

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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. It does not constitute an offer to purchase any security or financial product or service referred to herein. It does not take into account the investment objectives, financial situation or needs of any particular investor. Before making an investment decision, investors should consider obtaining professional investment advice that is tailored to their specific circumstances. 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.