CEO INSIGHTS – Week Ending 21 April 2023

“This [artificial intelligence] is going to impact every product across every company” Sundar Pichai, CEO, Alphabet Inc

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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Gig Economy & Transport

“There continues to be a healthy demand for our maps, our software and our services beyond the automotive industry as well. For example, our navigation software…is gaining traction in markets like fleet and logistics, ride-hailing and food delivery” Harold Goddijn, CEO, TomTom N.V.

“I think that the industry as a whole, to some extent, has taken drivers for granted” Dara Khosrowshahi, CEO, Uber Technologies Inc

Mortgages & Lending

“The longer-term consequence of this situation [extraordinary competition between the major banks for market share] is that smaller lenders will continue to be squeezed, impacting choice and competition for Australian borrowers, and will ultimately result in higher real long-term borrowing costs for Australian homebuyers” David Bailey, CEO, Australian Finance Group Ltd

“Recent events in the banking sector are lowering growth expectations and there is a higher risk of credit contractions given the environment is limiting banks’ appetite to extend credit” David Solomon, CEO, Goldman Sachs Inc

“We expect to see heightened mortgage competition continuing as well as escalated deposit competition” Market Statement, Bank of Queensland Ltd

Consumer Spending

“We did see a notable softening in consumer spending growth over the course of the [March] quarter” Jane Fraser, CEO, Citigroup Inc

NZ Economy

“We are really starting to see some hardship” Keith McLaughlin, Managing Director, Centrix [the NZ Credit Bureau]

Mining & Resources

“We need to continue to expand our participation throughout the battery supply chain, beyond just the mining of key raw minerals, in order to capture a greater share of the value. We believe the area where Australia can be most competitive is in mid-stream battery chemical processing” Matt Dusci, Acting CEO, IGO Ltd

“China’s iron ore imports hit a record 309 million tonnes in the first quarter of 2023, effectively unchanged from the volume imported during the prior quarter and 9% more than the first quarter of 2022” Market Statement, Rio Tinto Ltd

Artificial Intelligence

“A.I. is more dangerous than, say, mismanaged aircraft design or production maintenance or bad car production. In the sense that it has the potential - however small - one may regard that probability, but it is non-trivial and has the potential of civilization destruction” Elon Musk, CEO, Tesla Inc/Space X/Twitter

“This [artificial intelligence] is going to impact every product across every company” Sundar Pichai, CEO, Alphabet Inc

Retail

“[Foot] traffic everywhere in the world is still behind pre-COVID levels” Kenneth Wilson, CEO, Dr. Martens Plc

Holidays

“There’s no such thing as the last-minute deal anymore” Dean Long, CEO, Australian Federation of Travel Agents.

“We believe demand is just structurally different than it was pre-pandemic and we're still figuring out that new normal” Scott Kirby, CEO, United Airlines Inc 

Labour Shortages

“The Group, and the collision repair industry, continues to experience high repair volume demand; however, the constrained labour environment continues to challenge throughput” Market Statement, AMA Group Ltd

Supply Chain, Freight & Logistics

“While there are signs of supply chains progressively optimising inventory levels, we now anticipate destocking of approximately four to five million pallets in the second half of FY23” Graham Chipcase, CEO, Brambles Ltd

“We're in a challenging freight environment where there is deflationary price pressure for an industry that continues to face inflationary cost pressures. Simply stated, we're in a freight recession” Shelley Simpson, President, J.B. Hunt Transport Services Inc [major multinational freight & logistics company]

Advertising Spend & Television

“The rate and volume of supply chain issues are constantly being resolved to the upside, while several key advertising categories will return with stronger investment including but not limited to Government, Automotive, Banking and Telecommunications” Grant Blackley, CEO, Southern Cross Austereo Media Group Ltd

“At last, like the rest of the world, investment will shift away from Linear [traditional] TV with its decreasing audiences and increasing costs and towards BVOD [i.e., 7plus, 9Now, 10 Play], streamed TV channels, outdoor and the ever-increasing audiences offered by all of audio” Peter Charlton, CEO, NOVA Entertainment

Government Stimulus

“We took that strong run in the construction sector and then completely over-juiced it with stimulus for first home builders” John Winter, CEO, Australian Restructuring Insolvency and Turnaround Association

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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.