CEO INSIGHTS – Week Ending 23 December 2022 By NAOS Asset Management

“We’ve seen our recession. Consumers are prioritising their spend, where they’re making choices, and they’re prioritising investing in themselves and experience” Ed Bastian, CEO, Delta Air Lines 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.  

Merry Christmas from the team at NAOS. Wishing you a fun-filled holiday season. We hope you enjoy our final CEO Insights for 2022 and please watch out for our return in the New Year.

If you do not already subscribe and wish to receive this weekly publication of “CEO Insights” via email please click here. 

Inflation

“I would not call it [current conditions] deflationary, but it [inflation] has moderated to a meaningful degree” Michael Happe, CEO, Winnebago Industries Inc

Agriculture & Resources

"In the industry and market we operate in has a lot of tailwinds, we've got a tailwind with just more mouths to feed, more population...Second one is the fact that as economies mature and get more prosperous, they add more meat into their diet. Meat is a multiplier on the demand for grain” Eric Hansotia, CEO, AGCO Corp [global agricultural machinery manufacturer conglomerate inc. Massey Ferguson Tractors]

“In our sector, essential supply chains have continued to operate and the key sectors we serve, especially resources and agriculture, continue to see strong demand from the Asia Pacific. We see this demand sustaining for a long time to come” Andrew Harding, CEO, Aurizon Holdings Ltd

Travel & Transportation

“We’ve seen our recession. Consumers are prioritising their spend, where they’re making choices, and they’re prioritising investing in themselves and experience” Ed Bastian, CEO, Delta Air Lines Inc

“We’ve never seen it quite like this. Yes, we’ve always been known for our outlying islands, but this year even the mainland has proved to be a sweet spot with the Australian consumer, and is almost fully booked out” Rick Hamilton, CEO, Tourism Whitsundays

“People involved in the auto industry are largely a silent majority. That silent majority is wondering whether EVs are really OK to have as a single option. But they think it's the trend so they can't speak out loudly” Akio Toyoda, CEO, Toyota Motor Corp.

Housing Sector

“Around 23 per cent of all Aussie home loans – worth almost $500 billion – are currently on fixed rates and will switch to variable rates by the end of 2023. These borrowers will experience significant interest rate increases which will further squeeze household disposable incomes” Steve Johnston, CEO, Suncorp Group Ltd

“December is experiencing an earlier than usual seasonal decline as agents and vendors defer listings into the 2023 calendar year. This trend contrasts with December 2021, when listings activity was unusually long, extending into late December” Market Statement, Domain Holdings Group Ltd

“North America, Asia Pacific and Europe, [we expect] to experience housing market slowdowns in calendar 2023” Aaron Erter, CEO, James Hardie Industries plc

Education, Literacy & Universities

“There's also a strong consensus that [there is] pandemic-related declines in students' reading skills” Peter Warwick, CEO, Scholastic Corp

“But to be perfectly honest, I don’t think the geopolitical issue [with China] has had a huge impact on the international education sector” Phil Honeywood, CEO, International Education Association of Australia

“[Issues behind why Chinese students are not coming back to Australian universities] include the unavailability and prohibitive costs of direct flights to Australia, as well as a growing appetite for studying top university courses online” Phil Honeywood, CEO, International Education Association of Australia

Media & Design

“I think there are 2 things happening in the macroeconomic environment, that are actually going to be tailwinds. The first is the fact that it is the golden age of design. Everybody would like to express themselves. There are more screens on which all of this content is being consumed” Shantanu Narayen, CEO, Adobe Inc

Corporate Sector

“[Regardless] of industry, as the macro uncertainty has increased, they're [businesses] being a little bit more cautious. So, we're seeing some delays in decision-making. We see changes in the pace of spending, and we're seeing some pausing of the smaller deals” Julie Sweet, CEO, Accenture plc

“All businesses are operating in a complex environment, and it is hard to see that changing in 2023” Steve Vamos, CEO, Xero Ltd

Manufacturing

“That’s [challenging macro environment] going to flow through the economy, and we’re going to see some signs of softening activity output slowing…We’re seeing profitability beginning to pull back” Andrew McKellar, CEO, Australian Chamber of Commerce and Industry

Building & Construction

“This combination [falling demand and soaring costs] is creating a perfect storm of lower-than-expected demand coupled with higher-than-expected input costs, which is putting significant pressure on our current and future financial returns” Aaron Erter, CEO, James Hardie Industries plc

Retail

“There is still some underlying strength in the retail sector” Paul Graham, CEO, Australia Post

“The trend towards humanisation and premiumisation in the pet food category are strong and will continue to grow in the US and around the world” Jeffrey Harmening, CEO, General Mills Inc

Domestic Economy

“From our global perspective, Australia has performed better than comparable economies and shown great resilience” Graham Chipchase, CEO, Brambles Ltd

For all enquiries please contact enquiries@naos.com.au

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.